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EXHIBIT 10.3 EXECUTIVE EMPLOYMENT AGREEMENT This Executive Employment Agreement (“Agreement”) made effective as of the 23rd day of August, 2000, by and between NetRadio Corporation, a Minnesota corporation (“Company”) and Richard Hailey (“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 Chief Technology Officer. 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 for a two- (2) year term, commencing August 1, 2000 (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 semimonthly 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.  Bonus. The Company will pay Executive a guaranteed annual bonus of $35,000 during each year of the Employment Period, with the payment to be made forty-five (45) days after the end of the Company’s fiscal year. In addition, Executive may be eligible for additional bonus compensation pursuant to the terms of the separate Executive Incentive Plan adopted by the Company.   --------------------------------------------------------------------------------   3.3. 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.     3.4. Vacation. Executive will be entitled to fifteen (15) days of paid vacation per calendar year of Executive’s employment hereunder, prorated for partial calendar years.     3.5. Stock Options. Subject to approval by the Board of Directors at the next Board meeting, currently scheduled for August 23, 2000, Executive will be granted 125,000 incentive stock options for shares of NetRadio common stock, subject to the terms of the Company’s Amended and Restated 1998 Stock Option Plan and the separate Incentive Stock Option Agreement between the Company and Executive. Those shares shall vest according to the following schedule provided Executive remains employed with the Company on the scheduled vesting date: 41,666 shares shall vest on the one-year anniversary of the date of the grant; 41,667 shares shall vest on the second anniversary of the grant; and 41,667 shares vest on the third anniversary of the date of the grant. The strike price for all shares granted to Executive hereunder shall be the market price 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.     3.6. Restricted Stock. Subject to the approval by the Board of Directors at the next Board meeting, currently scheduled for August 23, 2000, Executive will receive a restricted stock grant of 50,000 shares of NetRadio common stock, subject to the terms of the Company’s Amended and Restated 1998 Stock Option Plan and the separate Restricted Stock Award Agreement between the Company and Executive. Those shares shall vest on the two-year anniversary of the date of the grant, provided Executive remains employed as of that date, and are subject to forfeiture prior to that time according to the terms of the Restricted Stock Award Agreement. If there is any inconsistency in the language of this Agreement and the Restricted Stock Award Agreement with respect to the restricted stock, the terms of the Restricted Stock Award 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.     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.  2 -------------------------------------------------------------------------------- 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) (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 Chief Technology Officer of the Company and such removal is not pursuant to Section 4.1 hereof;  3 --------------------------------------------------------------------------------         (ii) Executive’s duties as Chief Technology Officer are reduced to such an extent as to constitute a constructive removal of Executive from the position of Chief Technology Officer; 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 Company prior to the date of this Agreement 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 owing 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, to 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 restricted stock or 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 or restricted stock 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 the 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: 5 --------------------------------------------------------------------------------         (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; (ii) All unvested stock options or restricted stock 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 reimbursements.   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 to 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,  6 --------------------------------------------------------------------------------   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 cost 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 judgment, 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;  7 --------------------------------------------------------------------------------         (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; (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. Survival of Restrictive Covenants. The restrictive covenants contained in paragraph 7.4 shall survive expiration or termination of this Agreement. 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 and Restricted Stock 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/ RICHARD HAILEY -------------------------------------------------------------------------------- Richard Hailey NETRADIO CORPORATION   By: /s/ EDWARD TOMECHKO -------------------------------------------------------------------------------- Its: President & CEO  9

EXHIBIT 10.1 PURCHASE AGREEMENT NO. 1201000 MADE AND ENTERED INTO BY AND BETWEEN NOKIA NETWORKS OY AND ENDWAVE CORPORATION ON 7/11/2000         [*] 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.   -------------------------------------------------------------------------------- PURCHASE AGREEMENT 1201000 6.0.0, 2/2000/TT CONFIDENTIAL TABLE OF CONTENTS Preamble Clause 1               Definitions   Clause 2   Object Of The Agreement   Clause 3   Parts   Clause 4   Purchase Estimates   Clause 5   Orders   Clause 6   Prices   Clause 7   Terms Of Payment   Clause 8   Terms Of Delivery And Passing Of Title   Clause 9   Packing   Clause 10   Delivery Times   Clause 11   Re-Scheduling And Cancellation   Clause 12   Inspections   Clause 13   Quality Requirements   Clause 14   Availability Of The Parts And Discontinuation Of Production   Clause 15   Facility Surveys   Clause 16   Warranties   Clause 17   Liability   Clause 18   Environmental Management   Clause 19   Manufacturing Rights, Intellectual Property Rights And Tooling   Clause 20   Confidentiality   Clause 21   Force Majeure   Clause 22   Effective Date And Term   Clause 23   Reportable Events And Termination For Default   Clause 24   Governing Law And Settlement Of Disputes   Clause 25   Final Provisions           Appendix 1   The Parts, Prices, Discounts and Price Validity   Appendix 2   Intentionally Omitted   Appendix 3   Quality Requirements and Workmanship Standards   Appendix 4   Warranties and Support   Appendix 5   Logistics Appendix   Appendix 6   (Statistical Sampling Methods) Not available   Appendix 7   Product Liability Insurance   Appendix 8   (Tooling) Not available   -------------------------------------------------------------------------------- PURCHASE AGREEMENT 1201000 6.0.0, 2/2000/TT CONFIDENTIAL PURCHASE AGREEMENT THIS AGREEMENT, made and entered into this day of ______, 200__ by and between NOKIA NETWORKS Oy, a company incorporated under the laws of Finland with its principal office at Keilalahdentie 4, 02150 Espoo AND ENDWAVE CORPORATION, a company incorporated under the laws of the State of Delaware, USA, with its principal office at 321 Soquel Way, Sunnyvale, CA 94086, USA. CLAUSE 1 DEFINITIONS For the purposes of this Agreement the following definitions shall govern (and where the context so admits the singular shall include the plural and vice versa): "Affiliate" of Nokia Networks Oy or Endwave Corporation shall mean an entity (i)  which is directly or indirectly controlling such Party; (ii)  which is under the same direct or indirect ownership or control as such Party; or (iii)  which is directly or indirectly owned or controlled by such Party. For these purposes, entity shall be treated as being controlled by another if that other entity has fifty percent (50 %) or more of votes in such entity, is able to direct its affairs and/or to control the composition of its board of directors or equivalent body. "Agreement" shall mean this Purchase Agreement and all its Appendices as well as any amendment or addenda that may subsequently be agreed upon in writing between the Parties. "Appendix" shall mean a document that the Parties will, by mutual agreement, sign and attach to this Agreement on the Effective Date or at any time during the term of this Agreement. All Appendices shall be subject to the terms and conditions of this Agreement. In the event of a conflict between the terms of an Appendix and the terms of this Agreement, the terms of this Agreement shall prevail. "Buyer" shall mean Nokia Networks and its Affiliates. The abbreviations "NET", "NTC" and "Nokia" are also used as to identify Buyer in the Appendices and other documents attached or referred to in this Agreement and in the daily correspondence and communications between the Parties. "Delivery Date" shall mean the date on which Seller shall have successfully completed the delivery of all the Parts, which meet all of the requirements set forth under this Agreement, as ordered under the Order and/or as may be further defined under the Logistics Appendix. "Development Agreement" shall mean an agreement between the Parties in accordance with which Seller will design, develop, and/or test for Buyer's approval certain new Parts that Buyer may elect to have Seller furnish to Buyer under this Agreement.   -------------------------------------------------------------------------------- PURCHASE AGREEMENT 1201000 6.0.0, 2/2000/TT CONFIDENTIAL "EDI Agreement" shall mean an Electronic Data Interchange ("EDI") agreement, that the Parties may elect to enter into, in which the Parties agree and define the use of EDI in the purchase and sales of the Parts under this Agreement. "Effective Date" shall mean the date mentioned first above, i.e. the date of signing of this Agreement.. "INCOTERMS 2000" shall mean International Commercial Terms issued by the International Chamber of Commerce in 2000 (I.C.C. Pub.No.560, 1999 ed.). "Intellectual Property Rights" shall mean patents (including utility models), design patents, mask work and designs (whether or not capable of registration), chip topography rights and other like protection, copyright, trademark and any other form of statutory or common law protection of any kind and applications for any of the foregoing respectively as well as any trade secrets. "Lead Times" shall mean the time period, which is mutually agreed in writing by the Parties, from the date of issuing an Order to the Delivery Date of the ordered Parts to Buyer. The maximum Lead Times are set forth in Appendix 5. "Logistics Appendix" shall mean the documents attached hereto as Appendix 5, which describe the logistics procedures for forecasting, ordering, shipping and invoicing the Parts. Each of Buyer's sites and/or Affiliates may create a Logistics Appendix in conjunction with Seller in order to specify the procedures unique to that particular site and/or Affiliate and which procedures are not otherwise covered by the Purchase Agreement. "Nokia Bank Link Policy" shall mean Nokia's centralized system for payments pursuant to which all invoices maturing during a working week (i.e. Monday through Friday) are consolidated and paid on one predetermined business day during that same week irrespective of the invoice due date. At the moment, the payment day is Wednesday, but the payment day is subject to change by Nokia at any time without notice. "Order" shall mean either a single purchase order or a blanket purchase order submitted by Buyer to Seller. "Parts" shall mean the mutually agreed object of the sale and purchase hereunder, which Buyer may buy by issuing an Order to Seller. The Parts are listed in Appendix 1. "Party" and "Parties" refer to Seller and/or Buyer. "Quality Requirements" shall mean the document that specifies the quality requirements to which all of the Parts shall strictly conform. The Quality Requirements are set forth in Appendix 3. "Seller" shall mean Endwave Corporation and its Affiliates. "Specifications" shall mean the requirements, agreed upon by Buyer and Seller in writing, to which all of the Parts must strictly conform to in order for the delivery of such Parts to be successfully completed. The Specifications are set forth in the document entitled, [*] GHz Integrated Microwave Module Specifications. [*] 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.   -------------------------------------------------------------------------------- PURCHASE AGREEMENT 1201000 6.0.0, 2/2000/TT CONFIDENTIAL "Tooling" shall mean the moulds, casting moulds, manufacturing, testing and other tools, drawings and technical documents, which Seller produces or which are produced for him. CLAUSE 2 OBJECT OF THE AGREEMENT 2.1  Seller wishes to sell to Buyer and Buyer wishes to purchase from Seller, in accordance with the terms and conditions hereof, certain Parts for which Buyer may elect to place Orders from time to time and which are listed in Appendix 1 hereto and which are manufactured and/or marketed by Seller in accordance with the Specifications. The Parties further agree that this Agreement is not exclusive as to Buyer's Orders to Seller for the Parts. 2.2  The Affiliates of Buyer may place Orders for the Parts to Seller in their own name and for their own account under the terms and conditions of this Agreement. CLAUSE 3 PARTS 3.1  The Parts to be supplied hereunder are listed in Appendix 1 hereto. 3.2  Each Part that Seller delivers hereunder must strictly conform to all of the requirements (including but not limited to the Specifications and the Quality Requirements) set forth under this Agreement, and as set forth in the Development Agreement when applicable. 3.3  Any changes in the design or in the manufacturing process of the Parts, which change may affect the quality, reliability, interchangeability, availability, fit, form or function of the Parts, are subject to Buyer's written approval given prior to the implementation of any such change. 3.4  The Parties may, upon mutual agreement, amend Appendix 1 to include any new item to, or to delete any item from, the definition of Parts. 3.5  Seller shall notify Buyer of any export control restrictions that may apply to the Parts. Seller further agrees to provide Buyer, upon request, with all information necessary to accurately classify the Parts under any applicable export regulations, including but not limited to the US Bureau of Export Administration regulations. 3.6  Buyer may request that Seller label the Parts with serial numbers provided by Buyer, and Seller may not unreasonably deny such request. CLAUSE 4 PURCHASE ESTIMATES 4.1   The Parties hereto acknowledge, that the purchase volumes set out in Appendix 1 hereto, or in any estimates or other forecasts provided by Buyer to Seller, are regarded as estimates only based on the best assumptions of Buyer and they are provided for Seller's planning purposes. Purchase estimates shall not be regarded as binding purchase orders under any circumstances. Buyer shall be under no obligation to purchase any specific quantity of the Parts from Seller, unless otherwise expressly agreed in Appendix 1. Any actions taken by Seller based on such forecasts shall be taken at Seller's risk. 4.2   The Buyer shall buy from the Seller and Seller agrees to sell the Buyer [*] set forth in Appendix 1. [*] 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.   -------------------------------------------------------------------------------- PURCHASE AGREEMENT 1201000 6.0.0, 2/2000/TT CONFIDENTIAL CLAUSE 5 ORDERS 5.1  Buyer may place Orders for the Parts by mail, by telefax, by EDI in accordance with the EDI Agreement, or in any other mutually agreed way. 5.2  The method of placing Orders shall be governed by the Logistics Appendix in respect of each of Buyer's sites and/or Affiliates. However, if the Order placing method is not defined in the Logistics Appendix, Seller shall forthwith and not later than [*] from the receipt of the Order send Buyer an acknowledgement of such Order. If such acknowledgement is not received by Buyer within the above defined time period, the said Order shall be deemed to be accepted by Seller and to be in force as such. 5.3    Seller shall use its best endeavours to supply the Parts in accordance with the Logistics Appendix attached as Appendix 5, and Seller shall use reasonable efforts to meet any quantities exceeding such estimates. 5.4  In case Buyer's Order, Seller's confirmation of Order or Seller's invoice contain terms and conditions, which are in discrepancy with, or attempt to amend, or change in any way this Agreement, such terms and conditions shall be regarded as null and void. CLAUSE 6 PRICES 6.1  The prices, the validity period for such prices, and the discounts for the Parts are provided in Appendix 1. 6.2  Notwithstanding Clause 6.1, if Buyer exceeds the estimated purchase volumes referred to in Clause 4 above, then Buyer reserves the right to renegotiate the prices accordingly. 6.3  All changes in prices shall become effective upon written agreement. 6.4  All prices are exclusive of all taxes and expressed in USD. All duties, levies and income taxes imposed by any governmental authorities of the United States in respect of payments due herein shall be to the account of Seller. All duties, levies and taxes imposed by the authorities of Finland in respect of payments due herein shall be to the account of Buyer. CLAUSE 7 TERMS OF PAYMENT         All payments under this Agreement shall be made [*] from the date of receipt of the Seller's invoice subject to Nokia Bank Link Policy. Buyer's obligation to pay such invoice is conditional on the following: (a)  Seller has delivered, in accordance with this Agreement, the full quantities of the Parts requested in the respective Order (and reflected in Seller's invoice); (b)  the delivered Parts strictly conform to the Specifications and the QualityRequirements.         Buyer is entitled to withhold payment in respect of a delivery of the Parts, which delivery is not fulfilled in accordance with the requirements set forth under subClauses (a) and (b) above, until the delivery is completed to comply with the said subClauses. Notwithstanding the above, if partial delivery is accepted in writing by Buyer in accordance with Clause 10.4 below, then Seller shall be entitled to invoice Buyer accordingly.         In the event that payment is not made within such [*], however, subject to the Nokia Bank Link Policy, Buyer shall pay a penalty of [*] per annum, not to exceed the rate of [*] per month, of the amount owed to Seller. [*] 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. -------------------------------------------------------------------------------- PURCHASE AGREEMENT 1201000 6.0.0, 2/2000/TT CONFIDENTIAL CLAUSE 8 TERMS OF DELIVERY AND PASSING OF TITLE 8.1  The terms of delivery are defined in accordance with INCOTERMS 2000. The terms of delivery are FCA (INCOTERMS 2000), Diamond Springs California, unless otherwise agreed in the Logistics Appendix. 8.2  Title to the Parts shall pass upon delivery to Buyer's receiving facility. CLAUSE 9 PACKING 9.1  Seller's obligations for packing and packaging include, without limitation, the following: (i) all Parts shall be packed and packaged by Seller for protection during shipment, handling, and storage in strict conformance with Buyer's written requirements and instructions, and otherwise in accordance with best commercial practice; (ii) highly polished, highly finished, or precision Parts or those that might be sensitive to stresses of temperature or moisture, or electro-static or electro-magnetic charges, are to be properly preserved and packed in containers which will afford physical protection against any damage and deterioration from those or any other causes. Any Parts packed with nonconforming packing and/or packaging are, upon request of Buyer, subject to rejection and repackaging at Seller's expense. The prices for the Parts shall include the cost of packing and packaging required to prevent any deterioration or damage to the Parts during transpor tation and subsequent storage. Seller shall indemnify Buyer against any damage that the Parts suffer due to improper or nonconforming packaging and/or packing. 9.2  Seller shall use reasonable efforts to use packing and packaging material that can be recycled. 9.3  Further details on packing and packaging may be set forth in the Logistics Appendix and/or in the Specifications. 9.4  If Buyer directs Seller to mark or label any Parts with a trade name, trademark, logo or service mark owned or licensed by Buyer ("Buyer Identification"), Seller shall apply the marking or labeling only on the quantity of Parts and in the manner specified in Buyer's written instructions. Seller shall not sell nor otherwise dispose of, nor permit the sale or disposal of, any Parts bearing any Buyer Identification (including any rejected Parts) to anyone other than Buyer without first obtaining Buyer's express written consent and first removing all Buyer Identification. Upon termination or expiration of this Agreement any materials bearing Buyer's identification shall be returned to Nokia or destroyed. 9.5  With reference to Clause 3.6 the packages shall bear the same serial number as the corresponding Parts. CLAUSE 10 DELIVERY TIMES 10.1  Time shall be of the essence in this Agreement. 10.2  The Delivery Dates, unless otherwise set forth in the Logistics Appendix, shall be defined in the Order of Buyer, as acknowledged by Seller. Any changes to the mutually agreed Delivery Date are subject to the prior written approval of Buyer. The maximum Lead Times for the Parts are specified in the Logistics Appendix. 10.3  Buyer is not obligated to take the Parts into its possession before the agreed Delivery Date. 10.4  Partial deliveries are not allowed, unless expressly accepted in writing on a case by case basis by Buyer prior to the respective delivery. -------------------------------------------------------------------------------- PURCHASE AGREEMENT 1201000 6.0.0, 2/2000/TT CONFIDENTIAL   10.5  If Seller cannot deliver the Parts in accordance with the agreed Lead Times and on the mutually agreed Delivery Date, then Seller shall as soon as Seller becomes or should have become aware of the delay inform Buyer thereof in writing. Such notice shall be entitled "Notice of Delay" and signed by Seller, and shall also include:         (a)  identification of which kind and what quantities of the Parts will be delayed;         (b)  the anticipated duration of delay for each kind and quantity;         (c)  the cause(s) of the delay;         (d)  the actions that Seller is taking and will take to remedy or shorten the delay; and         (e)  a proposal, for Buyer's approval, of a new Delivery Date for each kind and quantity of the delayed Parts, together with a clear, firm commitment to treat such new Delivery Date as contractual and to make the deliveries by such date. In order to avoid any delay in delivery, Seller shall use best efforts (such as, but not limited to, expedited freight), at the cost of Seller, to minimize the possible delay. 10.6  If Buyer does not agree with Seller's proposal for the new Delivery Date submitted in accordance with Clause 10.5 above, and in case the respective delivery of the Parts is delayed [*] or more from the agreed Delivery Date due to reasons other than an Event of Force Majeure (as set forth below in Clause 21), then Buyer shall have the right to terminate the respective delivery only without any liability to Seller. Should Buyer in any such case purchase the respective Parts from a third party supplier, then Seller shall be liable to compensate Buyer for any and all direct costs, which exceed the purchase price of the respective Parts under this Agreement, arising out of such covering purchase. In such case Buyer shall provide documentation on the details of such purchase. 10.7  If Buyer has not granted Seller with an extension to the delivery time and until Buyer exercises the right of termination under Clause 10.6 above, Buyer may at its discretion [*]. 10.8  If Seller fails to notify Buyer of the delay in accordance with Clause 10.5 above, Buyer may at its discretion require Seller to [*]. 10.9  Buyer shall not be obligated to show evidence to Seller in respect of having suffered actual damage as a result of the delay in delivery in order to [*]. Buyer shall be entitled to issue an invoice to Seller for payment of [*] or to deduct the [*] from any outstanding invoice of Seller under this Agreement; Seller shall be obligated, upon request by Buyer, to provide Buyer with a credit note accordingly, and/or Buyer may issue a debit note. CLAUSE 11 RE-SCHEDULING AND CANCELLATION 11.1  Unless otherwise agreed in the Logistics Appendix, Buyer may, without any liability to Seller, by written notice sent to Seller not less than [*] prior to the intended Delivery Date, re-schedule the respective delivery to take place within a [*] following the intended Delivery Date. 11.2  Unless otherwise agreed in the Logistics Appendix, Buyer may, without any liability to Seller, by written notice sent to Seller not less than [*] prior to the intended Delivery Date, cancel the respective delivery for its convenience upon a written notice thereof to Seller. CLAUSE 12 INSPECTIONS 12.1  Buyer may inspect the Parts upon delivery to ascertain correct quantities and whether there exists any visible damage or deviation from the Order in the Parts delivered. In such case Buyer is entitled to treat the Order as discharged either in whole or in part, or if Buyer so requires, Seller agrees to replace all damaged or incorrect Parts   [*] 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.   -------------------------------------------------------------------------------- PURCHASE AGREEMENT 1201000 6.0.0, 2/2000/TT CONFIDENTIAL and deliver additional Parts in order to meet the correct quantities without delay. Such replacement and/or additional deliveries shall be completed and invoiced within [*] (or within the time period specified in the Logistics Agreement) from the receipt by Seller of Buyer's notice. Buyer has the right to deduct the value of the rejected and/or undelivered Parts from Seller's invoice, and Buyer shall provide Seller with a debit note. If Buyer has paid for the rejected Part, Seller shall on the request of Buyer provide a credit note. Upon Seller's request, Buyer shall provide its inspection report to Seller without delay. Buyer shall keep any rejected Parts available for Seller for [*] from the date of inspection, unless otherwise agreed upon between the Parties. Any return of the Parts shall be made at Seller's expense. 12.2  Without limiting the generality of Clause 12.1, Buyer may use statistical sampling methods in the incoming inspection as described in Appendix 6 hereto. If the delivered Parts do not pass this inspection, then Buyer has the right to reject the entire delivery lot or batch of Parts inspected. In any such case, Buyer shall have the option to either (i) demand Seller to forthwith replace the rejected delivery [*] (or within the time period specified in the Logistics Appendix) from the receipt by Seller of Buyer's notice, or (ii) terminate the respective Order without any liability to Seller. In case of replacement by Seller of the rejected delivery, then Seller shall be obligated to pay to Buyer liquidated damages in accordance with Clause 10.7 above calculated from the original Delivery Date to the date of replacement delivery. [*]. 12.3  Notwithstanding Clause 12.2, in case Buyer wishes to sort a delivery which has failed the inspection referred to above in Clause 12.2 in order to determine whether certain Parts may nevertheless be suitable for use by Buyer, then Buyer may do so upon agreement with Seller of the compensation for all additional costs of such action to Buyer. 12.4  In certain cases, Buyer and Seller may agree that Seller shall undertake the incoming inspection of the Parts on behalf of Buyer. 12.5  Any acceptance of the Parts by Buyer, with or without inspection, shall not reduce Seller's responsibility to warrant that the Parts meet the Specifications and Quality Requirements. Acceptance of the Parts shall not limit Buyer's right to make claims relating to the Parts or to complete deliveries, if the Parts are later found not to meet any of the requirements set forth in this Agreement. CLAUSE 13 QUALITY REQUIREMENTS 13.1  Seller warrants that it shall manufacture the Parts strictly in accordance with the Specifications. Seller also warrants that it shall at all times strictly adhere to the Quality Requirements and the workmanship standards set forth in Appendix 3 hereto. Seller shall be responsible for taking preventive and corrective actions to ensure continuity of compliance with Specifications, Quality Requirements and workmanship standards. 13.2  If Buyer has to maintain incoming inspection activities as a result of Seller's inability to deliver only Parts that strictly conform to the Quality Requirements, then Seller shall compensate the cost of such incoming inspections to Buyer in a mutually agreed way. Furthermore, if Seller delivers Parts which do not strictly conform to the Quality Requirements and/or Specifications, and if Buyer integrates other components in such non-conforming Parts and as a result of such integration any/all components do not function properly or are otherwise affected, then Seller shall compensate Buyer purchase price of such integrated components and all direct costs incurred. 13.3  Seller shall provide a list of all subcontractors involved in the manufacture of the Parts prior to the beginning of the serial production phase. Seller shall not have the right to transfer the manufacture of the Parts or any part thereof to another subcontractors without a prior written consent of Buyer. Seller shall always remain responsible for the supply of such subcontractors. 13.4  Seller shall not transfer the manufacture of the Parts to another factory of Seller without a prior written consent of Buyer.   [*] 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.   -------------------------------------------------------------------------------- PURCHASE AGREEMENT 1201000 6.0.0, 2/2000/TT CONFIDENTIAL CLAUSE 14 AVAILABILITY OF THE PARTS AND DISCONTINUATION OF PRODUCTION 14.1  Buyer shall [*] prior to the end of this Agreement provide Seller with a notice whether Buyer desires to renew the Agreement or place an end-of-life Order. Incase of an end-of-life Order, Such Parts shall be delivered in one or more partial deliveries, in accordance with Buyer's Orders, within [*] from the end of the Agreement. CLAUSE 15 FACILITY SURVEYS 15.1  Buyer reserves the right, by itself or through its appointed representative, during regular business hours and following reasonable notice to Seller, to inspect Seller's physical facilities or quality control procedures, or to conduct environmental management system audits, both prior to the first delivery of the Parts under this Agreement and periodically thereafter, in order to verify compliance with the Specifications, Quality Requirements, and other standard industry practices and procedures. Seller shall afford a similar inspection right to Buyer's customers upon request. Such survey shall be subject to a prior written Non-Disclosure Agreement.         Seller shall maintain quality control procedures mutually agreed upon by the Parties as a result of such facility survey. In the event that Buyer determines during any facility survey, that the quality procedures applied by Seller are insufficient as to ensure consistent production of Parts which are strictly in conformance with Specifications and the Quality Requirements, then Buyer shall specifically inform Seller thereof and recommend corrective measures to be undertaken by Seller. Seller hereby agrees to work together in good faith with Buyer to establish corrective actions. The Parties further agree, that the above shall also apply to any and all subsuppliers and/or subcontractors of Seller involved in the manufacture of the Parts, provided that Buyer is accompanied by Seller. The Seller hereby agrees to take all mutually agreed corrective measures necessary in order to ensure compliance of its respective subsuppliers and/or subc ontractors with this Clause15. 15.2  Seller agrees that it shall deliver to Buyer, within [*] from the Effective Date of the Agreement, a detailed disaster recovery plan (the "Recovery Plan"). The Recovery Plan shall define the actions Seller shall take to resume production of the Parts as soon as possible after damage to or destruction of Seller's factory or other facilities, or machinery, personnel, software, documentation and/or supply management. Such events include, without limitation, fire, water damage, flood, main power shortage, power surges or spikes, computer system failure, earthquake and Events of Force Majeure. The Recovery Plan shall also include alternative processes for resuming production of the Parts by opening an alternative facility or setting up the necessary equipment and assembly lines in an existing factory of Seller and/or of its Affiliates.         Seller agrees that should any of the events referred to in this Clause 15.2 or in Clause 21 of the Agreement occur, it shall promptly implement the steps detailed in the Recovery Plan to the full extent and shall take all other necessary measures to resume the performance of its obligations under this Agreement in the shortest time possible. CLAUSE 16 WARRANTIES 16.1  Seller hereby gives a warranty for each Part delivered to receiver's facility under this Agreement for a period of [*] from the delivery of the respective Part ("Warranty Period"). The warranty provided hereunder shall include that each Part supplied shall:         16.1.1  Be new, unused and in good working order; and         16.1.2  Be free from all defects (including without limitation, defects inmaterials and/or workmanship), excluding defects in design as provided by Buyer; and         16.1.3  Be of the highest quality; and         16.1.4  Strictly conform to the Specifications and the Quality Requirements.   [*] 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.   -------------------------------------------------------------------------------- PURCHASE AGREEMENT 1201000 6.0.0, 2/2000/TT CONFIDENTIAL         Any breach of non-conformance with or deviation from the warranty set out in Clause 16.1 shall be referred as "Defect" in this Agreement. 16.2  Seller shall repair or replace, at its own option and cost and without delay, all Defects in the Parts delivered under the Agreement that appear within the Warranty Period. If the remaining Warranty Period for the repaired and/or replaced Part is less than [*], the Warranty Period shall be extended to be [*] from the date of receipt of the repaired or replaced Part. 16.3  If the Parties mutually agree on case by case basis that Buyer shall undertake the repair or replacement of a Defect in a Part on behalf of Seller, Seller shall compensate Buyer for all direct costs incurred thereby. 16.4  If such Defects appear during or after the Warranty Period, which could not have been detected during an ordinary incoming inspection described in Clause 12 of this Agreement (hidden defects) and which are attributable to non-compliance by Seller with any of the terms and conditions of this Agreement or to Seller's design work of the Parts, then Seller shall, at its own cost and without delay, undertake any and all necessary corrective action(s) (including but not limited to redesigning the Parts and/or to replacing in the field (retrofit) all Parts of that particular delivery with new ones) to ensure that the Parts are made to conform to all the terms of this Agreement and that such Defects do not reappear in the Parts.         If Seller fails to remedy any such Defect within a reasonable time period mutually agreed by the Parties, then Buyer shall be entitled to terminate this Agreement and/or terminate all/any part of undelivered orders under the Agreement by written notice to Seller, without prejudice to any other rights of Buyer under this Agreement and without any liability to Seller. 16.5  Should Seller be unable to fulfill any of its obligations under this Clause within a mutually agreed period from the date of notice submitted by Buyer to Seller in respect of the Defect, then Buyer or a third party appointed by Buyer may take the necessary corrective actions at the cost of Seller. 16.6  Buyer shall notify Seller of the Defects in writing, and Seller shall respond to the Buyer within one (1) week from the date of Buyer's notice. Such response shall include a detailed outline of the necessary corrective actions that Seller undertakes to perform in order to remedy the Defect without delay. If Seller is not able to perform the corrective actions and/or present a correction plan that both Parties can accept, then Buyer or a third party appointed by Buyer may take the necessary corrective actions at the cost of Seller.         In addition to the warranties given in Clauses 12, 13, 14 and 19 of this Agreement, Seller gives further warranties specified in Appendix 4 ("Warranty Terms") hereto. Seller hereby commits to strictly comply with the Warranty Terms. Furthermore, Appendix 4 sets forth the support obligations of Seller in respect of the Parts. CLAUSE 17 LIABILITY 17.1  Seller shall indemnify and hold Buyer and its officers, directors employees and customers harmless from and against all damage, claims, demands, suits, proceedings, damages, costs, expenses and liabilities, including without limitation, reasonable legal fees brought against or incurred by Buyer for         (i)  injury to persons, including death; and/or         (ii)  loss or damage to any property; and/or         any other liabilityresulting from any acts or omissions of Seller in the performance of this Agreement and/or a failure of the Parts to conform to the Specifications and the Quality Requirements. Seller shall maintain in force and upon request give evidence of adequate insurance covering its potential liability under this Clause 17.1. Buyer shall on its behalf indemnify and hold Seller Buyer and its officers, directors employees and customers harmless   [*] 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.   -------------------------------------------------------------------------------- PURCHASE AGREEMENT 1201000 6.0.0, 2/2000/TT CONFIDENTIAL from and against all damage, claims, demands, suits, proceedings, damages, costs, expenses and liabilities, including without limitation, reasonable legal fees brought against or incurred by Seller for         (iii)  injury to persons, including death; and/or         (iv)  loss or damage to any property; and/or         (v)  any other liability         resulting from any acts or omissions of Buyer in the performance of this Agreement.         Without prejudice to the generality of the above, Seller shall maintain on a continuous basis a product liability insurance (or a general liability insurance which includes coverage for product liability) with an insured amount of not less than [*] per each occurrence. If the sales of the Parts under this Agreement include sales to Nokia Networks Inc., Seller shall further maintain on a continuous basis an insurance in accordance with Appendix 7. 17.2  Neither Party shall be liable to each other in contract, tort or otherwise, whatever the cause thereof, for any indirect, special, punitive or consequential damage, including but not limited to loss of business or goodwill, loss of revenue or loss of profits, howsoever arising under or in connection with this Agreement, except in cases of intentional misconduct or gross negligence. For the purposes of this Clause 17.2 gross negligence shall mean willful default in the United Kingdom. 17.3  Seller shall use counsel reasonably satisfactory to Buyer to defend indemnification claims under Clause 17.1 or Clause 19.3 (each a "Claim"). If Buyer reasonably determines that any Claim or any proposed Claim settlement might adversely affect any Buyer indemnitees, Buyer may take control of the investigation, defense and/or settlement of the Claim at Seller's risk and expense. If Buyer elects to do so, Buyer and its attorneys shall proceed diligently and in good faith. Notwithstanding the indemnifying party's primary right to have control over defense, the indemnitee may take all necessary steps, at the expense of the indemnifying party, to defend itself until the indemnifying party, to the reasonable satisfaction of the indemnitee, assigns a counsel and initiates defense in a professional manner, and the indemnifying party agrees to fully cooperate with such defense. CLAUSE 18 ENVIRONMENTAL MANAGEMENT AND COMPLIANCE WITH LAWS 18.1  Seller shall comply with the principles of the Business Charter for Sustainable Development (published by the International Chamber of Commerce in 1991) for environmental management. Buyer encourages the adoption of the principles therein by Seller and its subsuppliers and subcontractors. Buyer may, where appropriate, request improvements in Seller's practices to ensure compliance with the said principles and the Nokia Supplier Requirements for the environment. 18.2  Seller shall inform Buyer on request, of all substances and compounds by weight in the Parts supplied. 18.3  Buyer has the right to return any Parts to Seller and Seller shall be responsible for the proper disposal and/or recycling of the Parts. 18.4  Seller shall implement an environment management system (EMS) based on the basic principles of ISO 14001 standard by January 1, 2002. 18.5  Seller represents and warrants that Seller shall in the manufacturing of the Parts diligently follow all applicable laws, statutes and regulations.   [*] 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.   -------------------------------------------------------------------------------- PURCHASE AGREEMENT 1201000 6.0.0, 2/2000/TT CONFIDENTIAL CLAUSE 19 MANUFACTURING RIGHTS, INTELLECTUAL PROPERTY RIGHTS AND TOOLING 19.1  The Parties hereby agree, that in case the Specifications are provided by Buyer based on design which is proprietary to Buyer, in whole or in part, then Seller shall not have any right to manufacture and/or sell or license the Parts to third Parties or otherwise utilize Buyer's design or other technical information provided by Buyer without the prior written consent of Buyer. 19.2  Ownership of the copyright in all drawings, specifications, manuals, documents, data, software and other material provided by one Party hereto to the other under this Agreement shall remain with the Party first referred to above, but the receiving Party, which shall include it's Affiliates in the case of Buyer, shall be deemed to have the right to use such copyright for the performance of the Agreement hereunder. 19.3  Seller represents and warrants that (i) the Parts are delivered free from any lien, security or interest and title when conveyed to Buyer is good and valid and the transfer rightful, and (ii) Seller is not subject to any restriction, agreement, contract, commitment, law or judgement/order which would prohibit or be breached or violated by Seller's execution, delivery and performance of this Agreement and its obligations hereunder.         Seller shall settle and/or defend at its own option and its own expense and indemnify and hold Buyer harmless from any cost, expense, loss, attorney's fees or damage arising out of any claim, demand, suit or proceedings against Buyer or any customer of Buyer to the extent such claim, demand, suit or proceedings alleges that the Parts and/or the incorporation of the Parts in the equipment sold by Buyer, and/or the use of sale of the Parts by Buyer or by any of Buyer's direct customers, infringes upon any Intellectual Property Right of any third party, provided that (1) Buyer informs Seller in writing of any such claim, demand, proceedings or suit without delay, (2) Seller is given control over the defense thereof and Buyer reasonably cooperates in the defense at Seller's expense, and (3) Buyer will not agree with the third party to the settlement of any such claim, demand, proceedings or suit prior to a final judgement t hereon without the prior written consent of Seller, which consent shall not be unreasonably withheld. Buyer shall have the right to select its own counsel to participate in any such defense at Buyer's own expense. This indemnification does not apply to the extent that: (1) infringement arises by a combination made by Buyer or a customer of Buyer to whom Buyer has supplied the Parts, of Parts furnished under this Agreement with other products not furnished hereunder by Seller except to the extent Seller is a contributory infringer, (2) infringement arises solely from changes or modifications made to or from the Parts by Buyer or Buyer's customer; (3) infringements arises from Parts that are made in accordance with drawings, samples or manufacturing specifications designated by Buyer and Seller proves that such infringements arise solely from such drawings, samples or manufacturing specifications designated by Buyer.         If a claim, demand, suit or proceeding alleging infringement is brought or Seller believes one may be brought, Seller shall have the option, at its expense, to (1) modify the Parts to avoid the allegation of infringement, while at the same time maintaining compliance of the Parts with the requirements set forth under this Agreement, (2) replace the Parts with non-infringing but equivalent Parts, which comply with requirements set forth under this Agreement; or (3) obtain for Buyer, at no cost to Buyer a license to continue using and exploiting the Parts in accordance with this Agreement free of any liability or restriction.         In the event any Part to be furnished under this Agreement is to be made in accordance with drawings, samples or manufacturing specifications designated by Buyer and to the extent such Part is not the design of Seller, Buyer agrees to settle and/or defend, at its own option and its own expense and indemnify and hold Seller harmless from any cost, expense, loss, attorney's fees or damage arising out of any claim, demand, suit or proceedings against Seller to the extent such claim, demand, suit or proceedings alleges that such Part or drawings, samples or manufacturing specifications designated by Buyer infringes upon any Intellectual Property Right of any third party, provided that (1) Seller informs Buyer in writing of any such claim, demand, proceedings or suit without delay, (2) Buyer is given control over the defense thereof and Seller reasonably cooperates in the defense at Buyer's expense, and (3) Seller will not agree with the third party to the settlement of any such claim, demand, proceedings or suit prior to a final judgement thereon without the prior written consent of Buyer, which consent shall not be   -------------------------------------------------------------------------------- PURCHASE AGREEMENT 1201000 6.0.0, 2/2000/TT CONFIDENTIAL unreasonably withheld. Seller shall have the right to select its own counsel to participate in any such defense at Seller's own expense. This indemnification does not apply to to the extent any infringement or any claim of infringement results from changes or modification made by Seller or on behalf of Seller to the drawings, samples, manufacturing specifications or any other information designated by Buyer. CLAUSE 20 CONFIDENTIALITY 20.1  Each Party ("Receiving Party") shall not disclose to third Parties nor use for any purpose other than for the proper fulfillment of this Agreement any technical or commercial information ("Information") received from the other Party ("Disclosing Party") in whatever form under or in connection with this Agreement without the prior written permission of the Disclosing Party except information which         a)  is in the public domain at the time of disclosure or later becomes part of the public domain through no fault of the Receiving Party; or         b)  was known to the Receiving Party prior to disclosure by the Disclosing Party as proven by the written records of the Receiving Party; or         c)  is disclosed to the Receiving Party by a third party who did not obtain such Information, directly or indirectly, from the Disclosing Party; or         d)  was independently developed (by personnel having no access to the Information) by the Receiving Party. 20.2  Seller hereby expressly agrees, that the use of Buyer as reference, and/or the use of Buyer or reference to Buyer in the marketing or in any materials or activities of Seller in any way is strictly forbidden. Any statements, announcements and/or press release of this Agreement or part thereof, or of the relationship herein described, shall not be made by Seller without a prior written acceptance of Buyer given on case by case basis. 20.3  The provisions of this Clause 20 shall be valid for 10 years from the date of disclosure. 20.4  Any Non-Disclosure Agreement(s) entered into between the Parties prior to the Effective Date of this Agreement shall remain to be valid, in accordance with its terms and conditions, in respect of the Information disclosed by either Party before the Effective Date of this Agreement, and in respect of the Information disclosed outside the scope of this Agreement. CLAUSE 21 EVENTS OF FORCE MAJEURE 21.1  Neither Party shall be liable to the other for any delay or non-performance of its obligations hereunder in the event and to the extent that such delay or non-performance is due to an event of Force Majeure. The Party affected by an event of Force Majeure shall inform the other Party in writing without delay of its occurrence, probable duration and cessation. 21.2  Events of "Force Majeure" are events beyond the control of the Party which occur after the date of signing of this Agreement and which were not reasonably foreseeable at the time of signing of this Agreement and whose effects are not capable of being overcome without unreasonable expense and/or loss of time to the Party concerned. Events of Force Majeure shall include (without being limited to) war, civil unrest, acts of government, natural disasters, fire, flood, earthquake, explosions and Acts of God. 21.3  The Party affected by an event of Force Majeure shall immediately take any necessary measures in order to limit and minimize the effect of such an event on the performance of its obligations under this Agreement, including but not limited to the fulfillment of the disaster recovery plan in accordance with Appendix 4. -------------------------------------------------------------------------------- PURCHASE AGREEMENT 1201000 6.0.0, 2/2000/TT CONFIDENTIAL 21.4  The Party appealing to the occurrence of an event of Force Majeure is under obligation to prove, upon request, its effect on the performance of the said Party's obligations under this Agreement. 21.5  In the event that the delay or non-performance of either Party hereto continues for a period of two (2) months due to events of Force Majeure, then either Party shall have the right to terminate this Agreement with immediate effect without liability towards the other Party. CLAUSE 22 EFFECTIVE DATE AND TERM 22.1  This Agreement shall become valid and effective on the Effective Date and shall remain valid until December 31, 2002. 22.2  The termination of this Agreement in accordance with Clause 22.1 above shall not affect the delivery of the Parts, in accordance with the terms and conditions hereof, which have been ordered and confirmed prior to the termination. 22.3  The obligations set forth in Clauses 16 (Warranty) (including also Appendix 4), 17 (Liability), 18.2, 18.3, 19, 20, 24, 25.2 and 25.3 shall survive any expiry, cancellation or termination of this Agreement. CLAUSE 23 REPORTABLE EVENTS AND TERMINATION FOR DEFAULT 23.1  Without prejudice to Seller's other obligations and Buyer's rights under this Agreement, Seller shall without delay notify Buyer if Seller finds or suspects that any of the following events is about to occur or appears imminent: delay in delivery, a change in ownership or legal company form of Seller, circumstances that may adversely affect the performance of Seller's (including without limitation its subcontractors/subsuppliers) obligations hereunder, infringement of third party Intellectual Property Rights, or any other action, omission or development which would be important for Buyer to be aware of in order to take precautions to prevent such from causing an adverse effect to its business, reputation, production schedule, or product quality. 23.2  In the event that a Party hereto is in default of a material obligation under this Agreement and fails to remedy such default within a reasonable time period fixed by the non-defaulting Party (which period shall not be less than [*]) in a written notice drawing the attention of the defaulting Party to the default and requiring the same to be remedied, then the non-defaulting Party shall have the right to terminate this Agreement with immediate effect after the expiry of the period fixed. In the event of bankruptcy, receivership or comparable procedure under applicable Bankruptcy Ordinance of a Party hereto or if the default is not capable of being remedied, or in case of substantial change in the ownership of the other Party, then the non-defaulting Party may terminate this Agreement forthwith. 23.3  The termination of this Agreement in accordance with Clause 23.2 above shall also terminate the carrying out of any outstanding Orders, whether confirmed or not. CLAUSE 24 GOVERNING LAW AND SETTLEMENT OF DISPUTES 24.1  This Agreement shall be governed by the laws of Switzerland without regard to its conflict of laws principles, as if wholly performed therein. The parties agree that any and all disputes arising out of or in connection with this Agreement shall be finally settled in arbitration by three neutral arbitrators appointed by the International Chamber of Commerce ("ICC") and shall be conducted pursuant to the ICC's regulations then in force. The arbitration proceedings shall be conducted in Geneva, Switzerland. [*] 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. -------------------------------------------------------------------------------- PURCHASE AGREEMENT 1201000 6.0.0, 2/2000/TT CONFIDENTIAL 24.2  All arbitration proceedings and all discovery related thereto shall be conducted in the English language. Subject to the limitations on liability set forth in this Agreement, the arbitrators may fashion any legal or equitable remedy The arbitration award shall be executable and final, and binding on the Parties. 24.3  In the event of a breach, threatened breach or likely breach of this Agreement, nothing contained in this Agreement to the contrary shall bar the non-breaching Party from seeking injunctive relief in a court of competent jurisdiction. CLAUSE 25 FINAL PROVISIONS 25.1  Neither Party shall assign or transfer to any third Party, without a prior written consent of the other Party, which consent will not be unreasonably withheld, this Agreement or any of its share or interest therein; on condition that the assigning Party shall remain fully responsible towards the other Party for the proper fulfillment of this Agreement. Such consent shall not be unreasonably withheld in case of assignment to an Affiliate of the assigning Party, on condition that the assigning Party shall remain fully responsible towards the other Party for the proper fulfillment of this Agreement. 25.2  This Agreement contains the entire understanding between the Parties in respect of this matter and all previous correspondence, memoranda, minutes of meetings, offers, enquiries and other documents exchanged between the Parties prior to the date of this Agreement shall be cancelled and superseded by this Agreement. 25.3  In addition to this Agreement, the following documents are hereby made Parts of this Agreement:         Appendix 1  The Parts, Prices, Discounts and Price Validity         Appendix 2  Intentionally Omitted         Appendix 3  Quality Requirements and Workmanship Standards         Appendix 4  Warranties and Support         Appendix 5  Logistics Appendix         Appendix 6  Statistical Sampling Methods (N/A)         Appendix 7  Product Liability Insurance         Appendix 8  Tooling (N/A)         In case of any discrepancies between the above documents, the text of this Agreement document shall always prevail over any of the Appendices hereto. 25.4  Any modifications, alterations, additions or amendment to this Agreement (excluding the Appendices) shall be valid only if signed by both Parties and expressly marked "Amendment to the Purchase Agreement". Any Appendices may be modified, altered, added or amended by a written agreement between the Parties. 25.5  The following persons shall act as the representatives of the Parties regarding notices, performance, extension, termination and changes in respect of this Agreement: REPRESENTING THE BUYER REPRESENTING THE SELLER Name: Ville Taipale Name: Nick Ingrao Address: Karaportti 2, 02610 Espoo Address: 321 Soquel Way, Sunnyvale CA 94085 Telephone: +358 50 557 2611 Telephone: 408.522.3165 Telefax: +358 9 5112 7262 Telefax: 408.522.3102   -------------------------------------------------------------------------------- PURCHASE AGREEMENT 1201000 6.0.0, 2/2000/TT CONFIDENTIAL 25.6  The Parties further agree, that in case any subsupplier, subcontractor and/or distributor of Buyer wishes to purchase Parts from Seller to be used in the manufacture of products for Buyer, then Seller agrees to negotiate in good faith with such subsupplier, subcontractor and/or distributor. 25.7  No failure or delay of either Party in exercising its rights hereunder (including but not limited to the right to require performance of any provision of this Agreement) shall be deemed to be a waiver of such rights unless expressly made in writing by the Party waiving its rights. 25.8  In the event that any provision of this Agreement shall be held invalid as contrary to any law, statute or regulation in that regard, the invalidity of such provision shall in no way affect the validity of any other provision of this Agreement and each and every provision shall be severable from each and every other. 25.9  The headings used in this Agreement are inserted for convenience only and shall not affect the interpretation of the respective provisions of this Agreement. This Agreement shall not be construed more or less strictly against either Party for its participation or lack thereof in its drafting. 25.10  The Parties shall be deemed independent contractors hereunder. This Agreement is not intended to create a partnership, franchise, joint venture, agency, or employment relationship between the Parties. Unless otherwise agreed in writing by the Parties, neither Party shall make any express or implied agreements, warranties, guarantees, commitments or representations, or incur any debt, in the name or on behalf of the other Party. -------------------------------------------------------------------------------- PURCHASE AGREEMENT 1201000 6.0.0, 2/2000/TT CONFIDENTIAL IN WITNESS WHEREOF, the Parties have caused this Agreement to be signed by their duly authorized representatives. SIGNED FOR AND ON BEHALF OF NOKIA NETWORKS Oy      SIGNED FOR AND ON BEHALF OF ENDWAVE CORPORATION /s/ Ulla Autere      /s/ Jim Bybokas --------------------------------------------------------------------------------      -------------------------------------------------------------------------------- Name:   Ulla Autere Title:   Plant Manager Date:   7/11/2000 Place:   Espoo      Name:   Jim Bybokas Title:   Vice President Date:   11/3/2000 Place:   Espoo SIGNED FOR AND ON BEHALF OF NOKIA NETWORKS Oy      SIGNED FOR AND ON BEHALF OF ENDWAVE CORPORATION /s/ Jarmo Alander      /s/ Nick Ingrao --------------------------------------------------------------------------------      -------------------------------------------------------------------------------- Name:   Jarmo Alander Title:   Material Manager Date:   11/4/2000 Place:   Espoo      Name:   Nick Ingrao Title:   Director Date:   11/3/2000 Place:   Espoo -------------------------------------------------------------------------------- NOKIA Radio Access Systems(RAS)     MWU Specifications System Development (SD)     06.04.2000 Jyrki Louhi     Confidential Purchase Agreement 1201000 The Parts, Prices, Discounts and Price Validity APPENDIX 1 [*]:              Nokia and Endwave have agreed that Nokia will purchase microwave modules [*]: Year [*]  [*] microwave units and Year [*]  [*] microwave units and Year [*]  [*] microwave units,              Nokia and Endwave have agreed that in case Nokia buys more microwave units during any one year than defined hereinabove for the said year, such quantities exceeding the above [*] shall reduce [*] of the following year(s) even though the actual purchase would take place during the previous years. The above [*] to be purchased and delivered within each calendar year. Increased quantities may be added at prices equal to or lower than above prices. Nokia and Endwave have further agreed in the case Nokia does not order [*] in calendar year [*] or in calendar year [*], [*] by Nokia in the following year. Calendar year [*] units not ordered until calendar unit [*] will be priced at [*]. Calendar year [*] units not ordered until calendar year [*] will be priced at [*]. Prices Unit Price for RATS 18, 23, 26 and 38 GHz Modules Calendar Year     [*]     [*]     [*]   [*] Deliverable     [*]     [*]     [*]   Unit Price     [*]     [*]     [*]             [*] 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.          . -------------------------------------------------------------------------------- NOKIA NOKIA NETWORKS PRODUCT OPERATIONS CONFIDENTIAL APPENDIX 3 QUALITY REQUIREMENTS 1.  PURPOSE         Both the Buyer and the Seller regard the fulfillment of the final costumer's expectations and needs as the basis for their business operation. The purpose of the Quality Requirements is to ensure final customer satisfaction by agreed upon Quality Control activities at Seller and Buyer. The aim is to develop the Seller's quality systems in a joint effort to the point where the Seller can assume full responsibility for his activities and for the quality of his products by maintaining process capability by continuously monitoring and improving his manufacturing and related processes. 2.  APPLICATION         This quality document is complementary to General conditions of Purchase. This document applies to all components, units and devices supplied by the Seller to the Buyer (hereinafter referred to as "the Products"). 3.  GENERAL BUYER REQUIREMENTS         In order to fulfill final customer expectations, the Buyer assumes the following general duties: Informs the Seller of any development projects that will have notable influence on the former's Seller relations. Discloses the quantities for and the nature of deliveries in good time Supplies, with every order of a new product, written documentation giving the expected quality requirements. In co-operation with the Seller the Buyer makes sure that the requirements are unambiguous. Informs the Seller of reasons that are attributable to the latter and may result in the termination of business relations, early enough to allow the Seller to take the necessary measures in order to eliminate the said reasons. 4.  QUALITY CONTROL         4.1  General         The Seller shall run an effective quality system capable of assuring that the requirements will be fulfilled. Seller's quality system shall comply with the requirements of the international quality standard ISO 9000 (EN 29000) and Nokia Supplier Requirements. The Seller shall provide evidence of ISO 9000 certification, evidence of meeting the Nokia Supplier Requirements and permits system and process audits at his premises with reference to deliveries and related processes to the Buyer at any time.         4.2  Process Control, Control Plan and quality metrics               The Seller shall maintain or exceed process capability as validated in PV (Process Validation) and continuously improve these with the objective to continuously improve all process yields. A Control Plan shall reflect the prevailing process controls and shall be available for review upon Buyer's request. Seller shall to the extent and within the time frames requested by the Buyer have documented reports of quality metrics regarding both process and test measures readily available at the quarterly management meeting. Key quality metrics (see table below) of the Seller's manufacturing process(es) shall be communicated to the Buyer continuously on a quarterly basis or upon the Buyer's request. --------------------------------------------------------------------------------         4.3  Design and Process Changes and Quality Plan               The Seller shall communicate all design and process changes as they deviate from either DV (Design Validation) or PV (Process Validation) as described in the Nokia Design and Process Change Management Requirements For Microwave Module Suppliers. All such design and process changes shall be validated in agreement with the Buyer to maintain product reliability and capability as well as process capability. If there are major design or process changes the Seller shall on Buyer's request produce a Quality Plan for the redesign Product and/or related manufacturing process prior to validation of the change. The Quality Plan shall clearly state the criteria that will be employed when releasing items to the Buyer and when releasing items from any stage of the Seller's production to next including incoming material inspection criteria.               In accordance with paragraph 3, the Parties must inform in writing each other of any modifications concerning electrical components and raw materials as defined in the Seller supplied Project Parts Lists. Both parties are under obligation to verify that the information provided is unambiguous and, in case ambiguities exist, to contact the other party without delay in order to straighten them out. If required, a sample must be submitted for approval. 5.  INCOMING MATERIAL INSPECTION AND TESTING AT BUYER         The incoming Part inspection will be done according to the international standard IEC410 (MIL-STD 105 E) and the quality evaluation done against IPC-A-610 (class 2) and Nokia Networks Quality Requirements. The Buyer is entitled to perform a sampling plan according to the General inspection level II, single sample, AQL 1 for visual inspection. If the amount of defective products [*] in electrical incoming inspection or in the production test process, the Buyer is entitled to return the delivery lot at the Seller's expense. Refer to CLAUSE 12.         The Buyer has the right to return all faulty Products, regardless of at which stage of production the fault has been detected. Refer to CLAUSE 12. When a reported result deviates from the quality level according to the incoming inspection plan, Seller shall, when requested, inform the Buyer of the measures that Seller has taken or will take in order to achieve the required quality level.         5.1  Quality Complaint         In case of complaint, the Buyer informs the Seller of the detected fault [defect] in writing as soon as possible from its detection. On this occasion, the Buyer and the Seller agree on the measures to be taken.         Refer to CLAUSE 12 on returns. 6.  RELIABILITY         The Seller's quality system shall clearly set out the procedures to be followed during the design and production of the product in order to prevent any departure from the Seller's internal reliability criteria.         Seller shall analyze field data of MWU's provided by Buyer to verify that MTBF and Expected Lifetime for MWU's are within the specification. In the case that any adverse deviation from specification is identified Seller shall immediately start and implement all the necessary preventive and corrective actions for future shipments to meet expected lifetime and MTBF.         If requested by the Buyer, the Seller shall provide a list of materials, which are used in the Product to the Buyer's component quality assurance personnel. If unreliable materials or components are found, the Seller shall make appropriate modifications to prevent any possible reliability problems.         Refer to 4.3 Design and Process changes for reliability on design and process changes.   [*] 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. -------------------------------------------------------------------------------- Quality metrics and monthly reports for MMIC co-operation partners Process Phase --------------------------------------------------------------------------------   Metrics --------------------------------------------------------------------------------   Description --------------------------------------------------------------------------------   Target -------------------------------------------------------------------------------- Manufacturing phase [*] [*] Refer to CP   Manufacturing phase [*] [*] TRW Internal Targets TBD   Manufacturing phase [*] [*] [*] [*] TBD TBD [*] Delivery phase [*] [*] [*] [*] [*] [*] [*] Operation and Maintenance [*] [*] One month          [*] [*] TBD [*] 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. --------------------------------------------------------------------------------   Purchase Agreement 1201000 Appendix 4 Warranties and Support 1. WARRANTIES FOR SERVICES 1.1  Seller hereby gives a warranty for the services rendered under the Agreement for a period of [*] from the date of completion of the respective service. 1.2  The warranty does not cover defects caused by the installation of the Part by Buyer at Buyer's site, unless such installation is performed in accordance with the written instructions of Seller. 2. REPAIRS AND REPLACEMENTS WITHIN THE WARRANTY PERIOD 2.1   The defective Parts shall be delivered to Seller, at Seller's expense, for warranty repair or replacement by Buyer or its designee. Each repaired and/or replaced Part shall be delivered by Seller, at Seller's expense, to the address from which the Part was sent by Buyer, unless otherwise expressly requested by Buyer or its designee. 2.2  All repaired or replaced Parts shall be delivered to Buyer or its designee in accordance with Sections 16.4 and 16.5 of Clause 16 of the Agreement. 2.3  If Seller's evaluation indicates that that the Defect is of the kind not covered by the Agreement warranty, then Seller shall notify Buyer thereof in writing within a period of thirty (30) days after the Seller's receipt of the applicable Parts. 2.4  If a total recall of the Parts is found to be necessary, the recalled Parts can be sent back to Seller by Buyer or its customers and the repaired or replaced Parts shall be returned to the address, from which the recalled Parts were sent to Seller, unless otherwise expressly requested by Buyer or its customer. In case of such recall, Seller shall perform the repairs and/or retrofit required, and shall be liable for all costs accrued thereof, including without limitation any delivery charges. [*] 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.   -------------------------------------------------------------------------------- 2.5  If, during or after the Warranty Period, the repair and/or replacement of the Part and/or the delivery of the same to Buyer is not completed within the time periods defined in this Appendix 4, Buyer shall be credited by Seller [*] of the price of the Parts being repaired or replaced per each week, or part thereof, of delay. Provided that the amount to be credited by Seller shall not exceed [*] of the price of the Parts being repaired or replaced. 3. REPORTING OF THE REPAIRS AND REPLACEMENTS 3.1  Each delivery of the repaired or replaced Parts by Seller shall include a written repair report with the following information:   (1)  identification and the serial number of each repaired and replaced Part; and (2)  detailed explanation of the repair actions performed by Seller on each Part; and (3)  whether the repair or replacement performed by Seller falls under the warranty or not; and (4)  the applicable price, if the repair/replacement performed outside the warranty.   [*] 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.   -------------------------------------------------------------------------------- Confidential         Version 2.0.0 Purchase Agreement 1201000 Appendix 5   3.2  Each year Seller shall give four detailed, written service reports to Buyer. The reporting periods are: Q1          January.....March Q2          April.........June Q3          July.........September Q4          October...December 3.3  Each service report shall be presented by Seller to Buyer at the following quarterly management meeting. 3.4  The service report shall include: (1)  the quantity of Parts repaired during the reporting period; and (2)  the quantity of Parts replaced during the reporting period; and (3)  the serial number of each repaired Part; and (4)  the serial number of each replaced Part; and (5)  the quantity of Parts waiting to be repaired or replaced; and (5)  a detailed list of any frequent Defects detected; and (6)  the average turn-around time for the repairs and replacements hereunder. 3.5  Any time upon request Seller shall be able to check and report to Buyer the status of any Part sent by Buyer to be repaired or replaced by Seller. 4. SPARE PARTS 4.1  Buyer may purchase spare parts in accordance with Clause 14 of the Agreement.   CONFIDENTIAL                                                                                                                                                                                                                                      Version 2.0.0 Purchase Agreement 1201000 Appendix 5 CONFIDENTIAL   Version 2.0.0 Purchase Agreement 1201000 Appendix 5 LOGISTICS APPENDIX MADE AND ENTERED INTO BY AND BETWEEN NOKIA NETWORKS OY / KARAMALMI PLANT AND ENDWAVE CORPORATION ON -------------------------------------------------------------------------------- CONFIDENTIAL Purchase Agreement 1201000 Appendix 5 CONTENTS       Page 1   Scope and Objective 3         2   Forecasting 3 2.1      Forecast 3 2.2      Commitment to Forecast 3         3   Ordering Methods 4 3.1      Single Purchase Order 4         4   Delivery Notification Methods 4 4.1      Common Purchase Order 4         5   Flexibility 4         6   Buffer Stock and Allocation of Risk 4         7   Terms of Delivery 4         8   Packing List Requirements 4       9   Transportation 5         10   Return and Rejected Materials 6 10.1      Return Note 6 10.2      Compensation for Defective Parts 6 10.3      Return of Defective Parts 6         11   Invoicing 6         12   Reporting Oblications Of Seller 8         13   Final Provisions 8         Schedule 1   List of Parts, Methods for Forecasting, Ordering and Delivering,    Flexibility and Buffers   Schedule 2   Commitment Schedule   -------------------------------------------------------------------------------- CONFIDENTIAL Purchase Agreement 1201000 Appendix 5 This LOGISTICS APPENDIX is made and entered into this __ day of _______, 200__ by and between NOKIA NETWORKS OY, a company incorporated in Finland with its principal office at Keilalahdentie 4, 02150 Espoo, Finland (hereinafter referred to as the "LOCAL BUYER"), AND ENDWAVE CORPORATION, a company incorporated in California, United States with its principal office at 6425 Capitol Avenue, Diamond Springs, CA 95619, US (hereinafter referred to as the "SELLER"). The LOCAL BUYER and the SELLER may hereinafter be jointly referred to as the "Parties." 1  SCOPE AND OBJECTIVE This Logistics Appendix is incorporated by reference into the Purchase Agreement entered into between the SELLER and Nokia Networks Oy (hereinafter referred to as "NOKIA") on __________ ___, 200__ (hereinafter referred to as "Purchase Agreement"). The object of this Logistics Appendix is to identify the procedures for forecasting, ordering, shipping and invoicing the Parts listed in Schedule 1 between LOCAL BUYER and SELLER in order to specify the procedures unique to that particular site which are not otherwise covered by the Purchase Agreement. In case of any discrepancies between the Purchase Agreement and this Logistics Appendix, the text of the Purchase Agreement shall always prevail. This Logistics Appendix shall not create any obligation for LOCAL BUYER to purchase any particular quantity of Parts from SELLER until a specific order has been placed for the Parts by LOCAL BUYER. The Parties acknowledge that this Logistics Appendix does not govern the forecasting, ordering, shipping or invoicing logistics for any sites of BUYER or SELLER other than LOCAL BUYER's manufacturing sites Nokia Networks Oy, Karamalmi Plant, Karaniityntie 1, 02610 Espoo, Finland and SELLER's facilities EndWave Corporation, 6425 Capitol Avenue, Diamond Springs, CA 95619, US, or for the forecasting, ordering, shipping or invoicing for any parts other than those listed in Schedule 1. 2  FORECASTING 2.1  FORECAST LOCAL BUYER agrees to provide from time to time in good faith a forecast of its anticipated purchasing needs to the SELLER, in order to permit the SELLER to plan for an adequate manufacturing capacity. The forecast provided by the LOCAL BUYER to the SELLER shall not be regarded as binding upon the LOCAL BUYER under any circumstances, except as provided in Schedule 2. The forecasting principles (e.g. existence, content, time period and method of the forecast) for each Part governed by this Logistics Appendix are contained in Schedule 1. 2.2  COMMITMENT TO FORECAST Schedule 2 specifies the commitment to forecast for each Part governed by this Logistics Appendix. -------------------------------------------------------------------------------- CONFIDENTIAL Purchase Agreement 1201000 Appendix 5 3  ORDERING METHODS LOCAL BUYER may place orders for Parts by a single purchase order. Schedule 1 specifies the order method for each Part governed by this Logistics Appendix. 3.1  SINGLE PURCHASE ORDER LOCAL BUYER may from time to time submit single purchase orders to SELLER which shall specify Part numbers, order quantities, delivery dates, delivery address and specific order number for the Parts to be ordered thereunder. 4  DELIVERY NOTIFICATION METHODS LOCAL BUYER shall give delivery notification for Parts by the following methods:         Common purchase order Schedule 1 attached hereto specifies the delivery notification method for each Part governed by this Logistics Appendix. 4.1  COMMON PURCHASE ORDER Under the Common Purchase Order method, LOCAL BUYER shall submit single purchase orders to SELLER for the purchase of Parts. SELLER shall deliver the ordered Parts on the date specified on the purchase order and in accordance with the terms and conditions specified in the Purchase Agreement. Schedule 1 specifies the details for orders placed under the Common Purchase Order method. 5  FLEXIBILITY SELLER is committed to maintain its ability to deliver the Parts according to the Flexibility Schedule agreed between LOCAL BUYER and SELLER and specified in Schedule 1. The flexibility requirements define the quantity of Parts above the given basic level the SELLER shall be ready to deliver. The given level can be based on LOCAL BUYER's manufacturing capacity, on LOCAL BUYER'S forecast, or as otherwise defined by LOCAL BUYER. Schedule 2 specifies the basic level flexibility requirement and the flexibility requirements for each Part governed by this Logistics Appendix. 6  BUFFER STOCK AND ALLOCATION OF RISK SELLER shall hold at their own expense Buffer Stock for the Parts in the quantities specified in Schedule 1. 7  TERMS OF DELIVERY Terms of delivery between LOCAL BUYER and SELLER are FCA Loaded Diamond Springs, CA (INCOTERMS 2000). The prices for the Parts are determined by Appendix 1 to the Purchase Agreement. 8  PACKING LIST REQUIREMENTS All packaging must be barcoded as defined in NESS 0099B60 barcode specifications. The packing list must include the following information:         1.  SELLER's name and mailing address.         2.  LOCAL BUYER's name and address:   -------------------------------------------------------------------------------- CONFIDENTIAL Purchase Agreement 1201000 Appendix 5         delivery address.         mailing and invoicing address.         precise location (for example production line, door number or warehouse).         3.  LOCAL BUYER purchasing order number (in written and barcode form).         4.  LOCAL BUYER's order position (in written and barcode form).         5.  Identification information for the goods:         LOCAL BUYER code (in written and barcode form).         Manufacturer type.         6.  Item quantity (in written and barcode form).         7.  Quantity of packages.         8.  Terms of delivery (INCOTERMS 2000).         9.  Date of consignment.         10.  Production date or other traceable code (in written and barcode form).         11.  Packing list number (in written and barcode form).         12.  WO-number in subcontracting (in written and barcode form). Only Parts sharing the same Part code may be packed together in a single package; however, the delivery package (Master carton) may contain several separately packed single-Part code packages, provided that the delivery package also conforms to the requirements set forth in this Logistics Appendix. 9  TRANSPORTATION LOCAL BUYER's forwarding agents / transportation companies are listed below. Factory Address Forwarder / Transportation Company Contact Details (Name, Telephone, Fax) -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Nokia Networks Oy,   [*]   [*]     Karamalmi Plant,             Karaniityntie 1,             FIN-02610 Espoo, Finland SELLER's forwarding agents / transportation companies are listed below. Factory Address Forwarder / Transportation Company Contact Details (Name, Telephone, Fax) -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- EndWave Corporation    [*]         6425 Capitol Avenue,             Diamond Springs, CA 95619               [*] 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.   -------------------------------------------------------------------------------- CONFIDENTIAL Purchase Agreement 1201000 Appendix 5 10  RETURN AND REJECTED MATERIALS Defective Parts can be found upon or after the receipt of the Parts, or during or after the use of Parts in production. 10.1  RETURN NOTE         The LOCAL BUYER shall issue a RETURN NOTE and send a copy to the SELLER.         The RETURN NOTE shall include the following information:   LOCAL BUYER contact information   SELLER contact information *   LOCAL BUYER's Non-Conforming Materials (NCM) reference number *   Description of the returned material (LOCAL BUYER's part number & description)   Quantity of Parts returned *   Description of the defect *   Serial numbers of returned Parts (if applicable)   Total value of returned material and other expenses to be compensated by the SELLER   Reparation expenses to be compensated by the SELLER (if applicable)   Packing information (quantities, weights, dimensions) 10.2  COMPENSATION FOR DEFECTIVE PARTS Compensation for defective Parts rejected by LOCAL BUYER shall be by Credit Note issued by SELLER. The Credit Note shall be issued within [*] of the Parts being returned to SELLER and shall correspond to LOCAL BUYER's Return Note, referencing the Non-Conforming Material (NCM) number contained therein. At LOCAL BUYER's option, defective Parts rejected by LOCAL BUYER may be replaced by SELLER within [*] after receiving the Return Note. The replacement Parts shipped to LOCAL BUYER from SELLER shall be identified with the LOCAL BUYER's reference number. 10.3  RETURN OF DEFECTIVE PARTS LOCAL BUYER shall return the defective Parts and the expense shall be billed directly to SELLER via its preferred carrier Emery . 11  INVOICING The invoice shall include the following information: Invoicing address:     Please do not specify a person's name   Please specify "Nokia Networks Oy/LOCAL BUYER" Purchase order number(s) per line item [*] 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. -------------------------------------------------------------------------------- CONFIDENTIAL   Version 2.0.0 Purchase Agreement 1201000 Appendix 5   Terms of payment (days)   Bank *   Name of bank *   Account number *   SELLERs contact information *   Delivery or shipment day *   Country of origin and despatch                                   [FOR EU DELIVERIES ONLY] *   Goods are in free circulation within the EU countries     or   Goods are not in free circulation within the EU countries *   Description of goods: *   LOCAL BUYER part number & description   SELLER's part number *   Domestic invoices: *   Tax free price   Added value tax and percentage   Taxable price *   Invoicing currency and it's international abbreviation *   VAT-code *   SELLER's customer number for LOCAL BUYER *   Bar code for domestic invoices (if applicable) *   Shipment details: *   Net and gross weight   Dimensions of each package   Number of packages *   Terms of delivery (INCOTERMS 2000) *   Waybill number *   Forwarder and it's representative in the country of departure   -------------------------------------------------------------------------------- CONFIDENTIAL Purchase Agreement 1201000 Appendix 5 * Customs tariff code Packing list number 12  REPORTING OBLIGATIONS OF SELLER SELLER shall submit the following reports to the LOCAL BUYER: TYPE OF REPORT   REPORTING FREQUENCY Delivery Accuracy     [*]   Buffer Levels and Stock on hand     [*]   Quality performance     [*]   13  FINAL PROVISIONS 13.1.  Any modifications or amendments to the text of this Logistics Appendix must be made in writing and signed by authorized representatives of both Parties. However, the Parties acknowledge that the Schedules are intended to be revised periodically and to the extent that such revisions do not conflict with the terms of the Purchase Agreement or the Logistics Appendix, updated versions of Schedules may be issued upon the signatures of authorized representatives of both Parties and without requiring a formal amendment either to this Logistics Appendix or to the Purchase Agreement. 13.2.  All times specified in this Logistics Appendix are based on LOCAL BUYER's time zone. 13.3.  This version 2.0.0, upon signature of both Parties, below, cancels and supercedes all prior versions of this Logistics Appendix or any forecast or commitment schedules issued with regard to the Parts covered by this Logistics Appendix. LOCAL BUYER:      SELLER:           NOKIA NETWORKS OY      ENDWAVE CORPORATION      Karamalmi Plant      By: /s/ Jarmo Alander   By:   /s/ Nick Ingrao -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Title:   Jarmo Alander Materials Manager   Title:   Nick Ingrao Director, Wireless Programs Date:  4 November 2000   Date:  3 November 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.   -------------------------------------------------------------------------------- CONFIDENTIAL Purchase Agreement 1201000 Appendix 5 LIST OF PARTS, METHODS FOR FORECASTING, ORDERING AND DELIVERING, FLEXIBILITY AND BUFFERS Schedule 1     Part Number Description Forecasting Existance Content Time Period Frequency Total Commitment Existence Ordering Ordering Method Tool Delivery Frequency Lead Time/ Delivery Time Packing Size/Lot Size Flexibility Based On Daily Weekly Monthly Buffer Stock Minimum Qty     [*]       [*] 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.   -------------------------------------------------------------------------------- CONFIDENTIAL Purchase Agreement 1201000 Appendix 5 CONFIDENTIAL COMMITMENT SCHEDULE Schedule 2 [*] [*] Weeks 1 2 3 4 5 6 7 8 9 10   Forecast [*] [*] [*] Parameters [*] [*] Flexibility [*] Firm period of the forecast = Forecast defines the exact amount of the Parts to be delivered according to latest forecast. Commitment period to the quantity of the Forecast = Forecast defines the amount of the Parts to be committed but not the delivery date. Rescheduling Parameters define the time period when the Parts Inside the Commitment period shall be ordered at the latest. Flexibility defines Local Buyer's commitment to the Part Forecast and Seller's commitment to maintain ability to delivery Parts above the Forecast. A failure to meet the Endwave capacity commitment [*] by the difference between the amount accepted and amount committed to. [*] [*] 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.   Purchase Agreement 6.0.0, 2/20002TT CONFIDENTIAL Appendix 7 Product Liability Insurance Required Insurance Coverage The insurance coverage required of all Component Part Suppliers of Notkia Telecommunications, Inc. are:   1. Workers Compensation: Statutory   Employer's Liability: [*] Disease per Employee Limit   [*] Disease per Policy Limit   [*] Limit per Accident Limit       2. General Liability: [*] General Aggregate Limit   [*] Products/Completed Operations Aggregate Limit   [*] Personal and Advertising Injury Limit   [*] Each Occurrence Limit   [*] Broad Form Property Damage Legal Liability Limit   [*] Medical Payments Limit       3. Automobile Liability: [*] per Occurrence Limit       4. Umbrella Liability: [*] per Occurrence Limit NOKIA, its directors, officers, affiliates, and employees should be named as an additional insured on the General Liability, Automobile Liability and Umbrella Liability policies via the Certificate of Insurance. All insurance policies must be written on an occurrence basis. The insurance company or companies must be licensed, admitted insurers in the State of Texas and in the State(s) of Suppliers' operations. Each insurer must also meet the following minimum criteria: (i) A.M. Best rating of "A"; and (ii) Policyholders' Surplus Size VII. The Certificate will provide that NOKIA will receive [*] notice for material change, reduction of limits, cancellation or nonrenewal of the policy or policies. The words "endeavor to" and the phrase "but failure to mail such notice shall impose no obligation or liability of any kind upon the company" must be deleted from the Cancellation wording on the Certificate. The aforementioned insurance policies and limits in no way limit the Suppliers' liability to defend and indemnify NOKIA for negligent acts committed by the Supplier. [*] Certain information in this exhibit has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions.

EXHIBIT 10.1     FIVE-YEAR CREDIT AGREEMENT   Dated as of May 23, 2000 among AUTOZONE, INC., as Borrower,   THE SEVERAL LENDERS FROM TIME TO TIME PARTY HERETO AND BANK OF AMERICA, N.A., as Administrative Agent and THE CHASE MANHATTAN BANK, as Syndication Agent ______________________________________________________________   BANC OF AMERICA SECURITIES, LLC and CHASE SECURITIES INC., as Lead Arrangers and Book Managers and BANK ONE, NA and FLEET NATIONAL BANK, as Co-Documentation Agents -------------------------------------------------------------------------------- TABLE OF CONTENTS SECTION 1 DEFINITIONS 1.1     Definitions. 1.2     Computation of Time Periods. 1.3     Accounting Terms. SECTION 2 CREDIT FACILITIES 2.1     Revolving Loans. 2.2     Competitive Loan Subfacility. 2.3     Swingline Loan Subfacility. SECTION 3 OTHER PROVISIONS RELATING TO CREDIT FACILITIES 3.1     Default Rate. 3.2     Extension and Conversion. 3.3     Prepayments. 3.4     Termination, Reduction and Increase of Revolving Committed Amount. 3.5     Fees. 3.6     Capital Adequacy. 3.7     Inability To Determine Interest Rate. 3.8     Illegality. 3.9     Yield Protection. 3.10    Withholding Tax Exemption. 3.11     Indemnity. 3.12     Pro Rata Treatment. 3.13     Sharing of Payments. 3.14     Payments, Computations, Etc. 3.15     Evidence of Debt. 3.16     Replacement of Lenders. SECTION 4 CONDITIONS 4.1     Closing Conditions. 4.2     Conditions to all Extensions of Credit. SECTION 5 REPRESENTATIONS AND WARRANTIES 5.1     Financial Condition. 5.2     Organization; Existence; Compliance with Law. 5.3     Power; Authorization; Enforceable Obligations. 5.4     No Legal Bar. 5.5     No Material Litigation. 5.6     No Default. 5.7     Ownership of Property; Liens. 5.8     No Burdensome Restrictions. 5.9     Taxes. 5.10     ERISA. 5.11     Governmental Regulations, Etc. 5.12     Subsidiaries. 5.13     Purpose of Loans 5.14    Year 2000 Matters. SECTION 6 AFFIRMATIVE COVENANTS 6.1     Information Covenants. 6.2     Preservation of Existence and Franchises. 6.3     Books and Records. 6.4     Compliance with Law. 6.5     Payment of Taxes and Other Indebtedness. 6.6     Insurance. 6.7     Maintenance of Property. 6.8     Use of Proceeds. 6.9     Audits/Inspections. 6.10     Adjusted Debt to EBITDAR Ratio. 6.11     Interest Coverage Ratio. SECTION 7 NEGATIVE COVENANTS 7.1     Liens. 7.2     Nature of Business. 7.3     Consolidation, Merger, Sale or Purchase of Assets, etc. 7.4     Fiscal Year. 7.5     Subsidiary Indebtedness. SECTION 8 EVENTS OF DEFAULT 8.1     Events of Default. 8.2     Acceleration; Remedies. SECTION 9 AGENCY PROVISIONS 9.1     Appointment. 9.2     Delegation of Duties. 9.3     Exculpatory Provisions. 9.4     Reliance on Communications. 9.5     Notice of Default. 9.6     Non-Reliance on Administrative Agent and Other Lenders. 9.7     Indemnification. 9.8     Administrative Agent in its Individual Capacity. 9.9     Successor Administrative Agent. 9.10   Syndication Agent. SECTION 10 MISCELLANEOUS 10.1     Notices. 10.2     Right of Set-Off. 10.3     Benefit of Agreement. 10.4     No Waiver; Remedies Cumulative. 10.5     Payment of Expenses, etc. 10.6     Amendments, Waivers and Consents. 10.7     Counterparts. 10.8     Headings. 10.9     Survival. 10.10     Governing Law; Submission to Jurisdiction; Venue. 10.11     Severability. 10.12     Entirety. 10.13     Binding Effect; Termination. 10.14     Confidentiality. 10.15     Source of Funds. 10.16     Conflict. SCHEDULES Schedule 1.1 Applicable Percentage Schedule 2.1(a) Lenders Schedule 2.1(b)(i) Form of Notice of Borrowing Schedule 2.1(e) Form of Revolving Note Schedule 2.2(f) Form of Competitive Note Schedule 2.3(d) Form of Swingline Note Schedule 3.2 Form of Notice of Extension/Conversion Schedule 3.4(b) Form of New Commitment Agreement Schedule 4.1(f) Form of Legal Opinion Schedule 5.5 Material Litigation Schedule 5.12 Subsidiaries Schedule 6.1(c) Form of Officer's Compliance Certificate Schedule 7.5 Subsidiary Indebtedness Schedule 10.3(b) Form of Assignment and Acceptance -------------------------------------------------------------------------------- FIVE-YEAR CREDIT AGREEMENT THIS FIVE-YEAR CREDIT AGREEMENT dated as of May 23, 2000 (the "Credit Agreement"), is by and among AUTOZONE, INC., a Nevada corporation (the "Borrower"), the several lenders identified on the signature pages hereto and such other lenders as may from time to time become a party hereto (the "Lenders"), BANK OF AMERICA, N.A., as administrative agent for the Lenders (in such capacity, the "Administrative Agent"), and THE CHASE MANHATTAN BANK, as syndication agent (in such capacity, the "Syndication Agent").     W I T N E S S E T H WHEREAS, the Borrower has requested that the Lenders provide a $650,000,000 credit facility (as such credit facility may be increased or decreased pursuant to the terms hereof) for the purposes hereinafter set forth; WHEREAS, the Lenders have agreed to make the requested credit facility available to the Borrower on the terms and conditions hereinafter set forth; NOW, THEREFORE, IN CONSIDERATION of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:     SECTION 1 DEFINITIONS 1.1 Definitions. As used in this Credit Agreement, the following terms shall have the meanings specified below unless the context otherwise requires: "364-Day Credit Agreement" means that certain Credit Agreement dated as of the date hereof by and among the Borrower, the lenders party thereto, Bank of America, N.A., as administrative agent and The Chase Manhattan Bank, as syndication agent. "364-Day Revolver" means the revolving loan facility established pursuant to the 364-Day Credit Agreement. "Administrative Agent" shall have the meaning assigned to such term in the heading hereof, together with any successors or assigns. "Administrative Agent's Fee Letter" means that certain letter agreement, dated as of April 14, 2000, between the Administrative Agent and the Borrower, as amended, modified, supplemented or replaced from time to time. "Administrative Agent's Fees" shall have the meaning assigned to such term in Section 3.5(b). "Affiliate" means, with respect to any Person, any other Person (i) directly or indirectly controlling or controlled by or under direct or indirect common control with such Person or (ii) directly or indirectly owning or holding five percent (5%) or more of the equity interest in such Person. For purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Agency Services Address" means Bank of America, N.A., Agency Administrative Services, 1850 Gateway Boulevard, 5th Floor, Concord, California 94520-3281, Attention: Jennifer Reeves, or such other address as may be identified by written notice from the Administrative Agent to the Borrower. "Applicable Percentage" means, for purposes of calculating the applicable interest rate for any day for any Revolving Loan, the applicable rate of the Facility Fee for any day for purposes of Section 3.5(a) or the applicable rate of the Utilization Fee for any day for the purposes of Section 3.5(c), the appropriate applicable percentage set forth on Schedule 1.1. The Applicable Percentages shall be determined and adjusted on the following dates (each a "Calculation Date"):   (i) where the Borrower has a senior unsecured (non-credit enhanced) long term debt rating from S&P and/or Moody's, five (5) Business Days after receipt of notice by the Administrative Agent of a change in any such debt rating, based on such debt rating(s); and   (ii) where the Borrower previously had a senior unsecured (non-credit enhanced) long term debt rating from S&P and/or Moody's, but either or both of S&P and Moody's withdraws its rating such that the Borrower's senior unsecured (non-credit enhanced) long term debt no longer is rated by either S&P or Moody's, five (5) Business Days after receipt by the Administrative Agent of notice of the withdrawal of the last to exist of such previous debt ratings, based on Pricing Level V until the earlier of (A) such time as S&P and/or Moody's provides another rating for such debt of the Borrower or (B) the Required Lenders have agreed to an alternative pricing grid or other method for determining Pricing Levels pursuant to an effective amendment to this Credit Agreement.   The Applicable Percentage shall be effective from a Calculation Date until the next such Calculation Date. The Administrative Agent shall determine the appropriate Applicable Percentages promptly upon receipt of the notices and information necessary to make such determination and shall promptly notify the Borrower and the Lenders of any change thereof. Such determinations by the Administrative Agent shall be conclusive absent manifest error. The Applicable Percentage from the Closing Date shall be based on Pricing Level II, subject to adjustment as provided herein. "Bank of America" means Bank of America, N.A. and its successors. "Bankruptcy Code" means the Bankruptcy Code in Title 11 of the United States Code, as amended, modified, succeeded or replaced from time to time. "Bankruptcy Event" means, with respect to any Person, the occurrence of any of the following with respect to such Person: (i) a court or governmental agency having jurisdiction in the premises shall enter a decree or order for relief in respect of such Person in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of such Person or for any substantial part of its Property or ordering the winding up or liquidation of its affairs; or (ii) there shall be commenced against such Person an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or any case, proceeding or other action for the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of such Person or for any substantial part of its Property or for the winding up or liquidation of its affairs, and such involuntary case or other case, proceeding or other action shall remain undismissed, undischarged or unbonded for a period of sixty (60) consecutive days; or (iii) such Person shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consent to the entry of an order for relief in an involuntary case under any such law, or consent to the appointment or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of such Person or for any substantial part of its Property or make any general assignment for the benefit of creditors; or (iv) such Person shall be unable to, or shall admit in writing its inability to, pay its debts generally as they become due. "Base Rate" means, for any day, the rate per annum (rounded upwards, if necessary, to the nearest whole multiple of 1/100 of 1%) equal to the greater of (a) the Federal Funds Rate in effect on such day plus ½ of 1% or (b) the Prime Rate in effect on such day. If for any reason the Administrative Agent shall have determined (which determination shall be conclusive absent manifest error) that it is unable after due inquiry to ascertain the Federal Funds Rate for any reason, including the inability or failure of the Administrative Agent to obtain sufficient quotations in accordance with the terms hereof, the Base Rate shall be determined without regard to clause (a) of the first sentence of this definition until the circumstances giving rise to such inability no longer exist. Any change in the Base Rate due to a change in the Prime Rate or the Federal Funds Rate shall be effective on the effective date of such change in the Prime Rate or the Federal Funds Rate, respectively. "Base Rate Loan" means any Loan bearing interest at a rate determined by reference to the Base Rate. "Borrower" means the Person identified as such in the heading hereof, together with any permitted successors and assigns. "Business Day" means a day other than a Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by law to close, except that, when used in connection with a Eurodollar Loan, such day shall also be a day on which dealings between banks are carried on in U.S. dollar deposits in London, England and New York, New York. "Calculation Date" has the meaning set forth in the definition of Applicable Percentage. "Capital Lease" means, as applied to any Person, any lease of any Property (whether real, personal or mixed) by that Person as lessee which, in accordance with GAAP, is or should be accounted for as a capital lease on the balance sheet of that Person. "Change of Control" means either (i) a "person" or a "group" (within the meaning of Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934) becomes the "beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act of 1934) of more than 50% of the then outstanding voting stock of the Borrower or (ii) a majority of the board of directors of the Borrower shall consist of individuals who are not Continuing Directors. For purposes hereof, "Continuing Directors" means, as of any date of determination, (i) an individual who on the date two years prior to such determination date was a member of the Borrower's board of directors or (ii) (a) any new director whose nomination for election by the Borrower's shareholders was approved by a vote of a majority of the directors then still in office who either were directors on the date two years prior to such determination date or whose nomination for election was previously so approved or (b) any new director who was elected by a majority of the directors then still in office who either were directors on the date two years prior to such determination date or whose nomination for election was previously so approved. "Closing Date" means the date hereof. "Code" means the Internal Revenue Code of 1986, as amended, and any successor statute thereto, as interpreted by the rules and regulations issued thereunder, in each case as in effect from time to time. References to sections of the Code shall be construed also to refer to any successor sections. "Commercial Credit Business Arrangement" means any agreement between the Borrower or any of its Subsidiaries and an entity that purchases such Person's commercial accounts receivables with only such limited recourse back to such Person as is customary in factoring arrangements of this type. As of the Closing Date, such services are provided to the Borrower pursuant to an agreement between the Borrower and Transamerica Accounts Receivables Servicing, Inc. "Commitment" means (i) with respect to each Lender, the Revolving Commitment of such Lender and (ii) with respect to the Swingline Lender, the Swingline Commitment. "Commitment Percentage" means, for any Lender, the percentage which such Lender's Revolving Commitment then constitutes of the aggregate Revolving Committed Amount. "Competitive Bid" means an offer by a Lender to make a Competitive Loan pursuant to the terms of Section 2.2. "Competitive Bid Rate" means, as to any Competitive Bid made by a Lender in accordance with the provisions of Section 2.2, the fixed rate of interest offered by the Lender making the Competitive Bid. "Competitive Loan" means a loan made by a Lender in its discretion pursuant to the provisions of Section 2.2. "Competitive Note" means a promissory note of the Borrower in favor of a Lender delivered pursuant to Section 2.2(f) and evidencing the Competitive Loans, if any, of such Lender, as such promissory note may be amended, modified, restated or replaced from time to time. "Consolidated Adjusted Debt" means, at any time, the sum of (i) Consolidated Funded Indebtedness and (ii) the product of Consolidated Rents multiplied by 6.0. "Consolidated EBITDA" means, for any period for the Borrower and its Subsidiaries, Consolidated Net Income plus Consolidated Interest Expense plus all provisions for any Federal, state or other domestic and foreign income taxes plus depreciation and amortization, in each case on a consolidated basis determined in accordance with GAAP applied on a consistent basis. Except as otherwise expressly provided, the applicable period shall be for the four consecutive fiscal quarters ending as of the date of determination. "Consolidated EBITDAR" means, for any period, the sum of Consolidated EBITDA and Consolidated Rents. Except as otherwise expressly provided, the applicable period shall be for the four consecutive fiscal quarters ending as of the date of determination. "Consolidated EBITR" means, for any period for the Borrower and its Subsidiaries, Consolidated EBITDA minus depreciation and amortization plus Consolidated Rents, in each case on a consolidated basis as determined in accordance with GAAP applied on a consistent basis. Except as otherwise expressly provided, the applicable period shall be for the four consecutive fiscal quarters ending as of the date of determination. "Consolidated Funded Indebtedness" means, at any time, the outstanding principal amount of all Funded Indebtedness, without duplication, of the Borrower and its Subsidiaries at such time. "Consolidated Interest Coverage Ratio" means, as of the last day of any fiscal quarter of the Borrower, the ratio of (i) Consolidated EBITR to (ii) Consolidated Interest Expense plus Consolidated Rents. "Consolidated Interest Expense" means, for any period for the Borrower and its Subsidiaries, all interest expense plus the interest component under Capital Leases, in each case on a consolidated basis as determined in accordance with GAAP applied on a consistent basis. Except as otherwise expressly provided, the applicable period shall be for the four consecutive fiscal quarters ending as of the date of determination. "Consolidated Net Income" means, for any period for the Borrower and its Subsidiaries, net income on a consolidated basis determined in accordance with GAAP applied on a consistent basis, but excluding non-recurring charges in an aggregate amount not to exceed $50,000,000 collectively with respect to all periods relevant for the calculation of the financial covenants contained in Sections 6.10 and 6.11. Except as otherwise expressly provided, the applicable period shall be for the four consecutive fiscal quarters ending as of the date of determination. "Consolidated Rents" means, for any period for the Borrower and its Subsidiaries, all rental expense of the Borrower and its Subsidiaries for such period under operating leases (specifically including rents paid in connection with synthetic leases, tax retention operating leases, off-balance sheet loans or similar off-balance sheet financing products), on a consolidated basis as determined in accordance with GAAP applied on a consistent basis. Except as otherwise expressly provided, the applicable period shall be for the four consecutive fiscal quarters ending as of the date of determination. "Credit Documents" means a collective reference to this Credit Agreement, the Notes, the Administrative Agent's Fee Letter, and all other related agreements and documents issued or delivered hereunder or thereunder or pursuant hereto or thereto. "Default" means any event, act or condition which with notice or lapse of time, or both, would constitute an Event of Default. "Designating Lender" has the meaning set forth in Section 10.3(e). "Dollars" and "$" means dollars in lawful currency of the United States of America. "Environmental Laws" means any and all lawful and applicable Federal, state, local and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or other governmental restrictions relating to the environment or to emissions, discharges, releases or threatened releases of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes into the environment including, without limitation, ambient air, surface water, ground water, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute thereto, as interpreted by the rules and regulations thereunder, all as the same may be in effect from time to time. References to sections of ERISA shall be construed also to refer to any successor sections. "ERISA Affiliate" means an entity which is under common control with the Borrower within the meaning of Section 4001(a)(14) of ERISA, or is a member of a group which includes the Borrower and which is treated as a single employer under Sections 414(b) or (c) of the Code. "ERISA Event" means (i) with respect to any Plan, the occurrence of a Reportable Event or the substantial cessation of operations (within the meaning of Section 4062(e) of ERISA); (ii) the withdrawal by the Borrower, any Subsidiary of the 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(a)(2) of ERISA), or the termination of a Multiple Employer Plan; (iii) the distribution of a notice of intent to terminate or the actual termination of a Plan pursuant to Section 4041(a)(2) or 4041A of ERISA; (iv) the institution of proceedings to terminate or the actual termination of a Plan by the PBGC under Section 4042 of ERISA; (v) any event or condition which could 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; (vi) the complete or partial withdrawal of the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate from a Multiemployer Plan; (vii) the conditions for imposition of a lien under Section 302(f) of ERISA exist with respect to any Plan; or (vii) the adoption of an amendment to any Plan requiring the provision of security to such Plan pursuant to Section 307 of ERISA. "Eurodollar Loan" means any Loan bearing interest at a rate determined by reference to the Eurodollar Rate. "Eurodollar Rate" means, for the Interest Period for each Eurodollar Loan comprising part of the same borrowing (including conversions, extensions and renewals), a per annum interest rate determined pursuant to the following formula:   Eurodollar Rate = Interbank Offered Rate                            1 - Eurodollar Reserve Percentage "Eurodollar Reserve Percentage" means for any day, that percentage (expressed as a decimal) which is in effect from time to time under Regulation D of the Board of Governors of the Federal Reserve System (or any successor), as such regulation may be amended from time to time or any successor regulation, as the maximum reserve requirement (including, without limitation, any basic, supplemental, emergency, special, or marginal reserves) applicable with respect to Eurocurrency liabilities as that term is defined in Regulation D (or against any other category of liabilities that includes deposits by reference to which the interest rate of Eurodollar Loans is determined), whether or not Lender has any Eurocurrency liabilities subject to such reserve requirement at that time. Eurodollar Loans shall be deemed to constitute Eurocurrency liabilities and as such shall be deemed subject to reserve requirements without benefits of credits for proration, exceptions or offsets that may be available from time to time to a Lender. The Eurodollar Rate shall be adjusted automatically on and as of the effective date of any change in the Eurodollar Reserve Percentage. "Event of Default" means such term as defined in Section 8.1. "Existing Credit Agreements" means, collectively, (i) that certain Credit Agreement, dated as of December 20, 1996, as amended by Amendment No. 1 to Credit Agreement dated as of February 10, 1998, Amendment No. 2 to Credit Agreement dated as of November 13, 1998 and Amendment No. 3 to Credit Agreement dated as of March 28, 2000, by and among the Borrower, the lenders party thereto and Bank of America, formerly known as NationsBank, N.A., as Agent, and (ii) that certain Credit Agreement dated as of November 13, 1998, as amended by Amendment No. 1 to Credit Agreement dated as of July 16, 1999 and Amendment No. 2 to Credit Agreement dated as of March 28, 2000, by and among the Borrower, the lenders party thereto and Bank of America, formerly known as NationsBank, N.A., as Agent. "Facilities" means a collective reference to (i) the revolving loan facility established pursuant to Section 2.1 and (ii) the 364-Day Revolver. "Facility Fee" shall have the meaning assigned to such term in Section 3.5(a). "Facility Fee Calculation Period" shall have the meaning assigned to such term in Section 3.5(a). "Fees" means all fees payable pursuant to Section 3.5. "Federal Funds Rate" means, for any day, the rate of interest per annum (rounded upwards, if necessary, to the nearest whole multiple of 1/100 of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day, provided that (A) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day and (B) if no such rate is so published on such next preceding Business Day, the Federal Funds Rate for such day shall be the average rate quoted to the Administrative Agent on such day on such transactions as determined by the Administrative Agent. "Financial Officer" means, with respect to the Borrower, the Treasurer, the Chief Accounting Officer, the General Counsel, the Chief Financial Officer, or the Vice President-Finance of the Borrower; provided that the Borrower may designate additional persons or delete persons so authorized by written notice to the Administrative Agent from at least two existing Financial Officers of the Borrower. "Funded Indebtedness" means, with respect to any Person (for purposes of this sentence only, the "Debtor"), without duplication, (i) all Indebtedness of such Debtor for borrowed money, (ii) all purchase money Indebtedness of such Debtor, including without limitation the principal portion of all obligations of such Debtor under Capital Leases, (iii) all Guaranty Obligations of such Debtor with respect to Funded Indebtedness of another Person, (iv) the maximum available amount of all standby letters of credit or acceptances issued or created for the account of such Debtor, and (v) all Funded Indebtedness of another Person secured by a Lien on any Property of such Debtor, whether or not such Funded Indebtedness has been assumed; provided that Funded Indebtedness shall not include (i) any letters of credit used by such Debtor for the financing of inventory in the ordinary course of business or (ii) any amounts received by such Debtor pursuant to a Commercial Credit Business Arrangement. The Funded Indebtedness of any Person shall include the Funded Indebtedness of any partnership or joint venture in which such Person is a general partner or joint venturer. "GAAP" means generally accepted accounting principles in the United States applied on a consistent basis and subject to the terms of Section 1.3 hereof. "Governmental Authority" means any Federal, state, local or foreign court or governmental agency, authority, instrumentality or regulatory body. "Guaranty Obligations" means, with respect to any Person, without duplication, any obligations of such Person (other than endorsements in the ordinary course of business of negotiable instruments for deposit or collection) guaranteeing or intended to guarantee any Indebtedness of any other Person in any manner, whether direct or indirect, and including without limitation any obligation, whether or not contingent, (i) to purchase any such Indebtedness or any Property constituting security therefor, (ii) to advance or provide funds or other support for the payment or purchase of any such Indebtedness or to maintain working capital, solvency or other balance sheet condition of such other Person (including without limitation keep well agreements, maintenance agreements, comfort letters or similar agreements or arrangements) for the benefit of any holder of Indebtedness of such other Person, (iii) to lease or purchase Property, securities or services primarily for the purpose of assuring the holder of such Indebtedness, or (iv) to otherwise assure or hold harmless the holder of such Indebtedness against loss in respect thereof. The amount of any Guaranty Obligation hereunder shall (subject to any limitations set forth therein) be deemed to be an amount equal to the outstanding principal amount (or maximum principal amount, if larger) of the Indebtedness in respect of which such Guaranty Obligation is made. "Indebtedness" of any Person means (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, or upon which interest payments are customarily made, (iii) all obligations of such Person under conditional sale or other title retention agreements relating to Property purchased by such Person (other than customary reservations or retentions of title under agreements with suppliers entered into in the ordinary course of business), (iv) all obligations of such Person issued or assumed as the deferred purchase price of Property or services purchased by such Person (other than trade debt incurred in the ordinary course of business and due within six months of the incurrence thereof) which would appear as liabilities on a balance sheet of such Person, (v) all obligations of such Person under take-or-pay or similar arrangements or under commodities agreements, (vi) 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, or payable out of the proceeds of production from, Property owned or acquired by such Person, whether or not the obligations secured thereby have been assumed, (vii) all Guaranty Obligations of such Person, (viii) the principal portion of all obligations of such Person under Capital Leases, (ix) all obligations of such Person in respect of interest rate protection agreements, foreign currency exchange agreements, commodity purchase or option agreements or other interest or exchange rate or commodity price hedging agreements, (x) the maximum amount of all standby letters of credit issued or bankers' acceptances facilities created for the account of such Person and, without duplication, all drafts drawn thereunder (to the extent unreimbursed), (xi) all preferred stock issued by such Person and required by the terms thereof to be redeemed, or for which mandatory sinking fund payments are due, by a fixed date and (xii) the principal balance outstanding under any synthetic lease, tax retention operating lease, off-balance sheet loan or similar off-balance sheet financing product to which such Person is a party, where such transaction is considered borrowed money indebtedness for tax purposes but is classified as an operating lease in accordance with GAAP; provided that Indebtedness shall not include (i) any letters of credit used by such Person for the financing of inventory in the ordinary course of business or (ii) any amounts received by such Person pursuant to a Commercial Credit Business Arrangement. The Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture in which such Person is a general partner or a joint venturer. "Interbank Offered Rate" means, for the Interest Period for each Eurodollar Loan comprising part of the same borrowing (including conversions, extensions and renewals), a per annum interest rate (rounded upwards, if necessary, to the nearest whole multiple of 1/100 of 1%) equal to the rate of interest, determined by the Administrative Agent on the basis of the offered rates for deposits in dollars for a period of time corresponding to such Interest Period (and commencing on the first day of such Interest Period), appearing on Telerate Page 3750 (or, if, for any reason, Telerate Page 3750 is not available, the Reuters Screen LIBO Page) as of approximately 11:00 A.M. (London time) two (2) Business Days before the first day of such Interest Period. As used herein, "Telerate Page 3750" means the display designated as page 3750 by Dow Jones Telerate, Inc. (or such other page as may replace such page on that service for the purpose of displaying the British Bankers Association London interbank offered rates) and "Reuters Screen LIBO Page" means the display designated as page "LIBO" on the Reuters Monitor Money Rates Service (or such other page as may replace the LIBO page on that service for the purpose of displaying London interbank offered rates of major banks). "Interest Payment Date" means (i) as to any Base Rate Loan, the last day of each March, June, September and December, the date of repayment of principal of such Loan and the Termination Date and (ii) as to any Eurodollar Loan, any Competitive Loan or any Swingline Loan, the last day of each Interest Period for such Loan, the date of repayment of principal of such Loan and on the Termination Date, and in addition where the applicable Interest Period is more than 3 months, then also on the date 3 months from the beginning of the Interest Period, and each 3 months thereafter. If an Interest Payment Date falls on a date which is not a Business Day, such Interest Payment Date shall be deemed to be the next succeeding Business Day, except that in the case of Eurodollar Loans where the next succeeding Business Day falls in the next succeeding calendar month, then on the next preceding Business Day. "Interest Period" means (i) as to any Eurodollar Loan, a period of one, two, three or six month's duration, as the Borrower may elect, commencing in each case, on the date of the borrowing (including conversions, extensions and renewals), (ii) as to any Competitive Loan, a period commencing in each case on the date of the borrowing and ending on the date specified in the applicable Competitive Bid whereby the offer to make such Competitive Loan was extended (such ending date in any event to be no less than one week and not more than 180 days from the date of the borrowing) and (iii) as to any Swingline Loan, a period commencing in each case on the date of the borrowing and ending on the date agreed to by the Borrower and the Swingline Lender in accordance with the provisions of Section 2.3(b)(i) (such ending date in any event to be not more than seven (7) Business Days from the date of borrowing); provided, however, (A) if any Interest Period would end on a day which is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day (except that in the case of Eurodollar Loans where the next succeeding Business Day falls in the next succeeding calendar month, then on the next preceding Business Day), (B) no Interest Period shall extend beyond the Termination Date, and (C) in the case of Eurodollar Loans, where an Interest Period begins on a day for which there is no numerically corresponding day in the calendar month in which the Interest Period is to end, such Interest Period shall end on the last day of such calendar month. "Lenders" means each of the Persons identified as a "Lender" on the signature pages hereto, and each Person which may become a Lender by way of assignment in accordance with the terms hereof, together with their successors and permitted assigns. "Lending Installation" means, with respect to a Lender or the Administrative Agent, any office, branch, subsidiary or affiliate of such Lender or the Administrative Agent. "Lien" means any mortgage, pledge, hypothecation, assignment, deposit arrangement, security interest, encumbrance, lien (statutory or otherwise), preference, priority or charge of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement, any financing or similar statement or notice filed under the Uniform Commercial Code as adopted and in effect in the relevant jurisdiction or other similar recording or notice statute, and any lease in the nature thereof). "Loan" or "Loans" means the Revolving Loans, the Competitive Loans and/or the Swingline Loans (or any Swingline Loan bearing interest at the Base Rate or the Quoted Rate and referred to as a Base Rate Loan or a Quoted Rate Swingline Loan), individually or collectively, as appropriate. "Master Account" means such account as may be identified by written notice from at least two Financial Officers of the Borrower to the Administrative Agent. "Material Adverse Effect" means a material adverse effect on (i) the condition (financial or otherwise), operations, business, assets or liabilities of the Borrower and its Subsidiaries, taken as a whole, (ii) the ability of the Borrower to perform any material obligation under the Credit Documents or (iii) any aspect of the Borrower or its business that adversely affects the material rights and remedies of the Lenders under the Credit Documents. "Materials of Environmental Concern" means any gasoline or petroleum (including crude oil or any fraction thereof) or petroleum products or any hazardous or toxic substances, materials or wastes, defined or regulated as such in or under any Environmental Laws, including, without limitation, asbestos, polychlorinated biphenyls and urea-formaldehyde insulation. "Moody's" means Moody's Investors Service, Inc., or any successor or assignee of the business of such company in the business of rating securities. "Multiemployer Plan" means a Plan which is a multiemployer plan as defined in Sections 3(37) or 4001(a)(3) of ERISA. "Multiple Employer Plan" means a Plan which the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate and at least one employer other than the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate are contributing sponsors. "New Commitment Agreement" means a New Commitment Agreement substantially in the form of Schedule 3.4(b), as executed pursuant to Section 3.4(b). "Note" or "Notes" means any Revolving Note, any Competitive Note or the Swingline Note, as the context may require. "Notice of Borrowing" means a written notice of borrowing in substantially the form of Schedule 2.1(b)(i), as required by Section 2.1(b)(i). "Notice of Extension/Conversion" means the written notice of extension or conversion in substantially the form of Schedule 3.2, as required by Section 3.2. "Participation Interest" means, the extension of credit by a Lender by way of a purchase of a participation in any Swingline Loans as provided in Section 2.3(b)(iii) or in any Loans as provided in Section 3.13. "PBGC" means the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA and any successor thereof. "Permitted Liens" means:   (i) Liens in favor of the Administrative Agent on behalf of the Lenders; (ii) Liens (other than Liens created or imposed under ERISA) for taxes, assessments or governmental charges or levies not yet due or Liens for taxes being contested in good faith by appropriate proceedings for which adequate reserves determined in accordance with GAAP have been established (and as to which the Property subject to any such Lien is not yet subject to foreclosure, sale or loss on account thereof); (iii) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen and suppliers and other Liens imposed by law or pursuant to customary reservations or retentions of title arising in the ordinary course of business, provided that any such Liens which are material secure only amounts not yet due and payable or, if due and payable, are unfiled and no other action has been taken to enforce the same or are being contested in good faith by appropriate proceedings for which adequate reserves determined in accordance with GAAP have been established (and as to which the Property subject to any such Lien is not yet subject to foreclosure, sale or loss on account thereof); (iv) Liens (other than Liens created or imposed under ERISA) incurred or deposits made by the Borrower and its Subsidiaries in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security, or to secure the performance of tenders, statutory obligations, bids, leases, government contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money); (v) Liens in connection with attachments or judgments (including judgment or appeal bonds) provided that the judgments secured shall, within 30 days after the entry thereof, have been discharged or execution thereof stayed pending appeal, or shall have been discharged within 30 days after the expiration of any such stay; (vi) easements, rights-of-way, restrictions (including zoning restrictions), minor defects or irregularities in title and other similar charges or encumbrances not, in any material respect, impairing the use of the encumbered Property for its intended purposes; (vii) leases or subleases granted to others not interfering in any material respect with the business of the Borrower and its Subsidiaries taken as a whole; (viii) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods; (ix) Liens on assets at the time such assets are acquired by the Borrower or any Subsidiary in accordance with Section 7.3(d); provided that such Liens are not created in contemplation of such acquisition; (x) Liens on assets of any Person at the time such Person becomes a Subsidiary in accordance with Section 7.3(d); provided that such Liens are not created in contemplation of such Person becoming a Subsidiary; (xi) normal and customary rights of setoff upon deposits of cash in favor of banks or other depository institutions; (xii) Liens on receivables sold pursuant to a Commercial Credit Business Arrangement; (xiii) Liens on inventory held by the Borrower or any of its Subsidiaries under consignment; (xiv) Liens on any inventory of the Borrower or any of its Subsidiaries in favor of a vendor of such inventory, arising in the normal course of business upon its sale to the Borrower or any such Subsidiary; and (xv) other Liens on Property of the Borrower and its Subsidiaries, so long as the Borrower and its Subsidiaries own at all times Property (a) unencumbered by any Liens other than Liens permitted by clauses (i) through (xiv) above and (b), having an aggregate fair market value of at least $2,000,000,000.   "Person" means any individual, partnership, joint venture, firm, corporation, limited liability company, association, trust or other enterprise (whether or not incorporated) or any Governmental Authority. "Plan" means any employee benefit plan (as defined in Section 3(3) of ERISA) which is covered by ERISA and with respect to which the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate is (or, if such plan were terminated at such time, would under Section 4069 of ERISA be deemed to be) an "employer" within the meaning of Section 3(5) of ERISA. "Pricing Level" means the applicable pricing level for the Applicable Percentage shown in Schedule 1.1. "Prime Rate" means the rate of interest per annum publicly announced or established from time to time by Bank of America as its prime rate in effect at its principal office in Charlotte, North Carolina, with each change in the Prime Rate being effective on the date such change is publicly announced as effective (it being understood and agreed that the Prime Rate is a reference rate used by Bank of America in determining interest rates on certain loans and is not intended to be the lowest rate of interest charged on any extension of credit by Bank of America to any debtor). "Property" means any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible. "Quoted Rate" means, with respect to any Quoted Rate Swingline Loan, the fixed percentage rate per annum offered by the Swingline Lender and accepted by the Borrower with respect to such Swingline Loan as provided in accordance with the provisions of Section 2.3. "Quoted Rate Swingline Loan" means a Swingline Loan bearing interest at a Quoted Rate. "Register" shall have the meaning given such term in Section 10.3(c). "Regulation D, T, U, or X" means Regulation D, T, U or X, respectively, of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof. "Release" means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping or disposing into the environment (including the abandonment or discarding of barrels, containers and other closed receptacles containing any Materials of Environmental Concern). "Reportable Event" means any of the events set forth in Section 4043(c) of ERISA, other than those events as to which the notice requirement has been waived by regulation. "Required Lenders" means, at any time, Lenders which are then in compliance with their obligations hereunder (as determined by the Administrative Agent) and holding in the aggregate at least 51% of (i) the Commitment Percentages or (ii) if the Commitments have been terminated, the outstanding Loans and Participation Interests. "Requirement of Law" means, 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 material property is subject. "Revolving Commitment" means, with respect to each Lender, the commitment of such Lender in an aggregate principal amount at any time outstanding not to exceed the amount set forth opposite such Lender's name on Schedule 2.1(a) (as such amount may be reduced or increased from time to time in accordance with the provisions of this Credit Agreement), (i) to make Revolving Loans in accordance with the provisions of Section 2.1(a) and (ii) to purchase participation interests in the Swingline Loans in accordance with the provisions of Section 2.3(b)(iii). "Revolving Committed Amount" shall have the meaning assigned to such term in Section 2.1(a). "Revolving Loans" shall have the meaning assigned to such term in Section 2.1(a). "Revolving Note" means a promissory note of the Borrower in favor of a Lender delivered pursuant to Section 2.1(e) and evidencing the Revolving Loans of such Lender, as such promissory note may be amended, modified, restated or replaced from time to time. "S&P" means Standard & Poor's Ratings Group, a division of McGraw Hill, Inc., or any successor or assignee of the business of such division in the business of rating securities. "SPV" has the meaning set forth in Section 10.3(e). "Single Employer Plan" means any Plan which is covered by Title IV of ERISA, but which is not a Multiemployer Plan or a Multiple Employer Plan. "Subsidiary" means, as to any Person, (a) any corporation more than 50% of whose stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation (irrespective of whether or not at the time, any class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time owned by such Person directly or indirectly through Subsidiaries, and (b) any partnership, association, joint venture or other entity in which such Person directly or indirectly through Subsidiaries has more than 50% equity interest at any time. "Swingline Commitment" means the commitment of the Swingline Lender to make Swingline Loans in an aggregate principal amount at any time outstanding of up to the Swingline Committed Amount. "Swingline Committed Amount" shall have the meaning assigned to such term in Section 2.3(a).                     "Swingline Lender" means Bank of America. "Swingline Loan" shall have the meaning assigned to such term in Section 2.3(a). "Swingline Note" means the promissory note of the Borrower in favor of the Swingline Lender in the original principal amount of $25,000,000, as such promissory note may be amended, modified, restated or replaced from time to time. "Syndication Agent" shall have the meaning assigned to such term in the heading hereof together with any successors and assigns. "Termination Date" means May 23, 2005. "Utilization Fee" shall have the meaning set forth in Section 3.5(c). "Utilization Fee Period" shall have the meaning assigned to such term in Section 3.5(c). 1.2 Computation of Time Periods. For purposes of computation of periods of time hereunder, the word "from" means "from and including" and the words "to" and "until" each mean "to but excluding." 1.3 Accounting Terms. Except as otherwise expressly provided herein, all accounting terms used herein shall be interpreted, and all financial statements and certificates and reports as to financial matters required to be delivered to the Lenders hereunder shall be prepared, in accordance with GAAP applied on a consistent basis. All calculations made for the purposes of determining compliance with this Credit Agreement shall (except as otherwise expressly provided herein) be made by application of GAAP applied on a basis consistent with the most recent annual or quarterly financial statements delivered pursuant to Section 6.1 hereof (or, prior to the delivery of the first financial statements pursuant to Section 6.1 hereof, consistent with the financial statements as at August 28, 1999); provided, however, if (a) the Borrower shall object to determining such compliance on such basis at the time of delivery of such financial statements due to any change in GAAP or the rules promulgated with respect thereto or (b) the Administrative Agent or the Required Lenders shall so object in writing within 30 days after delivery of such financial statements, then such calculations shall be made on a basis consistent with the most recent financial statements delivered by the Borrower to the Lenders as to which no such objection shall have been made.     SECTION 2 CREDIT FACILITIES 2.1 Revolving Loans. (a) Revolving Commitment. Subject to the terms and conditions hereof and in reliance upon the representations and warranties set forth herein, each Lender severally agrees to make available to the Borrower revolving credit loans requested by the Borrower in Dollars ("Revolving Loans") up to such Lender's Revolving Commitment from time to time from the Closing Date until the Termination Date, or such earlier date as the Revolving Commitments shall have been terminated as provided herein for the purposes hereinafter set forth; provided, however, that the sum of the aggregate principal amount of outstanding Revolving Loans shall not exceed SIX HUNDRED FIFTY MILLION DOLLARS ($650,000,000.00) (as such aggregate maximum amount may be reduced or increased from time to time as provided in Sections 3.3 and 3.4, the "Revolving Committed Amount"); provided, further, (i) with regard to each Lender individually, such Lender's outstanding Revolving Loans shall not exceed such Lender's Revolving Commitment, and (ii) with regard to the Lenders collectively, the aggregate principal amount of outstanding Revolving Loans plus the aggregate principal amount of outstanding Competitive Loans plus the aggregate principal amount of outstanding Swingline Loans shall not exceed the Revolving Committed Amount. Revolving Loans may consist of Base Rate Loans or Eurodollar Loans, or a combination thereof, as the Borrower may request, and may be repaid and reborrowed in accordance with the provisions hereof; provided, however, that no more than 25 Eurodollar Loans shall be outstanding hereunder at any time. For purposes hereof, Eurodollar Loans with different Interest Periods shall be considered as separate Eurodollar Loans, even if they begin on the same date, although borrowings, extensions and conversions may, in accordance with the provisions hereof, be combined at the end of existing Interest Periods to constitute a new Eurodollar Loan with a single Interest Period. Revolving Loans hereunder may be repaid and reborrowed in accordance with the provisions hereof. (b) Revolving Loan Borrowings. (i) Notice of Borrowing. The Borrower shall request a Revolving Loan borrowing by written notice (or telephone notice promptly confirmed in writing) to the Administrative Agent not later than 11:30 A.M. (Charlotte, North Carolina time) on the Business Day of the requested borrowing in the case of Base Rate Loans, and not later than 2:00 P.M. (Charlotte, North Carolina time) on the third Business Day prior to the date of the requested borrowing in the case of Eurodollar Loans. Each such request for borrowing shall be irrevocable, executed by a Financial Officer of the Borrower and shall specify (A) that a Revolving Loan is requested, (B) the date of the requested borrowing (which shall be a Business Day), (C) the aggregate principal amount to be borrowed, and (D) whether the borrowing shall be comprised of Base Rate Loans, Eurodollar Loans or a combination thereof, and if Eurodollar Loans are requested, the Interest Period(s) therefor. If the Borrower shall fail to specify in any such Notice of Borrowing (I) an applicable Interest Period in the case of a Eurodollar Loan, then such notice shall be deemed to be a request for an Interest Period of one month, or (II) the type of Revolving Loan requested, then such notice shall be deemed to be a request for a Base Rate Loan hereunder. The Administrative Agent shall give notice to each affected Lender promptly upon receipt of each Notice of Borrowing pursuant to this Section 2.1(b)(i), the contents thereof and each such Lender's share of any borrowing to be made pursuant thereto. (ii) Minimum Amounts. Each Eurodollar Loan or Base Rate Loan that is a Revolving Loan shall be in a minimum aggregate principal amount of $5,000,000 and integral multiples of $1,000,000 in excess thereof (or the remaining amount of the Revolving Committed Amount, if less). (iii) Advances. Each Lender will make its Commitment Percentage of each Revolving Loan borrowing available to the Administrative Agent for the account of the Borrower as specified in Section 3.14(a), or in such other manner as the Administrative Agent may specify in writing, by 1:00 P.M. (Charlotte, North Carolina time) on the date specified in the applicable Notice of Borrowing in Dollars and in funds immediately available to the Administrative Agent. Such borrowing will then be made available to the Borrower by the Administrative Agent by crediting the Master Account with the aggregate of the amounts made available to the Administrative Agent by the Lenders and in like funds as received by the Administrative Agent.   (c) Repayment. The principal amount of all Revolving Loans shall be due and payable in full on the Termination Date. (d) Interest. Subject to the provisions of Section 3.1,   (i) Base Rate Loans. During such periods as Revolving Loans shall be comprised in whole or in part of Base Rate Loans, such Base Rate Loans shall bear interest at a per annum rate equal to the Base Rate plus the Applicable Percentage; and (ii) Eurodollar Loans. During such periods as Revolving Loans shall be comprised in whole or in part of Eurodollar Loans, such Eurodollar Loans shall bear interest at a per annum rate equal to the Eurodollar Rate plus the Applicable Percentage.   Interest on Revolving Loans shall be payable in arrears on each applicable Interest Payment Date (or at such other times as may be specified herein). (e) Revolving Notes. The Revolving Loans made by each Lender shall be evidenced by a duly executed promissory note of the Borrower to such Lender in an original principal amount equal to such Lender's Revolving Commitment and in substantially the form of Schedule 2.1(e). 2.2 Competitive Loan Subfacility. (a) Competitive Loans. Subject to the terms and conditions and relying upon the representations and warranties herein set forth, the Borrower may, from time to time from the Closing Date until the Termination Date, request and each Lender may, in its sole discretion, agree to make, Competitive Loans in Dollars to the Borrower; provided, however, that (i) the aggregate principal amount of outstanding Competitive Loans shall not at any time exceed the Revolving Committed Amount, and (ii) the sum of the aggregate principal amount of outstanding Revolving Loans plus the aggregate principal amount of outstanding Competitive Loans plus the aggregate principal amount of outstanding Swingline Loans shall not at any time exceed the Revolving Committed Amount. Each Competitive Loan shall be not less than $10,000,000 in the aggregate and integral multiples of $1,000,000 in excess thereof (or the remaining portion of the Revolving Committed Amount, if less). (b) Competitive Bid Requests. The Borrower may solicit by making a written or telefax request to all of the Lenders for a Competitive Loan. To be effective, such request must be received by each of the Lenders by such time as determined by each such Lender in accordance with such Lender's customary practices (in any event not to be later than 2:00 P.M. (Charlotte, North Carolina time)) one Business Day prior to the date of the requested borrowing and must specify (i) that a Competitive Loan is requested, (ii) the amount of such Competitive Loan and (iii) the Interest Period for such Competitive Loan. (c) Competitive Bids. Upon receipt of a request by the Borrower for a Competitive Loan, each Lender may, in its sole discretion, submit a Competitive Bid containing an offer to make a Competitive Loan in an amount up to the amount specified in the related request for Competitive Loans. Such Competitive Bid shall be submitted to the Borrower by telephone notice (to be immediately confirmed by telecopy) by such time as determined by such Lender in accordance with such Lender's customary practices (in any event not to be later than 10:30 A.M. (Charlotte, North Carolina time)) on the date of the requested Competitive Loan. Competitive Bids so made shall be irrevocable. Each Competitive Bid shall specify (i) the date of the proposed Competitive Loan, (ii) the maximum and minimum principal amounts of the Competitive Loan for which such offer is being made (which may be for all or a part of (but not more than) the amount requested by the Borrower), (iii) the applicable Competitive Bid Rate, and (iv) the applicable Interest Period. (d) Acceptance of Competitive Bids. The Borrower may, before such time as determined by the applicable Lender in accordance with such Lender's customary practices (in any event until 1:00 P.M. (Charlotte, North Carolina time)) on the date of the requested Competitive Loan, accept any Competitive Bid by giving the applicable Lender and the Administrative Agent telephone notice (immediately confirmed in writing) of (i) the Lender or Lenders whose Competitive Bid(s) is/are accepted, (ii) the principal amount of the Competitive Bid(s) so accepted and (iii) the Interest Period of the Competitive Bid(s) so accepted. The Borrower may accept any Competitive Bid in whole or in part; provided, however, that (a) the principal amount of each Competitive Loan may not exceed the maximum amount offered in the Competitive Bid and may not be less than the minimum amount offered in the Competitive Bid, (b) the principal amount of each Competitive Loan may not exceed the total amount requested pursuant to subsection (a) above, (c) the Borrower shall not accept a Competitive Bid made at a particular Competitive Bid Rate if it has decided to reject a Competitive Bid made at a lower Competitive Bid Rate and (d) if the Borrower shall accept a Competitive Bid or Bids made at a particular Competitive Bid Rate but the amount of such Competitive Bid or Bids shall cause the total amount of Competitive Bids to be accepted by the Borrower to exceed the total amount requested pursuant to subsection (a) above, then the Borrower shall accept a portion of such Competitive Bid or Bids in an amount equal to the total amount requested pursuant to subsection (a) above less the amount of other Competitive Bids accepted with respect to such request, which acceptance, in the case of multiple Competitive Bids at the same Competitive Bid Rate, shall be made pro rata in accordance with each such Competitive Bid at such Competitive Bid Rate. Competitive Bids so accepted by the Borrower shall be irrevocable. (e) Funding of Competitive Loans. Upon acceptance by the Borrower pursuant to subsection (d) above of all or a portion of any Lender's Competitive Bid, such Lender shall, before such time as determined by such Lender in accordance with such Lender's customary practices, on the date of the requested Competitive Loan, make such Competitive Loan available by crediting the Master Account with the amount of such Competitive Loan. (f) Competitive Notes. The Competitive Loans of each Lender shall be evidenced by a single Competitive Note duly executed on behalf of the Borrower, dated the date hereof, in substantially the form of Schedule 2.2(f), payable to the order of such Lender. (g) Repayment of Competitive Loans. The Borrower shall repay to each Lender which has made a Competitive Loan on the last day of the Interest Period for such Competitive Loan the then unpaid principal amount of such Competitive Loan. Unless the Borrower shall repay the maturing Competitive Loan or give to notice to the Administrative Agent of its intent to otherwise repay such Loan not later than 11:30 A.M. (Charlotte, North Carolina time) on the last day of the Interest Period, the Borrower shall be deemed to have requested a Revolving Loan advance comprised of Base Rate Loans in the amount of the maturing Competitive Loan, the proceeds of which will be used to repay such Competitive Loan. (h) Interest on Competitive Loans. The Borrower shall pay interest to each Lender on the unpaid principal amount of each Competitive Loan from and including the date of such Competitive Loan to but excluding the stated maturity date thereof, at the applicable Competitive Bid Rate for such Competitive Loan (computed on the basis of the actual number of days elapsed over a year of 360 days). Interest on Competitive Loans shall be payable in arrears on each applicable Interest Payment Date (or at such other times as may be specified herein). (i) Limitation on Number of Competitive Loans. The Borrower shall not request a Competitive Loan if, assuming the maximum amount of Competitive Loans so requested is borrowed as of the date of such request, the sum of the aggregate principal amount of outstanding Revolving Loans plus the aggregate principal amount of outstanding Competitive Loans plus the aggregate principal amount of outstanding Swingline Loans would exceed the aggregate Revolving Committed Amount. (j) Change in Procedures for Requesting Competitive Loans. The Borrower and the Lenders hereby agree that, notwithstanding any other provision to the contrary contained in this Credit Agreement, upon mutual agreement of the Administrative Agent and the Borrower and written notice by the Administrative Agent to the Lenders, all further requests by the Borrower for Competitive Loans shall be made by the Borrower to the Lenders through the Administrative Agent in accordance with such procedures as shall be prescribed by the Administrative Agent and acceptable to the Borrower and each Lender. 2.3 Swingline Loan Subfacility. (a) Swingline Commitment. Subject to the terms and conditions hereof and in reliance upon the representations and warranties herein set forth, the Swingline Lender, in its individual capacity, agrees to make certain revolving credit loans requested by the Borrower in Dollars to the Borrower (each a "Swingline Loan" and, collectively, the "Swingline Loans") from time to time from the Closing Date until the Termination Date for the purposes hereinafter set forth; provided, however, (i) the aggregate principal amount of Swingline Loans outstanding at any time shall not exceed TWENTY-FIVE MILLION DOLLARS ($25,000,000.00) (the "Swingline Committed Amount"), and (ii) the aggregate principal amount of outstanding Revolving Loans plus the aggregate principal amount of outstanding Competitive Loans plus the aggregate principal amount of outstanding Swingline Loans shall not exceed the Revolving Committed Amount. Swingline Loans hereunder shall be made as Base Rate Loans or Quoted Rate Swingline Loans as the Borrower may request in accordance with the provisions of this Section 2.3, and may be repaid and reborrowed in accordance with the provisions hereof. (b) Swingline Loan Advances.   (i) Notices; Disbursement. Whenever the Borrower desires a Swingline Loan advance hereunder it shall give written notice (or telephone notice promptly confirmed in writing) to the Swingline Lender not later than 2:00 P.M. (Charlotte, North Carolina time) on the Business Day of the requested Swingline Loan advance. Each such notice shall be irrevocable and shall specify (A) that a Swingline Loan advance is requested, (B) the date of the requested Swingline Loan advance (which shall be a Business Day) and (C) the principal amount of the Swingline Loan advance requested. Each Swingline Loan shall be made as a Base Rate Loan or a Quoted Rate Swingline Loan and shall have such maturity date as the Swingline Lender and the Borrower shall agree upon receipt by the Swingline Lender of any such notice from the Borrower. The Swingline Lender shall initiate the transfer of funds representing the Swingline Loan advance to the Master Account by 3:30 P.M. (Charlotte, North Carolina time) on the Business Day of the requested borrowing. (ii) Minimum Amounts. Each Swingline Loan advance shall be in a minimum principal amount of $250,000 and in integral multiples of $100,000 in excess thereof (or the remaining amount of the Swingline Committed Amount, if less). (iii) Repayment of Swingline Loans. The principal amount of all Swingline Loans shall be due and payable on the earlier of (A) the maturity date agreed to by the Swingline Lender and the Borrower with respect to such Loan (which maturity date shall not be a date more than seven (7) Business Days from the date of advance thereof) or (B) the Termination Date. The Swingline Lender may, at any time, in its sole discretion, by written notice to the Borrower and the Lenders, demand repayment of its Swingline Loans by way of a Revolving Loan advance, in which case the Borrower shall be deemed to have requested a Revolving Loan advance comprised solely of Base Rate Loans in the amount of such Swingline Loans; provided, however, that any such demand shall be deemed to have been given one Business Day prior to the Termination Date and on the date of the occurrence of any Event of Default described in Section 8.1 and upon acceleration of the indebtedness hereunder and the exercise of remedies in accordance with the provisions of Section 8.2. Each Lender hereby irrevocably agrees to make its pro rata share of each such Revolving Loan in the amount, in the manner and on the date specified in the preceding sentence notwithstanding (I) the amount of such borrowing may not comply with the minimum amount for advances of Revolving Loans otherwise required hereunder, (II) whether any conditions specified in Section 4.2 are then satisfied, (III) whether a Default or an Event of Default then exists, (IV) failure of any such request or deemed request for Revolving Loan to be made by the time otherwise required hereunder, (V) whether the date of such borrowing is a date on which Revolving Loans are otherwise permitted to be made hereunder or (VI) any termination of the Commitments relating thereto immediately prior to or contemporaneously with such borrowing. In the event that any Revolving Loan cannot for any reason be made on the date otherwise required above (including, without limitation, as a result of the commencement of a proceeding under the Bankruptcy Code with respect to the Borrower), then each Lender hereby agrees that it shall forthwith purchase (as of the date such borrowing would otherwise have occurred, but adjusted for any payments received from the Borrower on or after such date and prior to such purchase) from the Swingline Lender such participations in the outstanding Swingline Loans as shall be necessary to cause each such Lender to share in such Swingline Loans ratably based upon its Commitment Percentage (determined before giving effect to any termination of the Commitments pursuant to Section 3.4), provided that (A) all interest payable on the Swingline Loans shall be for the account of the Swingline Lender until the date as of which the respective participation is purchased and (B) at the time any purchase of participations pursuant to this sentence is actually made, the purchasing Lender shall be required to pay to the Swingline Lender, to the extent not paid to the Swingline Lender by the Borrower in accordance with the terms of subsection (c)(ii) hereof, interest on the principal amount of participation purchased for each day from and including the day upon which such borrowing would otherwise have occurred to but excluding the date of payment for such participation, at the rate equal to the Federal Funds Rate.   (c) Interest on Swingline Loans.   (i) Subject to the provisions of Section 3.1, each Swingline Loan shall bear interest as follows:   (A) Base Rate Loans. If such Swingline Loan is a Base Rate Loan, at a per annum rate (computed on the basis of the actual number of days elapsed over a year of 365 days) equal to the Base Rate plus the Applicable Percentage. (B) Quoted Rate Swingline Loans. If such Swingline Loan is a Quoted Rate Swingline Loan, at a per annum rate (computed on the basis of the actual number of days elapsed over a year of 360 days) equal to the Quoted Rate applicable thereto.   Notwithstanding any other provision to the contrary set forth in this Credit Agreement, in the event that the principal amount of any Quoted Rate Swingline Loan is not repaid on the last day of the Interest Period for such Loan, then such Loan shall be automatically converted into a Base Rate Loan at the end of such Interest Period. (ii) Payment of Interest. Interest on Swingline Loans shall be payable in arrears on each applicable Interest Payment Date (or at such other times as may be specified herein).   (d) Swingline Note. The Swingline Loans shall be evidenced by a duly executed promissory note of the Borrower to the Swingline Lender in an original principal amount equal to the Swingline Committed Amount substantially in the form of Schedule 2.3(d). SECTION 3 OTHER PROVISIONS RELATING TO CREDIT FACILITIES 3.1 Default Rate. Upon the occurrence, and during the continuance, of an Event of Default, the principal of and, to the extent permitted by law, interest on the Loans and any other amounts owing hereunder or under the other Credit Documents shall bear interest, payable on demand, at a per annum rate 1% greater than the rate which would otherwise be applicable (or if no rate is applicable, whether in respect of interest, fees or other amounts, then 1% greater than the Base Rate). 3.2 Extension and Conversion. Subject to the terms of Section 4.2, the Borrower shall have the option, on any Business Day, to extend existing Loans into a subsequent permissible Interest Period or to convert Loans into Loans of another interest rate type; provided, however, that (a) except as provided in Section 3.8, Eurodollar Loans may be converted into Base Rate Loans only on the last day of the Interest Period applicable thereto, (b) Eurodollar Loans may be extended, and Base Rate Loans may be converted into Eurodollar Loans, only if no Default or Event of Default is in existence on the date of extension or conversion, (c) Loans extended as, or converted into, Eurodollar Loans shall be subject to the terms of the definition of "Interest Period" set forth in Section 1.1 and shall be in such minimum amounts as provided in Section 2.1(b)(ii), (d) no more than 25 Eurodollar Loans shall be outstanding hereunder at any time (it being understood that, for purposes hereof, Eurodollar Loans with different Interest Periods shall be considered as separate Eurodollar Loans, even if they begin on the same date, although borrowings, extensions and conversions may, in accordance with the provisions hereof, be combined at the end of existing Interest Periods to constitute a new Eurodollar Loan with a single Interest Period), (e) any request for extension or conversion of a Eurodollar Loan which shall fail to specify an Interest Period shall be deemed to be a request for an Interest Period of one month and (f) Competitive Loans and Swingline Loans may not be extended or converted pursuant to this Section 3.2. Each such extension or conversion shall be effected by a Financial Officer of the Borrower giving a Notice of Extension/Conversion (or telephone notice promptly confirmed in writing) to the Administrative Agent prior to 11:30 A.M. (Charlotte, North Carolina time) on the Business Day of, in the case of the extension of Base Rate Loans and prior to 2:00 P.M. (Charlotte, North Carolina time) on the third Business Day prior to, in the case of the extension of a Eurodollar Loan as, or conversion of a Base Rate Loan into, a Eurodollar Loan, the date of the proposed extension or conversion, specifying the date of the proposed extension or conversion, the Loans to be so extended or converted, the types of Loans into which such Loans are to be converted and, if appropriate, the applicable Interest Periods with respect thereto. Each request for extension or conversion shall be irrevocable and shall constitute a representation and warranty by the Borrower of the matters specified in subsections (b), (c), (d) and (e) of Section 4.2. In the event the Borrower fails to request extension or conversion of any Eurodollar Loan in accordance with this Section, or any such conversion or extension is not permitted or required by this Section, then such Eurodollar Loan shall be automatically converted into a Base Rate Loan at the end of the Interest Period applicable thereto. The Administrative Agent shall give each Lender notice as promptly as practicable of any such proposed extension or conversion affecting any Loan. 3.3 Prepayments. (a) Voluntary Prepayments. The Borrower shall have the right to prepay Loans (other than Competitive Bid Loans, which may not be prepaid) in whole or in part from time to time, subject to Section 3.11, but otherwise without premium or penalty; provided, however, that (i) Eurodollar Loans may only be prepaid on three Business Days prior written notice to the Administrative Agent and specifying the applicable Loans to be prepaid; (ii) any prepayment of Eurodollar Loans or Quoted Rate Swingline Loans will be subject to Section 3.11; and (iii) each such partial prepayment of Loans shall be (A) in the case of Revolving Loans, in a minimum principal amount of $5,000,000 and multiples of $1,000,000 in excess thereof (or, if less, the full remaining amount of the Revolving Loan being prepaid) and (B) in the case of Swingline Loans, in a minimum principal amount of $250,000 and multiples of $100,000 in excess thereof (or, if less, the full remaining amount of the then outstanding Swingline Loans). Subject to the foregoing terms, amounts prepaid under this Section 3.3(a) shall be applied as the Borrower may elect. (b) Mandatory Prepayments.   (i) Commitment Limitation. If at any time, the sum of the aggregate principal amount of outstanding Revolving Loans plus the aggregate principal amount of outstanding Competitive Loans plus the aggregate principal amount of outstanding Swingline Loans shall exceed the Revolving Committed Amount, the Borrower promises to prepay immediately the outstanding principal balance on the Revolving Loans and/or Competitive Loans in an amount sufficient to eliminate such excess. (ii) Debt and Equity Issuances. During any period in which the Borrower has a senior unsecured (non-credit enhanced) long term debt rating from S&P of below BBB- and a senior unsecured (non-credit enhanced) long term debt rating from Moody's of below Baa3, immediately upon receipt by the Borrower or any Subsidiary of proceeds from any Debt or Equity Issuance (as defined below) the Borrower shall prepay the principal amount of Revolving Loans outstanding under the Facilities in an aggregate amount equal to 50% of the net cash proceeds of such Debt or Equity Issuance. Such prepayment shall (A) be applied pro rata to the Facilities (to the extent of outstanding Revolving Loans under each Facility), (B) permanently reduce the Revolving Committed Amount (and the Revolving Commitments of the Lenders on a pro rata basis) on a Dollar for Dollar basis and (C) be accompanied by interest on the principal amount prepaid through the date of prepayment. For purposes hereof, "Debt or Equity Issuance" means the issuance by the Borrower or any of its Subsidiaries (to a Person other than the Borrower or any of its Subsidiaries) of (I) any Indebtedness for borrowed money in the form of publicly issued or privately placed bonds or other debt securities with a maturity of three years or greater or (II) any shares of capital stock or other equity securities.   (c) General. All prepayments made pursuant to this Section 3.3 shall (i) be subject to Section 3.11 and (ii) unless the Borrower shall specify otherwise, be applied first to Base Rate Loans, if any, and then to Eurodollar Loans in direct order of Interest Period maturities. Except as otherwise set forth in subclause (b) above, amounts prepaid on the Revolving Loans may be reborrowed in accordance with the provisions hereof. 3.4 Termination, Reduction and Increase of Revolving Committed Amount. (a) Voluntary Reductions. The Borrower may from time to time permanently reduce or terminate the Revolving Committed Amount in whole or in part (in minimum aggregate amounts of $5,000,000 or in integral multiples of $1,000,000 in excess thereof (or, if less, the full remaining amount of the then applicable Revolving Committed Amount)) upon five Business Days prior written notice to the Administrative Agent; provided, however, no such termination or reduction shall be made which would cause the aggregate principal amount of outstanding Revolving Loans plus the aggregate principal amount of outstanding Competitive Loans plus the aggregate principal amount of outstanding Swingline Loans to exceed the Revolving Committed Amount unless, concurrently with such termination or reduction, the Revolving Loans and/or Competitive Loans are repaid to the extent necessary to eliminate such excess. The Commitments of the Lenders shall automatically terminate on the Termination Date. The Administrative Agent shall promptly notify each affected Lender of receipt by the Administrative Agent of any notice from the Borrower pursuant to this Section 3.4(a). (b) Additional Commitments. The Borrower shall have the right no more than once a year to increase the Facilities up to an aggregate amount of $1,500,000,000 (with such increase to be applied pro rata to the Facilities) without the consent of the Lenders, subject however to the satisfaction of each of the following terms and conditions:   (i) to the knowledge of the Administrative Agent, no Default or Event of Default shall exist and be continuing at the time of such increase; (ii) concurrently with the Borrower's request for such increase hereunder, the Borrower shall deliver to the Administrative Agent, an officer's certificate substantially in the form of Schedule 6.1(c) certifying that no Default or Event of Default has occurred and is continuing and demonstrating compliance with each of the financial covenants set forth in Sections 6.10 and 6.11 both before and after giving effect to the increase requested hereunder; (iii) such increase shall be allocated in the following order:   (A) first, to the existing Lenders consenting to an increase in the amount of their Revolving Commitments; provided that (1) on or before the tenth Business Day following notification of a requested increase in the Revolving Committed Amount, each Lender shall notify the Borrower of the desired increase, if any, in its Revolving Commitment and (2) if the aggregate increases in the Revolving Commitments requested by the existing Lenders shall exceed the requested increase in the Revolving Committed Amount, the Revolving Commitments of such Lenders shall be increased on a pro rata basis according to the existing Commitment Percentage of such Lenders; and (B) second, to any other commercial bank, financial institution or "accredited investor" (as defined in Regulation D of the Securities and Exchange Commission) reasonably acceptable to the Administrative Agent and the Borrower;   (iv) each Person providing a new Commitment shall execute a New Commitment Agreement substantially in the form of Schedule 3.4(b) hereto and, upon such execution and the satisfaction of the other terms and conditions of this Section 3.4(b), such Person shall thereupon become a party hereto and have the rights and obligations of a Lender under this Credit Agreement as more specifically provided in the New Commitment Agreement; and (v) the Administrative Agent shall promptly notify each Lender of (A) the new Revolving Committed Amount and (B) each Lender's Commitment Percentage, in each case after giving effect to the one-time increase in Revolving Commitment referred to in this Section 3.4(b).   On the date (which date shall be a Business Day) on which the increase in the Revolving Committed Amount occurs the Administrative Agent and the Lenders shall make adjustments among the Lenders with respect to the Revolving Loans outstanding hereunder and under the 364-Day Revolver and amounts of principal, interest, fees and other amounts paid or payable with respect thereto as shall be necessary in order to reallocate among the Lenders such outstanding amounts based on the new Commitment Percentages and to otherwise carry out fully the terms of this Section 3.4(b). The Borrower agrees that, in connection with any such increase in the Revolving Committed Amount, it will promptly (i) provide to each Lender providing a new or increased Revolving Commitment (upon surrender of the existing Revolving Note of such Lender in the case of an existing Lender) a Revolving Note in the amount of its new or increased (as applicable) Revolving Commitment substantially in the form of the Revolving Note attached hereto as Schedule 2.1(e) (but, in the case of a new Revolving Note given to an existing Lender that increases its Revolving Commitment, with notation thereon that it is given in substitution for and replacement of the original Revolving Note or any replacement notes thereof) and (ii) provide to each Lender (upon surrender of the existing Competitive Note of such Lender in the case of an existing Lender) a Competitive Note in the amount of the new Revolving Committed Amount substantially in the form of the Competitive Note attached hereto as Schedule 2.2(f) (but, in the case of a new Competitive Note given to an existing Lender, with notation thereon that it is given in substitution for and replacement of the original Competitive Note or any replacement notes thereof). Each of the parties hereto acknowledges and agrees that no Lender shall be obligated to increase its Revolving Commitment pursuant to the terms of this Section 3.4(b). (c) Termination Date. The Revolving Commitments of the Lenders and the Swingline Commitment of the Swingline Lender shall automatically terminate on the Termination Date. The Termination Date may, on an annual basis at the request of the Borrower and in the sole discretion of each Lender, be extended for an additional one year period pursuant to the written consent of each Lender. (d) General. The Borrower shall pay to the Administrative Agent for the account of the Lenders in accordance with the terms of Section 3.5(a), on the date of each termination or reduction of the Revolving Committed Amount, the Facility Fee accrued through the date of such termination or reduction on the amount of the Revolving Committed Amount so terminated or reduced. 3.5 Fees. (a) Facility Fee. In consideration of the Revolving Commitments of the Lenders hereunder, the Borrower agrees to pay to the Administrative Agent for the account of each Lender a fee (the "Facility Fee") on the Revolving Committed Amount computed at a per annum rate for each day during the applicable Facility Fee Calculation Period (hereinafter defined) equal to the Applicable Percentage in effect from time to time. The Facility Fee shall commence to accrue on the Closing Date and shall be due and payable in arrears on the last Business Day of each March, June, September and December (and any date that the Revolving Committed Amount is reduced or increased as provided in Section 3.4 and the Termination Date) for the immediately preceding quarter (or portion thereof) (each such quarter or portion thereof for which the Facility Fee is payable hereunder being herein referred to as a "Facility Fee Calculation Period"), beginning with the first of such dates to occur after the Closing Date. (b) Administrative Fees. The Borrower agrees to pay to the Administrative Agent, for its own account, the fees referred to in the Administrative Agent's Fee Letter (collectively, the "Administrative Agent's Fees"). (c) Utilization Fee. During such periods as the aggregate principal amount of all outstanding Loans is greater than or equal to 33% of the Revolving Committed Amount (each a "Utilization Fee Period"), the Borrower agrees to pay to the Administrative Agent for the account of each Lender a fee (the "Utilization Fee") on all Loans outstanding during each such Utilization Fee Period computed at a per annum rate for each day during such period equal to the Applicable Percentage for the Utilization Fee in effect from time to time. The Utilization Fee shall be due and payable in arrears on the last Business Day of each March, June, September and December for all Utilization Fee Periods occurring during the immediately preceding quarter (or portion thereof), beginning with the first of such dates to occur after the Closing Date. 3.6 Capital Adequacy. If any Lender determines the amount of capital required or expected to be maintained by such Lender, any Lending Installation of such Lender or any corporation controlling such Lender is increased as a result of a Change, then, within 15 days of demand by such Lender, the Borrower shall pay such Lender the amount necessary to compensate for any shortfall in the rate of return on the portion of such increased capital which such Lender determines is attributable to this Credit Agreement, its Loans or its obligation to make Loans hereunder (after taking into account such Lender's policies as to capital adequacy). "Change" means (i) any change after the Closing Date in the Risk-Based Capital Guidelines or (ii) any adoption of or change in any other law, governmental or quasi-governmental rule, regulation, policy, guideline, interpretation, or directive (whether or not having the force of law) after the Closing Date which affects the amount of capital required or expected to be maintained by any Lender or any Lending Installation or any corporation controlling any Lender. "Risk-Based Capital Guidelines" means (i) the risk-based capital guidelines in effect in the United States on the Closing Date, including transition rules, and (ii) the corresponding capital regulations promulgated by regulatory authorities outside the United States implementing the July 1988 report of the Basle Committee on Banking Regulation and Supervisory Practices Entitled "International Convergence of Capital Measurements and Capital Standards," including transition rules, and any amendments to such regulations adopted prior to the Closing Date. 3.7 Inability To Determine Interest Rate. If prior to the first day of any Interest Period, the Administrative Agent shall have reasonably determined that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the Eurodollar Rate for such Interest Period, the Administrative Agent shall give telecopy or telephonic notice thereof to the Borrower and the Lenders as soon as practicable thereafter. If such notice is given (a) any Eurodollar Loans requested to be made on the first day of such Interest Period shall be made as Base Rate Loans and (b) any Loans that were to have been converted on the first day of such Interest Period to or continued as Eurodollar Loans shall be converted to or continued as Base Rate Loans. Until such notice has been withdrawn by the Administrative Agent, no further Eurodollar Loans shall be made or continued as such, nor shall the Borrower have the right to convert Base Rate Loans to Eurodollar Loans. 3.8 Illegality. Notwithstanding any other provision herein, if the adoption of or any change in any Requirement of Law or in the interpretation or application thereof occurring after the Closing Date shall make it unlawful for any Lender to make or maintain Eurodollar Loans as contemplated by this Credit Agreement, (a) such Lender shall promptly give written notice of such circumstances to the Borrower and the Administrative Agent (which notice shall be withdrawn whenever such circumstances no longer exist), (b) the commitment of such Lender hereunder to make Eurodollar Loans, continue Eurodollar Loans as such and convert a Base Rate Loan to Eurodollar Loans shall forthwith be canceled and, until such time as it shall no longer be unlawful for such Lender to make or maintain Eurodollar Loans, such Lender shall then have a commitment only to make a Base Rate Loan when a Eurodollar Loan is requested and (c) such Lender's Loans then outstanding as Eurodollar Loans, if any, shall be converted automatically to Base Rate Loans on the respective last days of the then current Interest Periods with respect to such Loans or within such earlier period as required by law. If any such conversion of a Eurodollar Loan occurs on a day which is not the last day of the then current Interest Period with respect thereto, the Borrower shall pay to such Lender such amounts, if any, as may be required pursuant to Section 3.11. 3.9 Yield Protection. If any law or any governmental or quasi-governmental rule, regulation, policy, guideline or directive (whether or not having the force of law), or any interpretation thereof, or the compliance of any Lender therewith, (a) subjects any Lender or any applicable Lending Installation to any tax, duty, charge or withholding on or from payments due from the Borrower (excluding federal taxation of the overall net income of any Lender or applicable Lending Installation), or changes the basis of taxation of payments to any Lender in respect of its Loans or other amounts due it hereunder; (b) imposes or increases or deems applicable any reserve, assessment, insurance charge, special deposit or similar requirements against assets of, deposits with or for the account of, or credit extended by, any Lender or any applicable Lending Installation (other than reserves and assessments taken into account in determining the Base Rate); and the result of which is to increase the cost to any Lender of making, funding or maintaining loans or reduces any amount receivable by any Lender or any applicable Lending Installation in connection with loans, or requires any Lender or any applicable Lending Installation to make any payment calculated by reference to the amount of loans held or interest received by it, by an amount deemed material by such Lender; then, within 15 days of demand by such Lender, the Borrower shall pay such Lender that portion of such increased expense incurred or reduction in an amount received which such Lender determines is attributable to making, funding and maintaining its Loans and its Commitments. This covenant shall survive the termination of this Credit Agreement and the payment of the Loans and all other amounts payable hereunder. 3.10 Withholding Tax Exemption. Each Lender that is not incorporated under the laws of the United States of America or a state thereof shall: (a) (i) on or before the date of any payment by the Borrower under this Credit Agreement or Notes to such Lender, deliver to the Borrower and the Administrative Agent (A) two (2) duly completed copies of United States Internal Revenue Service Form 1001 or 4224, or successor applicable form, as the case may be, certifying that it is entitled to receive payments under this Credit Agreement and any Notes without deduction or withholding of any United States federal income taxes and (B) an Internal Revenue Service Form W-8 or W-9, or successor applicable form, as the case may be, certifying that it is entitled to an exemption from United States backup withholding tax; (ii) deliver to the Borrower and the Administrative Agent two (2) 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; or   (b) in the case of any such Lender that is not a "bank" within the meaning of Section 881(c)(3)(A) of the Internal Revenue Code, (i) represent to the Borrower (for the benefit of the Borrower and the Administrative Agent) that it is not a bank within the meaning of Section 881(c)(3)(A) of the Internal Revenue Code, (ii) agree to furnish to the Borrower on or before the date of any payment by the Borrower, with a copy to the Administrative Agent two (2) accurate and complete original signed copies of Internal Revenue Service Form W-8, or successor applicable form certifying to such Lender's legal entitlement at the date of such certificate to an exemption from U.S. withholding tax under the provisions of Section 881(c) of the Internal Revenue Code with respect to payments to be made under this Credit Agreement and any Notes (and to deliver to the Borrower and the Administrative Agent two (2) further copies of such form on or before the date it expires or becomes obsolete and after the occurrence of any event requiring a change in the most recently provided form and, if necessary, obtain any extensions of time reasonably requested by the Borrower or the Administrative Agent for filing and completing such forms), and (iii) agree, to the extent legally entitled to do so, upon reasonable request by the Borrower, to provide to the Borrower (for the benefit of the Borrower and the Administrative Agent) such other forms as may be reasonably required in order to establish the legal entitlement of such Lender to an exemption from withholding with respect to payments under this Credit Agreement and any Notes; unless in any such case any change in treaty, law or regulation has occurred after the date such Person becomes a Lender hereunder 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 in either case. Each Person that shall become a Lender or a participant of a Lender pursuant to subsection 10.3 shall, upon the effectiveness of the related transfer, be required to provide all of the forms, certifications and statements required pursuant to this subsection, provided that in the case of a participant of a Lender the obligations of such participant of a Lender pursuant to this Section 3.10 shall be determined as if the participant of a Lender were a Lender except that such participant of a Lender shall furnish all such required forms, certifications and statements to the Lender from which the related participation shall have been purchased. 3.11 Indemnity. The Borrower promises to indemnify each Lender and to hold each Lender harmless from any loss or expense which such Lender may sustain or incur (other than through such Lender's gross negligence or willful misconduct) as a consequence of (a) default by the Borrower in making a borrowing of, conversion into or continuation of Eurodollar Loans or Quoted Rate Swingline Loans after the Borrower has given a notice requesting the same in accordance with the provisions of this Credit Agreement, (b) default by the Borrower in making any prepayment of a Eurodollar Loan or a Quoted Rate Swingline Loan after the Borrower has given a notice thereof in accordance with the provisions of this Credit Agreement or (c) the making of a prepayment of Eurodollar Loans or Quoted Rate Swingline Loans on a day which is not the last day of an Interest Period with respect thereto. With respect to Eurodollar Loans, such indemnification may include an amount equal to the excess, if any, of (i) the amount of interest which would have accrued on the amount so prepaid, or not so borrowed, converted or continued, for the period from the date of such prepayment or of such failure to borrow, convert or continue to the last day of the applicable 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 Eurodollar Loans provided for herein (excluding, however, the Applicable Percentage included therein, if any) over (ii) the amount of interest (as reasonably determined by such Lender) which would have accrued to such Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank Eurodollar market. The covenants of the Borrower set forth in this Section 3.11 shall survive the termination of this Credit Agreement and the payment of the Loans and all other amounts payable hereunder. 3.12 Pro Rata Treatment. Except to the extent otherwise provided herein: (a) Loans. Each Loan, each payment or prepayment of principal of any Loan, each payment of interest on the Loans, each payment of Facility Fees, each payment of Utilization Fees, each reduction of the Revolving Committed Amount and each conversion or extension of any Loan, shall be allocated pro rata among the Lenders in accordance with the respective principal amounts of their outstanding Loans and Participation Interests. With respect to Competitive Loans, if the Borrower fails to specify the particular Competitive Loan or Loans as to which any payment or other amount should be applied and it is not otherwise clear as to the particular Competitive Loan or Loans to which such payment or other amounts relate, or any such payment or other amount is to be applied to Competitive Loans without regard to any such direction by the Borrower, then each payment or prepayment of principal on Competitive Loans and each payment of interest or other amount on or in respect of Competitive Loans, shall be allocated pro rata among the relevant Lenders of Competitive Loans in accordance with the then outstanding amounts of their respective Competitive Loans. (b) Advances. Unless the Administrative Agent shall have been notified in writing by any Lender prior to a borrowing that such Lender will not make the amount that would constitute its ratable 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 such Lender within the time period specified therefor hereunder, such Lender shall pay to the Administrative Agent, on demand, such amount with interest thereon at a rate equal to the Federal Funds Rate for the period until such Lender makes such amount immediately available to the Administrative Agent. A certificate of the Administrative Agent submitted to any Lender with respect to any amounts owing under this subsection shall be conclusive in the absence of manifest error. 3.13 Sharing of Payments. The Lenders agree among themselves that, in the event that any Lender shall obtain payment in respect of any Loan or any other obligation owing to such Lender under this Credit Agreement through the exercise of a right of setoff, banker's lien or counterclaim, or pursuant to a secured claim under Section 506 of Title 11 of the United States Code or other security or interest arising from, or in lieu of, such secured claim, received by such Lender under any applicable bankruptcy, insolvency or other similar law or otherwise, or by any other means, in excess of its pro rata share of such payment as provided for in this Credit Agreement, such Lender shall promptly purchase from the other Lenders a participation in such Loans and other obligations in such amounts, and make such other adjustments from time to time, as shall be equitable to the end that all Lenders share such payment in accordance with their respective ratable shares as provided for in this Credit Agreement. The Lenders further agree among themselves that if payment to a Lender obtained by such Lender through the exercise of a right of setoff, banker's lien, counterclaim or other event as aforesaid shall be rescinded or must otherwise be restored, each Lender which shall have shared the benefit of such payment shall, by repurchase of a participation theretofore sold, return its share of that benefit (together with its share of any accrued interest payable with respect thereto) to each Lender whose payment shall have been rescinded or otherwise restored. The Borrower agrees that any Lender so purchasing such a participation may, to the fullest extent permitted by law, exercise all rights of payment, including setoff, banker's lien or counterclaim, with respect to such participation as fully as if such Lender were a holder of such Loan or other obligation in the amount of such participation. Except as otherwise expressly provided in this Credit Agreement, if any Lender or the Administrative Agent shall fail to remit to the Administrative Agent or any other Lender an amount payable by such Lender or the Administrative Agent to the Administrative Agent or such other Lender pursuant to this Credit Agreement on the date when such amount is due, such payments shall be made together with interest thereon for each date from the date such amount is due until the date such amount is paid to the Administrative Agent or such other Lender at a rate per annum equal to the Federal Funds Rate. If under any applicable bankruptcy, insolvency or other similar law, any Lender receives a secured claim in lieu of a setoff to which this Section 3.13 applies, such Lender shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the Lenders under this Section 3.13 to share in the benefits of any recovery on such secured claim. 3.14 Payments, Computations, Etc. (a) Except as otherwise specifically provided herein, all payments hereunder (other than payments in respect of Competitive Loans) shall be made to the Administrative Agent in dollars in immediately available funds, without offset, deduction, counterclaim or withholding of any kind, at the Administrative Agent's office specified in Schedule 2.1(a) not later than 4:00 P.M. (Charlotte, North Carolina time) on the date when due. Payments received after such time shall be deemed to have been received on the next succeeding Business Day. The Administrative Agent may (but shall not be obligated to) debit the amount of any such payment which is not made by such time to any ordinary deposit account of the Borrower maintained with the Administrative Agent (with notice to the Borrower). The Borrower shall, at the time it makes any payment under this Credit Agreement (other than payments in respect of Competitive Loans), specify to the Administrative Agent the Loans, Fees, interest or other amounts payable by the Borrower hereunder to which such payment is to be applied (and in the event that it fails so to specify, or if such application would be inconsistent with the terms hereof, the Administrative Agent shall distribute such payment to the Lenders in such manner as the Administrative Agent may determine to be appropriate in respect of obligations owing by the Borrower hereunder, subject to the terms of Section 3.12(a)). The Administrative Agent will distribute such payments to such Lenders, if any such payment is received prior to 12:00 Noon (Charlotte, North Carolina time) on a Business Day in like funds as received prior to the end of such Business Day and otherwise the Administrative Agent will distribute such payment to such Lenders on the next succeeding Business Day. All payments of principal and interest in respect of Competitive Loans shall be made in accordance with the terms of Section 2.2. Whenever any payment hereunder shall be stated to be due on a day which is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day (subject to accrual of interest and Fees for the period of such extension), except that in the case of Eurodollar Loans, if the extension would cause the payment to be made in the next following calendar month, then such payment shall instead be made on the next preceding Business Day. Except as expressly provided otherwise herein, all computations of interest and fees shall be made on the basis of actual number of days elapsed over a year of 360 days, except with respect to computation of interest on Base Rate Loans which (unless the Base Rate is determined by reference to the Federal Funds Rate) shall be calculated based on a year of 365 or 366 days, as appropriate. Interest shall accrue from and include the date of borrowing, but exclude the date of payment. (b) Allocation of Payments After Event of Default. Notwithstanding any other provisions of this Credit Agreement to the contrary, after the occurrence and during the continuance of an Event of Default, all amounts collected or received by the Administrative Agent or any Lender on account of the Loans, Fees or any other amounts outstanding under any of the Credit Documents shall be paid over or delivered as follows:   FIRST, to the payment of all reasonable out-of-pocket costs and expenses (including without limitation reasonable attorneys' fees) of the Administrative Agent in connection with enforcing the rights of the Lenders under the Credit Documents; SECOND, to payment of any fees owed to the Administrative Agent; THIRD, to the payment of all reasonable out-of-pocket costs and expenses (including without limitation, reasonable attorneys' fees) of each of the Lenders in connection with enforcing its rights under the Credit Documents or otherwise with respect to amounts owing to such Lender; FOURTH, to the payment of accrued fees and interest; FIFTH, to the payment of the outstanding principal amount of the Loans; SIXTH, to all other amounts and other obligations which shall have become due and payable under the Credit Documents or otherwise and not repaid pursuant to clauses "FIRST" through "FIFTH" above; and SEVENTH, to the payment of the surplus, if any, to whoever may be lawfully entitled to receive such surplus.   In carrying out the foregoing, (i) amounts received shall be applied in the numerical order provided until exhausted prior to application to the next succeeding category; and (ii) each of the Lenders shall receive an amount equal to its pro rata share (based on the proportion that the then outstanding Loans held by such Lender bears to the aggregate then outstanding Loans) of amounts available to be applied pursuant to clauses "THIRD", "FOURTH", "FIFTH" and "SIXTH" above. 3.15 Evidence of Debt. (a) Each Lender shall maintain an account or accounts evidencing each Loan made by such Lender to the Borrower from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time under this Credit Agreement. Each Lender will make reasonable efforts to maintain the accuracy of its account or accounts and to promptly update its account or accounts from time to time, as necessary. (b) The Administrative Agent shall maintain the Register pursuant to Section 10.3(c) hereof, and a subaccount for each Lender, in which Register and subaccounts (taken together) shall be recorded (i) the amount, type and Interest Period of each such Loan hereunder, (ii) the amount of any principal or interest due and payable or to become due and payable to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder from or for the account of the Borrower and each Lender's share thereof. The Administrative Agent will make reasonable efforts to maintain the accuracy of the subaccounts referred to in the preceding sentence and to promptly update such subaccounts from time to time, as necessary. (c) The entries made in the accounts, Register and subaccounts maintained pursuant to subsection (b) of this Section 3.15 (and, if consistent with the entries of the Administrative Agent, subsection (a)) shall be prima facie, but not conclusive, 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 any 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 the Loans made by such Lender in accordance with the terms hereof. 3.16 Replacement of Lenders. In the event any Lender delivers to the Borrower any notice in accordance with Sections 3.6, 3.8, 3.9 or 3.10, then the Borrower shall have the right, if no Default or Event of Default then exists, to replace such Lender (the "Replaced Lender") with one or more additional banks or financial institutions (collectively, the "Replacement Lender"), provided that (A) at the time of any replacement pursuant to this Section 3.16, the Replacement Lender shall enter into one or more assignment agreements substantially in the form of Schedule 10.3(b) pursuant to, and in accordance with the terms of, Section 10.3(b) (and with all fees payable pursuant to said Section 10.3(b) to be paid by the Replacement Lender) pursuant to which the Replacement Lender shall acquire all of the rights and obligations of the Replaced Lender hereunder and, in connection therewith, shall pay to the Replaced Lender in respect thereof an amount equal to the sum of (a) the principal of, and all accrued interest on, all outstanding Loans of the Replaced Lender, and (b) all accrued, but theretofore unpaid, fees owing to the Replaced Lender pursuant to Section 3.5(a), and (B) all obligations of the Borrower owing to the Replaced Lender (including all obligations, if any, owing pursuant to Section 3.6, 3.8 or 3.9, but excluding those obligations specifically described in clause (A) above in respect of which the assignment purchase price has been, or is concurrently being paid) shall be paid in full to such Replaced Lender concurrently with such replacement.     SECTION 4 CONDITIONS 4.1 Closing Conditions. The obligation of the Lenders to enter into this Credit Agreement and to make the initial Loans shall be subject to satisfaction of the following conditions (in form and substance acceptable to the Lenders): (a) The Administrative Agent shall have received original counterparts of this Credit Agreement executed by each of the parties hereto; (b) The Administrative Agent shall have received an appropriate original Revolving Note for each Lender, executed by the Borrower; (c) The Administrative Agent shall have received an appropriate original Competitive Note for each Lender, executed by the Borrower; (d) The Administrative Agent shall have received an appropriate original Swingline Note for the Swingline Lender, executed by the Borrower; (e) The Administrative Agent shall have received all documents it may reasonably request relating to the existence and good standing of the Borrower, the corporate or other necessary authority for and the validity of the Credit Documents, and any other matters relevant thereto, all in form and substance reasonably satisfactory to the Administrative Agent; (f) The Administrative Agent shall have received a legal opinion of Harry L. Goldsmith, Esq., general counsel for the Borrower, dated as of the Closing Date and substantially in the form of Schedule 4.1(f); (g) Since August 28, 1999 there shall not have occurred nor otherwise exist an event or condition which has a Material Adverse Effect; (h) The Administrative Agent shall have received, for its own account and for the accounts of the Lenders, all fees and expenses required by this Credit Agreement or any other Credit Document to be paid on or before the Closing Date; (i) Each of the Existing Credit Agreements shall have been terminated; and (j) The Administrative Agent shall have received such other documents, agreements or information which may be reasonably requested by the Administrative Agent. 4.2 Conditions to all Extensions of Credit. The obligations of each Lender to make, convert or extend any Loan (including the initial Loans) are subject to satisfaction of the following conditions in addition to satisfaction on the Closing Date of the conditions set forth in Section 4.1: (a) The Borrower shall have delivered, in the case of any Revolving Loan, an appropriate Notice of Borrowing or Notice of Extension/Conversion; (b) The representations and warranties set forth in Section 5 shall be, subject to the limitations set forth therein, true and correct in all material respects as of such date (except for those which expressly relate to an earlier date); (c) There shall not have been commenced against the Borrower an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or any case, proceeding or other action for the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of the Borrower or for any substantial part of its Property or for the winding up or liquidation of its affairs, and such involuntary case or other case, proceeding or other action shall remain undismissed, undischarged or unbonded; (d) No Default or Event of Default shall exist and be continuing either prior to or after giving effect thereto; and (e) Immediately after giving effect to the making of such Loan (and the application of the proceeds thereof), the sum of the aggregate principal amount of outstanding Revolving Loans plus the aggregate principal amount of outstanding Competitive Loans plus the aggregate principal amount of outstanding Swingline Loans shall not exceed the Revolving Committed Amount. The delivery of each Notice of Borrowing and each Notice of Extension/Conversion shall constitute a representation and warranty by the Borrower of the correctness of the matters specified in subsections (b), (c), (d) and (e) above.     SECTION 5 REPRESENTATIONS AND WARRANTIES The Borrower hereby represents to the Administrative Agent and each Lender that: 5.1 Financial Condition. The audited consolidated balance sheet of the Borrower and its consolidated Subsidiaries as of August 28, 1999 and the audited consolidated statements of earnings and statements of cash flows for the year ended August 28, 1999 have heretofore been furnished to each Lender. Such financial statements (including the notes thereto) (a) have been audited by Ernst & Young LLP, (b) have been prepared in accordance with GAAP consistently applied throughout the periods covered thereby and (c) present fairly (on the basis disclosed in the footnotes to such financial statements) the consolidated financial condition, results of operations and cash flows of the Borrower and its consolidated Subsidiaries as of such date and for such periods. During the period from August 28, 1999 to and including the Closing Date, there has been no sale, transfer or other disposition by the Borrower or any of its Subsidiaries of any material part of the business or property of the Borrower and its consolidated Subsidiaries, taken as a whole, and no purchase or other acquisition by any of them of any business or property (including any capital stock of any other person) material in relation to the consolidated financial condition of the Borrower and its consolidated Subsidiaries, taken as a whole, in each case, which, is not reflected in the foregoing financial statements or in the notes thereto and has not otherwise been disclosed in writing to the Lenders on or prior to the Closing Date. 5.2 Organization; Existence; Compliance with Law. Each of the Borrower and its Subsidiaries (a) is duly organized, validly existing and is in good standing under the laws of the jurisdiction of its incorporation or organization, (b) has the corporate or other necessary 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, except to the extent that the failure to have such legal right would not be reasonably expected to have a Material Adverse Effect, (c) is duly qualified as a foreign entity and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification, other than in such jurisdictions where the failure to be so qualified and in good standing would not be reasonably expected to have a Material Adverse Effect, and (d) is in compliance with all material Requirements of Law, except to the extent that the failure to comply therewith would not, in the aggregate, be reasonably expected to have a Material Adverse Effect. 5.3 Power; Authorization; Enforceable Obligations. The Borrower has the corporate or other necessary power and authority, and the legal right, to make, deliver and perform the Credit Documents to which it is a party, and in the case of the Borrower, to borrow hereunder, and has taken all necessary corporate action to authorize the borrowings on the terms and conditions of this Credit Agreement and to authorize the execution, delivery and performance of the Credit Documents to which it is a party. No consent or authorization of, filing with, notice to or other similar act by or in respect of, any Governmental Authority or any other Person is required to be obtained or made by or on behalf of the Borrower in connection with the borrowings hereunder or with the execution, delivery, performance, validity or enforceability of the Credit Documents to which the Borrower is a party. This Credit Agreement has been, and each other Credit Document to which the Borrower is a party will be, duly executed and delivered on behalf of the Borrower. This Credit Agreement constitutes, and each other Credit Document to which the Borrower is a party when executed and delivered will constitute, a legal, valid and binding obligation of the Borrower enforceable against such party in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law). 5.4 No Legal Bar. The execution, delivery and performance of the Credit Documents by the Borrower, the borrowings hereunder and the use of the proceeds thereof (a) will not violate any Requirement of Law or contractual obligation of the Borrower or any of its Subsidiaries in any respect that would reasonably be expected to have a Material Adverse Effect, (b) will not result in, or require, the creation or imposition of any Lien on any of the properties or revenues of any of the Borrower or any of its Subsidiaries pursuant to any such Requirement of Law or contractual obligation, and (c) will not violate or conflict with any provision of the Borrower's articles of incorporation or by-laws. 5.5 No Material Litigation. Except as disclosed in Schedule 5.5, there are no actions, suits or proceedings pending or, to the best knowledge of the Borrower, threatened against or affecting the Borrower, any of its Subsidiaries or any of its properties before any Governmental Authority that (a) could reasonably be expected to have a Material Adverse Effect or (b) in any manner draw into question the validity, legality or enforceability of any Credit Document or any transaction contemplated thereby. 5.6 No Default. Neither the Borrower nor any of its Subsidiaries is in default under or with respect to any of their contractual obligations in any respect which would be reasonably expected to have a Material Adverse Effect. No Default or Event of Default has occurred and is continuing. 5.7 Ownership of Property; Liens. Each of the Borrower and its Subsidiaries has good record and marketable title in fee simple to, or a valid leasehold interest in, all its material real property, and good title to, or a valid leasehold interest in, all its other material property, and none of such property is subject to any Lien, except for Permitted Liens. 5.8 No Burdensome Restrictions. Except as previously disclosed in writing to the Lenders on or prior to the Closing Date, no Requirement of Law or contractual obligation of the Borrower or any of its Subsidiaries would be reasonably expected to have a Material Adverse Effect. 5.9 Taxes. Each of the Borrower and its Subsidiaries has filed or caused to be filed all United States federal income tax returns and all other material tax returns which, to the best knowledge of the Borrower, are required to be filed and has paid (a) all taxes shown to be due and payable on said returns or (b) all taxes shown to be due and payable on any assessments of which it has received notice made against it or any of its property and all other taxes, fees or other charges imposed on it or any of its property by any Governmental Authority (other than any (i) taxes, fees or other charges with respect to which the failure to pay, in the aggregate, would not have a Material Adverse Effect or (ii) taxes, fees or other charges the amount or validity of which are currently being contested and with respect to which reserves in conformity with GAAP have been provided on the books of such Person), and no tax Lien has been filed, and, to the best knowledge of the Borrower, no claim is being asserted, with respect to any such tax, fee or other charge. 5.10 ERISA. Except as would not result in a Material Adverse Effect: (a) During the five-year period prior to the date on which this representation is made or deemed made: (i) no ERISA Event has occurred, and, to the best knowledge of the Borrower, no event or condition has occurred or exists as a result of which any ERISA Event could reasonably be expected to occur, with respect to any Plan; (ii) no "accumulated funding deficiency," as such term is defined in Section 302 of ERISA and Section 412 of the Code, whether or not waived, has occurred with respect to any Plan; (iii) each Single Employer Plan and, to the best knowledge of the Borrower, each Multiemployer Plan has been maintained, operated, and funded in compliance with its own terms and in material compliance with the provisions of ERISA, the Code, and any other applicable federal or state laws; and (iv) no lien in favor of the PBGC or a Plan has arisen or is reasonably likely to arise on account of any Plan. (b) The actuarial present value of all "benefit liabilities" (as defined in Section 4001(a)(16) of ERISA), whether or not vested, under each Single Employer Plan, as of the last annual valuation date prior to the date on which this representation is made or deemed made (determined, in each case, utilizing the actuarial assumptions used in such Plan's most recent actuarial valuation report), did not exceed as of such valuation date the fair market value of the assets of such Plan. (c) Neither the Borrower, any of the Subsidiaries of the Borrower nor any ERISA Affiliate has incurred, or, to the best knowledge of the Borrower, could be reasonably expected to incur, any withdrawal liability under ERISA to any Multiemployer Plan or Multiple Employer Plan. Neither the Borrower, any of the Subsidiaries of the Borrower nor any ERISA Affiliate would become subject to any withdrawal liability under ERISA if the Borrower, any of the Subsidiaries of the Borrower or any ERISA Affiliate were to withdraw completely from all Multiemployer Plans and Multiple Employer Plans as of the valuation date most closely preceding the date on which this representation is made or deemed made. Neither the Borrower, any of the Subsidiaries of the Borrower nor any ERISA Affiliate has received any notification that any Multiemployer Plan is in reorganization (within the meaning of Section 4241 of ERISA), is insolvent (within the meaning of Section 4245 of ERISA), or has been terminated (within the meaning of Title IV of ERISA), and no Multiemployer Plan is, to the best knowledge of the Borrower, reasonably expected to be in reorganization, insolvent, or terminated. (d) No prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the Code) or breach of fiduciary responsibility has occurred with respect to a Plan which has subjected or may subject the Borrower, any of the Subsidiaries of the Borrower or any ERISA Affiliate to any liability under Sections 406, 409, 502(i), or 502(l) of ERISA or Section 4975 of the Code, or under any agreement or other instrument pursuant to which the Borrower, any of the Subsidiaries of the Borrower or any ERISA Affiliate has agreed or is required to indemnify any person against any such liability. (e) Neither the Borrower, any Subsidiary of the Borrower nor any ERISA Affiliates has any material liability with respect to "expected post-retirement benefit obligations" within the meaning of the Financial Accounting Standards Board Statement 106. (f) Neither the execution and delivery of this Credit Agreement nor the consummation of the financing transactions contemplated thereunder will involve any transaction which is subject to the prohibitions of Sections 404, 406 or 407 of ERISA or in connection with which a tax could be imposed pursuant to Section 4975 of the Code. The representation by the Borrower in the preceding sentence is made in reliance upon and subject to the accuracy of the Lenders' representation in Section 10.15 with respect to their source of funds and is subject, in the event that the source of the funds used by the Lenders in connection with this transaction is an insurance company's general asset account, to the application of Prohibited Transaction Class Exemption 95-60, 60 Fed. Reg. 35,925 (1995), compliance with the regulations issued under Section 401(c)(1)(A) of ERISA, or the issuance of any other prohibited transaction exemption or similar relief, to the effect that assets in an insurance company's general asset account do not constitute assets of an "employee benefit plan" within the meaning of Section 3(3) of ERISA of a "plan" within the meaning of Section 4975(e)(1) of the Code. 5.11 Governmental Regulations, Etc. (a) No part of the proceeds of the Loans will be used, directly or indirectly, for the purpose of purchasing or carrying any "margin stock" in violation of Regulation U. If requested by any Lender or the Administrative Agent, the Borrower will furnish to the Administrative Agent and each Lender a statement to the foregoing effect in conformity with the requirements of FR Form U-1 referred to in said Regulation U. No indebtedness being reduced or retired out of the proceeds of the Loans was or will be incurred for the purpose of purchasing or carrying any margin stock within the meaning of Regulation U or any "margin security" within the meaning of Regulation T. "Margin stock" within the meanings of Regulation U does not constitute more than 25% of the value of the consolidated assets of the Borrower and its Subsidiaries. None of the transactions contemplated by this Credit Agreement (including, without limitation, the direct or indirect use of the proceeds of the Loans) will violate or result in a violation of the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, or regulations issued pursuant thereto, or Regulation T, U or X. (b) Neither the Borrower nor any of its Subsidiaries is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act or the Investment Company Act of 1940, each as amended. In addition, neither the Borrower nor any of its Subsidiaries is (i) an "investment company" registered or required to be registered under the Investment Company Act of 1940, as amended, and is not controlled by such a company, or (ii) a "holding company", or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company" or of a "subsidiary" of a "holding company", within the meaning of the Public Utility Holding Company Act of 1935, as amended. (c) Each of the Borrower and its Subsidiaries has obtained all licenses, permits, franchises or other governmental authorizations necessary to the ownership of its respective Property and to the conduct of its business, except where such failure could not reasonably be expected to have a Material Adverse Effect. (d) Neither the Borrower nor any of its Subsidiaries is in violation of any applicable statute, regulation or ordinance of the United States of America, or of any state, city, town, municipality, county or any other jurisdiction, or of any agency thereof (including without limitation, environmental laws and regulations), except where such violation could not reasonably be expected to have a Material Adverse Effect. (e) Each of the Borrower and its Subsidiaries is current with all material reports and documents, if any, required to be filed with any state or federal securities commission or similar agency and is in full compliance in all material respects with all applicable rules and regulations of such commissions, except where such failure could not reasonably be expected to have a Material Adverse Effect. 5.12 Subsidiaries. Schedule 5.12 sets forth all the Subsidiaries of the Borrower at the Closing Date, the jurisdiction of their organization and the direct or indirect ownership interest of the Borrower therein. 5.13 Purpose of Loans. The proceeds of the Loans hereunder shall be used solely by the Borrower to (a) to refinance existing Indebtedness of the Borrower under the Existing Credit Agreements, (b) repurchase stock in the Borrower, (c) to finance acquisitions to the extent permitted under this Credit Agreement and (d) for the working capital, commercial paper back up, capital expenditures and other lawful corporate purposes of the Borrower and its Subsidiaries. 5.14 Year 2000 Matters. The Borrower believes that all computer applications (including those of its suppliers, vendors and customers) that are material to its or any of its Subsidiaries' business and operations are able to perform properly date-sensitive functions for all dates before and after January 1, 2000 (that is, are "Year 2000 compliant"), except to the extent as would not reasonably be expected to have a Material Adverse Effect.     SECTION 6 AFFIRMATIVE COVENANTS The Borrower hereby covenants and agrees that so long as this Credit Agreement is in effect or any amounts payable hereunder or under any other Credit Document shall remain outstanding, and until all of the Commitments hereunder shall have terminated: 6.1 Information Covenants. The Borrower will furnish, or cause to be furnished, to the Administrative Agent and the Lenders: (a) Annual Financial Statements. As soon as available, and in any event within 100 days after the close of each fiscal year of the Borrower and its Subsidiaries, a consolidated balance sheet and income statement of the Borrower and its Subsidiaries, as of the end of such fiscal year, together with related consolidated statements of operations and retained earnings and of cash flows for such fiscal year, setting forth in comparative form consolidated figures for the preceding fiscal year, all such financial information described above to be in reasonable form and detail and audited by Ernst & Young LLP (or independent certified public accountants of recognized national standing reasonably acceptable to the Administrative Agent) and whose opinion shall be to the effect that such financial statements have been prepared in accordance with GAAP (except for changes with which such accountants concur) and shall not be limited as to the scope of the audit or qualified as to the status of the Borrower and its Subsidiaries as a going concern. (b) Quarterly Financial Statements. As soon as available, and in any event within 50 days after the close of each fiscal quarter of the Borrower and its Subsidiaries (other than the fourth fiscal quarter, in which case 100 days after the end thereof) a consolidated balance sheet and income statement of the Borrower and its Subsidiaries, as of the end of such fiscal quarter, together with related consolidated statements of operations and retained earnings and of cash flows for such fiscal quarter in each case setting forth in comparative form consolidated figures for the corresponding period of the preceding fiscal year, all such financial information described above to be in reasonable form and detail and reasonably acceptable to the Administrative Agent, and accompanied by a certificate of a Financial Officer of the Borrower to the effect that such quarterly financial statements fairly present in all material respects the financial condition of the Borrower and its Subsidiaries and have been prepared in accordance with GAAP, subject to changes resulting from audit and normal year-end audit adjustments. (c) Officer's Certificate. At the time of delivery of the financial statements provided for in Sections 6.1(a) and 6.1(b) above, a certificate of a Financial Officer of the Borrower substantially in the form of Schedule 6.1(c), (i) demonstrating compliance with the financial covenants contained in Sections 6.10 and 6.11 by calculation thereof as of the end of each such fiscal period and (ii) stating that no Default or Event of Default exists, or if any Default or Event of Default does exist, specifying the nature and extent thereof and what action the Borrower proposes to take with respect thereto. (d) Reports. Promptly upon transmission or receipt thereof, (a) copies of any filings and registrations with, and reports to or from, the Securities and Exchange Commission, or any successor agency, and copies of all financial statements, proxy statements, notices and reports as the Borrower or any of its Subsidiaries shall send to its shareholders or to a holder of any Indebtedness owed by the Borrower or any of its Subsidiaries in its capacity as such a holder and (b) upon the request of the Administrative Agent, all reports and written information to and from the United States Environmental Protection Agency, or any state or local agency responsible for environmental matters, the United States Occupational Health and Safety Administration, or any state or local agency responsible for health and safety matters, or any successor agencies or authorities concerning environmental, health or safety matters. (e) Notices. Upon obtaining knowledge thereof, the Borrower will give written notice to the Administrative Agent immediately of (a) the occurrence of an event or condition consisting of a Default or Event of Default, specifying the nature and existence thereof and what action the Borrower propose to take with respect thereto, and (b) the occurrence of any of the following with respect to the Borrower or any of its Subsidiaries (i) the pendency or commencement of any litigation, arbitral or governmental proceeding against such Person which if adversely determined is reasonably likely to have a Material Adverse Effect, (ii) the institution of any proceedings against such Person with respect to, or the receipt of notice by such Person of potential liability or responsibility for violation, or alleged violation of any federal, state or local law, rule or regulation, including but not limited to, Environmental Laws, the violation of which would likely have a Material Adverse Effect, or (iii) any notice or determination concerning the imposition of any withdrawal liability by a Multiemployer Plan against such Person or any ERISA Affiliate, the determination that a Multiemployer Plan is, or is expected to be, in reorganization within the meaning of Title IV of ERISA or the termination of any Plan. (f) ERISA. Upon obtaining knowledge thereof, the Borrower will give written notice to the Administrative Agent promptly (and in any event within five business days) of: (i) of any event or condition, including, but not limited to, any Reportable Event, that constitutes, or might reasonably lead to, an ERISA Event; (ii) with respect to any Multiemployer Plan, the receipt of notice as prescribed in ERISA or otherwise of any withdrawal liability assessed against the Borrower or any of its ERISA Affiliates, or of a determination that any Multiemployer Plan is in reorganization or insolvent (both within the meaning of Title IV of ERISA); (iii) the failure to make full payment on or before the due date (including extensions) thereof of all amounts which the Borrower, any of the Subsidiaries of the Borrower or any ERISA Affiliate is required to contribute to each Plan pursuant to its terms and as required to meet the minimum funding standard set forth in ERISA and the Code with respect thereto; or (iv) any change in the funding status of any Plan that reasonably could be expected to have a Material Adverse Effect, together with a description of any such event or condition or a copy of any such notice and a statement by a Financial Officer of the Borrower briefly setting forth the details regarding such event, condition, or notice, and the action, if any, which has been or is being taken or is proposed to be taken by the Borrower with respect thereto. Promptly upon request, the Borrower shall furnish the Administrative Agent and the Lenders with such additional information concerning any Plan as may be reasonably requested, including, but not limited to, copies of each annual report/return (Form 5500 series), as well as all schedules and attachments thereto required to be filed with the Department of Labor and/or the Internal Revenue Service pursuant to ERISA and the Code, respectively, for each "plan year" (within the meaning of Section 3(39) of ERISA). (g) Other Information. With reasonable promptness upon any such request, such other information regarding the business, properties or financial condition of the Borrower or any of its Subsidiaries as the Administrative Agent or the Required Lenders may reasonably request. 6.2 Preservation of Existence and Franchises. Except as would not result in a Material Adverse Effect, the Borrower will, and will cause each of its Subsidiaries to, do all things necessary to preserve and keep in full force and effect its existence, rights, franchises and authority. 6.3 Books and Records. The Borrower will, and will cause each of its Subsidiaries to, keep complete and accurate books and records of its transactions in accordance with good accounting practices on the basis of GAAP (including the establishment and maintenance of appropriate reserves). 6.4 Compliance with Law. The Borrower will, and will cause each of its Subsidiaries to, comply with all laws, rules, regulations and orders, and all applicable restrictions imposed by all Governmental Authorities, applicable to it and its property if noncompliance with any such law, rule, regulation, order or restriction would have a Material Adverse Effect. 6.5 Payment of Taxes and Other Indebtedness. Except as otherwise provided pursuant to the terms of the definition of "Permitted Liens" set forth in Section 1.1, the Borrower will, and will cause each of its Subsidiaries to, pay and discharge (a) all taxes, assessments and governmental charges or levies imposed upon it, or upon its income or profits, or upon any of its properties, before they shall become delinquent, (b) all lawful claims (including claims for labor, materials and supplies) which, if unpaid, might give rise to a Lien upon any of its properties, and (c) except as prohibited hereunder, all of its other Indebtedness as it shall become due. 6.6 Insurance. The Borrower will, and will cause each of its Subsidiaries to, at all times maintain in full force and effect insurance (including worker's compensation insurance, liability insurance and casualty insurance) in such amounts, covering such risks and liabilities and with such deductibles or self-insurance retentions as are in accordance with normal industry practice. 6.7 Maintenance of Property. The Borrower will, and will cause each of its Subsidiaries to, maintain and preserve its properties and equipment material to the conduct of its business in good repair, working order and condition, normal wear and tear and casualty and condemnation excepted, and will make, or cause to be made, in such properties and equipment from time to time all repairs, renewals, replacements, extensions, additions, betterments and improvements thereto as may be needed or proper, to the extent and in the manner customary for companies in similar businesses. 6.8 Use of Proceeds. The Borrower will use the proceeds of the Loans solely for the purposes set forth in Section 5.13. 6.9 Audits/Inspections. Upon reasonable notice and during normal business hours, the Borrower will, and will cause each of its Subsidiaries to, permit representatives appointed by the Administrative Agent, including, without limitation, independent accountants, agents, attorneys, and appraisers to visit and inspect its property, including its books and records, its accounts receivable and inventory, its facilities and its other business assets, and to make photocopies or photographs thereof and to write down and record any information such representative obtains and shall permit the Administrative Agent or its representatives to investigate and verify the accuracy of information provided to the Lenders and to discuss all such matters with the officers, employees and representatives of such Person. 6.10 Adjusted Debt to EBITDAR Ratio. The Borrower shall cause the ratio of Consolidated Adjusted Debt to Consolidated EBITDAR as of the last day of each fiscal quarter to be no greater than the amount set forth below with respect to the applicable periods set forth below:   Period Ratio Closing Date through  and including August 31, 2000 3.25 to 1.00 September 1, 2000 through  and including May 31, 2001 3.50 to 1.00 June 1, 2001 through and including August 31, 2001 3.25 to 1.00 September 1, 2001 through  and including May 31, 2002 3.50 to 1.00 June 1, 2002 through and including May 31, 2004 3.00 to 1.00 June 1, 2004 and thereafter 2.75 to 1.00 6.11 Interest Coverage Ratio. The Borrower shall cause the Consolidated Interest Coverage Ratio as of the last day of each fiscal quarter to be no less than 2.50 to 1.0.     SECTION 7 NEGATIVE COVENANTS The Borrower hereby covenants and agrees that, so long as this Credit Agreement is in effect or any amounts payable hereunder or under any other Credit Document shall remain outstanding, and until all of the Commitments hereunder shall have terminated: 7.1 Liens. The Borrower will not, nor will it permit any of its Subsidiaries to, contract, create, incur, assume or permit to exist any Lien with respect to any of their Property, whether now owned or after acquired, except for Permitted Liens. 7.2 Nature of Business. The Borrower will not, nor will it permit any of its Subsidiaries to, substantively alter the character or conduct of the business conducted by any such Person as of the Closing Date. 7.3 Consolidation, Merger, Sale or Purchase of Assets, etc. The Borrower will not, nor will it permit any of its Subsidiaries to: (a) except in connection with a disposition of assets permitted by the terms of subsection (c) below, dissolve, liquidate or wind up their affairs; (b) enter into any transaction of merger or consolidation; provided, however, that, so long as no Default or Event of Default would be directly or indirectly caused as a result thereof, (i) the Borrower may merge or consolidate with any of its Subsidiaries provided that the Borrower is the surviving corporation; (ii) any Subsidiary of the Borrower may merge or consolidate with any other Subsidiary of the Borrower; and (iii) the Borrower or any of its Subsidiaries may merge or consolidate with any Person (other than the Borrower or any of its Subsidiaries) provided that (A) the Borrower or a Subsidiary of the Borrower is the surviving corporation and (B) after giving effect on a pro forma basis to such merger or consolidation, no Default or Event of Default would exist hereunder; (c) sell, lease, transfer or otherwise dispose of Property owned by and material to the Borrower and its Subsidiaries, taken as a whole (other than (i) any such sale, lease, transfer or other disposition by a Subsidiary of the Borrower to the Borrower or any other Subsidiary of the Borrower), provided, however, for the purposes of this subsection (c), sale-leaseback transactions entered into by the Borrower or its Subsidiaries shall not be deemed material to the Borrower and its Subsidiaries, taken as a whole to the extent the aggregate amount with respect to all such transactions entered into after the Closing Date does not exceed $500,000,000; or (d) except as otherwise permitted by Section 7.3(a) or Section 7.3(b), acquire all or any portion of the capital stock or securities of any other Person or purchase, lease or otherwise acquire (in a single transaction or a series of related transactions) all or any substantial part of the Property of any other Person; provided that (i) the Borrower or any of its Subsidiaries shall be permitted to make acquisitions of the type referred to in this Section 7.3(d), so long as such acquisitions are non-hostile and (ii) after giving effect on a pro forma basis to any such acquisition (including but not limited to any Indebtedness to be incurred or assumed by the Borrower or any of its Subsidiaries in connection therewith), no Default or Event of Default would exist hereunder. 7.4 Fiscal Year. The Borrower will not, nor will it permit any of its Subsidiaries to, change its fiscal year without first obtaining the written consent of the Required Lenders (such consent not to be unreasonably withheld). 7.5 Subsidiary Indebtedness. The Borrower will not permit any of its Subsidiaries to contract, create, incur, assume or permit to exist any Indebtedness, except: (a) Indebtedness set forth on Schedule 7.5 (and any renewals, refinancings or extensions thereof on terms and conditions no more favorable, in the aggregate, to such creditor than such existing Indebtedness and in a principal amount not in excess of that outstanding as of the date of such renewal, refinancing or extension); (b) intercompany Indebtedness owed by a Subsidiary of the Borrower to the Borrower or to another wholly-owned Subsidiary of the Borrower; (c) Indebtedness of the Subsidiaries incurred after the Closing Date to provide all or a portion of the purchase price of short-lived assets (such as trucks and computer equipment) which may be treated as Capital Leases in accordance with GAAP in an aggregate amount not to exceed $50,000,000 in any fiscal year; (d) Indebtedness of the Subsidiaries incurred in connection with synthetic leases, tax retention operating leases, off-balance sheet loans or similar off-balance sheet financings in an aggregate amount not to exceed $250,000,000 in any two consecutive fiscal years; and (e) other Indebtedness in an aggregate principal amount not to exceed $25,000,000 at any time outstanding.     SECTION 8 EVENTS OF DEFAULT 8.1 Events of Default. An Event of Default shall exist upon the occurrence of any of the following specified events (each an "Event of Default"): (a) Payment. The Borrower shall   (i) default in the payment when due of any principal of any of the Loans, or (ii) default, and such default shall continue for five (5) or more Business Days, in the payment when due of any interest on the Loans, or of any Fees or other amounts owing hereunder, under any of the other Credit Documents or in connection herewith or therewith; or   (b) Representations. Any representation, warranty or statement made or deemed to be made by the Borrower herein, in any of the other Credit Documents, or in any statement or certificate delivered or required to be delivered pursuant hereto or thereto shall prove untrue in any material respect on the date as of which it was deemed to have been made; or (c) Covenants. The Borrower shall   (i) default in the due performance or observance of any term, covenant or agreement contained in Sections 6.2, 6.8, 6.10, 6.11 or 7.1 through 7.3, inclusive, and 7.5 or (ii) default in the due performance of any term, covenant or agreement contained in Section 6.1 and such default shall continue unremedied for a period of at least 5 days after the earlier of a responsible officer of the Borrower becoming aware of such default or notice thereof by the Administrative Agent. (iii) default in the due performance or observance by it of any term, covenant or agreement (other than those referred to in subsections (a), (b), (c)(i) or (c)(ii) of this Section 8.1) contained in this Credit Agreement and such default shall continue unremedied for a period of at least 30 days after the earlier of a responsible officer of the Borrower becoming aware of such default or notice thereof by the Administrative Agent; or   (d) Bankruptcy, etc. Any Bankruptcy Event shall occur with respect to the Borrower or any of its Subsidiaries; or (e) Other Indebtedness. With respect to any Indebtedness (other than Indebtedness outstanding under this Credit Agreement or owing to the Borrower or any of its Subsidiaries) in excess of $25,000,000 in the aggregate for the Borrower and its Subsidiaries taken as a whole, (i) the Borrower or any of its Subsidiaries shall (A) default in any payment (beyond the applicable grace period with respect thereto, if any) with respect to any such Indebtedness, or (B) the occurrence and continuance of a default in the observance or performance relating to such Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event or condition shall occur or condition exist, the effect of which default or other event or condition is to cause, or permit, the holder or holders of such Indebtedness (or trustee or agent on behalf of such holders) to cause, any such Indebtedness to become due prior to its stated maturity but after the expiration of all applicable grace periods; or (ii) any such Indebtedness shall be declared due and payable, or required to be prepaid other than by a regularly scheduled required prepayment, prior to the stated maturity thereof and shall not be repaid when due; or (f) Judgments. One or more judgments or decrees shall be entered against the Borrower or any of its Subsidiaries involving a liability of $25,000,000 or more in the aggregate (to the extent not paid or covered by insurance) and any such judgments or decrees shall not have been vacated, discharged or stayed or bonded pending appeal within 30 days from the entry thereof; or (g) ERISA. Any of the following events or conditions, if such event or condition reasonably could be expected to have a Material Adverse Effect: (1) any "accumulated funding deficiency," as such term is defined in Section 302 of ERISA and Section 412 of the Code, whether or not waived, shall exist with respect to any Plan, or any lien shall arise on the assets of the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate in favor of the PBGC or a Plan; (2) an ERISA Event shall occur with respect to a Single Employer Plan, which is, in the reasonable opinion of the Administrative Agent, likely to result in the termination of such Plan for purposes of Title IV of ERISA; (3) an ERISA Event shall occur with respect to a Multiemployer Plan or Multiple Employer Plan, which is, in the reasonable opinion of the Administrative Agent, likely to result in (i) the termination of such Plan for purposes of Title IV of ERISA, or (ii) the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate incurring any liability in connection with a withdrawal from, reorganization of (within the meaning of Section 4241 of ERISA), or insolvency or (within the meaning of Section 4245 of ERISA) such Plan; or (4) any prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the Code) or breach of fiduciary responsibility shall occur which may subject the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate to any liability under Sections 406, 409, 502(i), or 502(l) of ERISA or Section 4975 of the Code, or under any agreement or other instrument pursuant to which the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate has agreed or is required to indemnify any person against any such liability.                     (h) Ownership. There shall occur a Change of Control. 8.2 Acceleration; Remedies. Upon the occurrence of an Event of Default, and at any time thereafter unless and until such Event of Default has been waived by the Required Lenders or cured to the satisfaction of the Required Lenders (pursuant to the voting procedures in Section 10.6), the Administrative Agent shall, upon the request and direction of the Required Lenders, by written notice to the Borrower take any of the following actions: (a) Termination of Commitments. Declare the Commitments terminated whereupon the Commitments shall be immediately terminated. (b) Acceleration. Declare the unpaid principal of and any accrued interest in respect of all Loans and any and all other indebtedness or obligations of any and every kind owing by the Borrower to the Administrative Agent and/or any of the Lenders hereunder to be due whereupon the same shall be immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower. (c) Enforcement of Rights. Enforce any and all rights and interests created and existing under the Credit Documents and all rights of set-off. Notwithstanding the foregoing, if an Event of Default specified in Section 8.1(d) shall occur, then the Commitments shall automatically terminate and all Loans, all accrued interest in respect thereof, all accrued and unpaid Fees and other indebtedness or obligations owing to the Administrative Agent and/or any of the Lenders hereunder automatically shall immediately become due and payable without the giving of any notice or other action by the Administrative Agent or the Lenders.     SECTION 9 AGENCY PROVISIONS 9.1 Appointment. Each Lender hereby designates and appoints Bank of America, N.A. as administrative agent (in such capacity as Administrative Agent hereunder, the "Administrative Agent") of such Lender to act as specified herein and the other Credit Documents, and each such Lender hereby authorizes the Administrative Agent as the agent for such Lender, to take such action on its behalf under the provisions of this Credit Agreement and the other Credit Documents and to exercise such powers and perform such duties as are expressly delegated by the terms hereof and of the other Credit Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere herein and in the other Credit Documents, the Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein and therein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Credit Agreement or any of the other Credit Documents, or shall otherwise exist against the Administrative Agent. The provisions of this Section are solely for the benefit of the Administrative Agent and the Lenders and the Borrower shall have no rights as a third party beneficiary of the provisions hereof. In performing its functions and duties under this Credit Agreement and the other Credit Documents, the Administrative Agent shall act solely as agent of the Lenders and does not assume and shall not be deemed to have assumed any obligation or relationship of agency or trust with or for the Borrower or any of its Affiliates. 9.2 Delegation of Duties. The Administrative Agent may execute any of its respective duties hereunder or under the other Credit Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties; provided that the use of any agents or attorneys-in-fact shall not relieve the Administrative Agent of its duties hereunder. 9.3 Exculpatory Provisions. The Administrative Agent and its officers, directors, employees, agents, attorneys-in-fact or affiliates shall not be (a) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection herewith or in connection with any of the other Credit Documents (except for its or such Person's own gross negligence or willful misconduct), or (b) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by the Borrower contained herein or in any of the other Credit Documents or in any certificate, report, document, financial statement or other written or oral statement referred to or provided for in, or received by the Administrative Agent under or in connection herewith or in connection with the other Credit Documents, or enforceability or sufficiency therefor of any of the other Credit Documents, or for any failure of the Borrower to perform its obligations hereunder or thereunder. The Administrative Agent shall not be responsible to any Lender for the effectiveness, genuineness, validity, enforceability, collectability or sufficiency of this Credit Agreement, or any of the other Credit Documents or for any representations, warranties, recitals or statements made herein or therein or made by the Borrower in any written or oral statement or in any financial or other statements, instruments, reports, certificates or any other documents in connection herewith or therewith furnished or made by the Administrative Agent to the Lenders or by or on behalf of the Borrower to the Administrative Agent or any Lender or be required to ascertain or inquire as to the performance or observance of any of the terms, conditions, provisions, covenants or agreements contained herein or therein or as to the use of the proceeds of the Loans or of the existence or possible existence of any Default or Event of Default or to inspect the properties, books or records of the Borrower or any of its Affiliates. 9.4 Reliance on Communications. The Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document or conversation reasonably believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Borrower, independent accountants and other experts selected by the Administrative Agent with reasonable care). The Administrative Agent may deem and treat the Lenders as the owner of their respective interests hereunder for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with the Administrative Agent in accordance with Section 10.3(b) hereof. The Administrative Agent shall be fully justified in failing or refusing to take any action under this Credit Agreement or under any of the other Credit Documents unless it shall first receive such advice or concurrence of the Required 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, hereunder or under any of the other Credit Documents in accordance with a request of the Required Lenders (or to the extent specifically provided in Section 10.6, all the Lenders) and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders (including their successors and assigns). 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 notice from a Lender or the Borrower referring to the Credit Document, 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 prompt 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. 9.6 Non-Reliance on Administrative Agent and Other Lenders. Each Lender expressly acknowledges that each of the Administrative Agent and its officers, directors, employees, agents, attorneys-in-fact or affiliates has not made any representations or warranties to it and that no act by the Administrative Agent or any affiliate thereof hereinafter taken, including any review of the affairs of the Borrower or any of its Affiliates, 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, assets, operations, property, financial and other conditions, prospects and creditworthiness of the Borrower or its Affiliates and made its own decision to make its Loans hereunder and enter into this Credit 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 Credit Agreement, and to make such investigation as it deems necessary to inform itself as to the business, assets, operations, property, financial and other conditions, prospects and creditworthiness of the Borrower and its 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 not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, assets, property, financial or other conditions, prospects or creditworthiness of the Borrower or any of its Affiliates which may come into the possession of the Administrative Agent or any of its officers, directors, employees, agents, attorneys-in-fact or affiliates. 9.7 Indemnification. The Lenders agree to indemnify the Administrative Agent in its capacity as such (to the extent not reimbursed by the Borrower and without limiting the obligation of the Borrower to do so), ratably according to their respective Commitments (or if the Commitments have expired or been terminated, in accordance with the respective principal amounts of outstanding Loans and Participation Interests of the Lenders), 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 final payment of all of the obligations of the Borrower hereunder and under the other Credit Documents) be imposed on, incurred by or asserted against the Administrative Agent in its capacity as such in any way relating to or arising out of this Credit Agreement or the other Credit Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by the Administrative Agent under or in connection with any of the foregoing; provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the gross negligence or willful misconduct of the Administrative Agent. If any indemnity furnished to the Administrative Agent for any purpose shall, in the opinion of the Administrative Agent, be insufficient or become impaired, the Administrative Agent may call for additional indemnity and cease, or not commence, to do the acts indemnified against until such additional indemnity is furnished. The agreements in this Section shall survive the repayment of the Loans and other obligations under the Credit Documents and the termination of the Commitments 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, its Subsidiaries or their respective Affiliates as though the Administrative Agent were not the Administrative Agent hereunder. With respect to the Loans made by and all obligations of the Borrower hereunder and under the other Credit Documents, the Administrative Agent shall have the same rights and powers under this Credit 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, at any time, resign upon 20 days written notice to the Lenders, and may be removed, upon show of cause, by the Required Lenders upon 30 days written notice to the Administrative Agent. Upon any such resignation or removal, the Required Lenders shall have the right to appoint a successor Administrative Agent; provided that, so long as no Default or Event of Default has occurred and is continuing, such successor Administrative Agent shall be reasonably acceptable to the Borrower. If no successor Administrative Agent shall have been so appointed by the Required Lenders, and shall have accepted such appointment, within 30 days after the notice of resignation or notice of removal, as appropriate, then the retiring Administrative Agent shall select a successor Administrative Agent provided such successor is a Lender hereunder or a commercial bank organized under the laws of the United States of America or of any State thereof and has a combined capital and surplus of at least $400,000,000. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations as Administrative Agent, as appropriate, under this Credit Agreement and the other Credit Documents and 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 Credit Agreement. 9.10 Syndication Agent. The Syndication Agent, in its capacity as such, shall have no rights, powers, duties or obligations under this Credit Agreement or any of the other Credit Documents.     SECTION 10 MISCELLANEOUS 10.1 Notices. Except as otherwise expressly provided herein, all notices and other communications shall have been duly given and shall be effective (i) when delivered, (ii) when transmitted and received (by confirmation of receipt) via telecopy (or other facsimile device) to the number set out below, (iii) the day following the day on which the same has been delivered prepaid to a reputable national overnight air courier service, or (iv) the third Business Day following the day on which the same is sent by certified or registered mail, postage prepaid, in each case to the respective parties at the address, in the case of the Borrower and the Administrative Agent, set forth below, and, in the case of the Lenders, set forth on Schedule 2.1(a), or at such other address as such party may specify by written notice to the other parties hereto:             if to the Borrower: > > AutoZone, Inc. > > 123 South Front Street > > Memphis, TN 38103 > > Attn: Chief Financial Officer > > Telephone: (901) 495-7181 > > Telecopy: (901) 495-8317 > > > > with a copy to the Treasurer and to the General Counsel for the Borrower at > > the same address; > >               if to the Administrative Agent: > > Bank of America, N.A. > > Agency Administrative Services > > 1850 Gateway Boulevard, 5th Floor > > Concord, California 94520-3281 > > Attn: Jennifer Reeves > > Telephone: (925) 675-8384 > > Telecopy: (925) 969-2902 > > > > with a copy to: > > > > Bank of America, N.A. > > Retail Credit Products > > Bank of America Corporate Center > > 100 North Tryon Street, 16th Floor > > Charlotte, NC 28255 > > Attn: Timothy H. Spanos, Managing Director > > Telephone: (704) 386-4507 > > Telecopy: (704) 388-8268 10.2 Right of Set-Off. In addition to any rights now or hereafter granted under applicable law, and not by way of limitation of any such rights, upon the occurrence of an Event of Default, each Lender is authorized at any time and from time to time, without presentment, demand, protest or other notice of any kind (all of which rights being hereby expressly waived), to set-off and to appropriate and apply any and all deposits (general or special) and any other indebtedness at any time held or owing by such Lender (including, without limitation, branches, agencies or Affiliates of such Lender wherever located) to or for the credit or the account of the Borrower against obligations and liabilities of such Person to such Lender hereunder, under the Notes or the other Credit Documents, irrespective of whether such Lender shall have made any demand hereunder and although such obligations, liabilities or claims, or any of them, may be contingent or unmatured, and any such set-off shall be deemed to have been made immediately upon the occurrence of an Event of Default even though such charge is made or entered on the books of such Lender subsequent thereto. Any Person purchasing a participation in the Loans and Commitments hereunder pursuant to Section 3.13 or Section 10.3(d) may exercise all rights of set-off with respect to its participation interest as fully as if such Person were a Lender hereunder. 10.3 Benefit of Agreement. (a) Generally. This Credit Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective successors and assigns of the parties hereto; provided that the Borrower may not assign or transfer any of its interests without prior written consent of the Lenders; provided further that the rights of each Lender to transfer, assign or grant participations in its rights and/or obligations hereunder shall be limited as set forth in this Section 10.3, provided however that nothing herein shall prevent or prohibit any Lender from (i) pledging its Loans hereunder to a Federal Reserve Bank in support of borrowings made by such Lender from such Federal Reserve Bank, or (ii) granting assignments or selling participations in such Lender's Loans and/or Commitments hereunder to its parent company and/or to any Affiliate or Subsidiary of such Lender. (b) Assignments. Each Lender may assign all or a portion of its rights and obligations hereunder, pursuant to an assignment agreement substantially in the form of Schedule 10.3(b), to (i) any Lender or any Affiliate or Subsidiary of a Lender, or (ii) any other commercial bank, financial institution or "accredited investor" (as defined in Regulation D of the Securities and Exchange Commission) that is reasonably acceptable to the Administrative Agent and, so long as no Default or Event of Default has occurred and is continuing, is reasonably acceptable to the Borrower; provided that (i) any such assignment (other than any assignment to an existing Lender) shall be in a minimum aggregate amount of $5,000,000 (or, if less, the remaining amount of the Commitment being assigned by such Lender) of the Commitments and in integral multiples of $1,000,000 above such amount, (ii) so long as no Event of Default has occurred and is continuing, no Lender shall assign more than 50% of such Lender's original Revolving Commitment without the written consent of the Borrower and (iii) each such assignment shall be of a constant, not varying, percentage of all such Lender's rights and obligations under this Credit Agreement. Any assignment hereunder shall be effective upon delivery to the Administrative Agent of written notice of the assignment together with a transfer fee of $3,500 payable to the Administrative Agent for its own account from and after the later of (i) the effective date specified in the applicable assignment agreement and (ii) the date of recording of such assignment in the Register pursuant to the terms of subsection (c) below. The assigning Lender will give prompt notice to the Administrative Agent and the Borrower of any such assignment. Upon the effectiveness of any such assignment (and after notice to, and (to the extent required pursuant to the terms hereof), with the consent of, the Borrower as provided herein), the assignee shall become a "Lender" for all purposes of this Credit Agreement and the other Credit Documents and, to the extent of such assignment, the assigning Lender shall be relieved of its obligations hereunder to the extent of the Loans and Commitment components being assigned. Along such lines the Borrower agrees that upon notice of any such assignment and surrender of the appropriate Note or Notes, it will promptly provide to the assigning Lender and to the assignee separate promissory notes in the amount of their respective interests substantially in the form of the original Note (but with notation thereon that it is given in substitution for and replacement of the original Note or any replacement notes thereof). By executing and delivering an assignment agreement in accordance with this Section 10.3(b), the assigning Lender thereunder and the assignee thereunder shall be deemed to confirm to and agree with each other and the other parties hereto as follows: (i) such assigning Lender warrants that it is the legal and beneficial owner of the interest being assigned thereby free and clear of any adverse claim; (ii) except as set forth in clause (i) above, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Credit Agreement, any of the other Credit Documents or any other instrument or document furnished pursuant hereto or thereto, or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Credit Agreement, any of the other Credit Documents or any other instrument or document furnished pursuant hereto or thereto or the financial condition of the Borrower or any of its respective Affiliates or the performance or observance by the Borrower of any of its obligations under this Credit Agreement, any of the other Credit Documents or any other instrument or document furnished pursuant hereto or thereto; (iii) such assignee represents and warrants that it is legally authorized to enter into such assignment agreement; (iv) such assignee confirms that it has received a copy of this Credit Agreement, the other Credit Documents and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such assignment agreement; (v) such assignee will independently and without reliance upon the Administrative Agent, such assigning Lender or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Credit Agreement and the other Credit Documents; (vi) such assignee appoints and authorizes the Administrative Agent to take such action on its behalf and to exercise such powers under this Credit Agreement or any other Credit Document as are delegated to the Administrative Agent by the terms hereof or thereof, together with such powers as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all the obligations which by the terms of this Credit Agreement and the other Credit Documents are required to be performed by it as a Lender. If the assignee is not a United States person under Section 7701(a)(30) of the Code, it shall deliver to the Borrower and the Administrative Agent a valid certification as to exemption from deduction or withholding of taxes in accordance with Section 3.10. (c) Maintenance of Register. The Administrative Agent shall maintain at one of its offices in Charlotte, North Carolina (i) a copy of each New Commitment Agreement, (ii) a copy of each Lender assignment agreement delivered to it in accordance with the terms of subsection (b) above and (iii) a register for the recordation of the identity of the principal amount, type and Interest Period of each Loan outstanding hereunder, the names, addresses and the Commitments of the Lenders pursuant to the terms hereof from time to time (the "Register"). The Administrative Agent will make reasonable efforts to maintain the accuracy of the Register and to promptly update the Register from time to time, as necessary. The Register shall be prima facie, but not conclusive, evidence of the information contained therein and the Borrower, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Credit Agreement. The Register shall be available for inspection by the Borrower and each Lender, at any reasonable time and from time to time upon reasonable prior notice. (d) Participations. Each Lender may sell, transfer, grant or assign participations in all or any part of such Lender's interests and obligations hereunder; provided that (i) such selling Lender shall remain a "Lender" for all purposes under this Credit Agreement (such selling Lender's obligations under the Credit Documents remaining unchanged) and the participant shall not constitute a Lender hereunder, (ii) no such participant shall have, or be granted, rights to approve any amendment or waiver relating to this Credit Agreement or the other Credit Documents except to the extent any such amendment or waiver would (A) reduce the principal of or rate of interest on or Fees in respect of any Loans in which the participant is participating or (B) postpone the date fixed for any payment of principal (including extension of the Termination Date or the date of any mandatory prepayment), interest or Fees in which the participant is participating, and (iii) sub-participations by the participant (except to an affiliate, parent company or affiliate of a parent company of the participant) shall be prohibited. In the case of any such participation, the participant shall not have any rights under this Credit Agreement or the other Credit Documents (the participant's rights against the selling Lender in respect of such participation to be those set forth in the participation agreement with such Lender creating such participation) and all amounts payable by the Borrower hereunder shall be determined as if such Lender had not sold such participation, provided, however, that such participant shall be entitled to receive additional amounts under Sections 3.6, 3.9 and 3.11 on the same basis as if it were a Lender provided that it shall not be entitled to receive any more than the selling Lender would have received had it not sold the participation. (e) Designation.   (i) Notwithstanding anything to the contrary contained herein, any Lender (a "Designating Lender") may grant to one or more special purpose funding vehicles (each, an "SPV"), identified as such in writing from time to time by the Designating Lender to the Administrative Agent and the Borrower, the option to provide to the Borrower all or any part of any Loan that such Designating Lender would otherwise be obligated to make to the Borrower pursuant to this Credit Agreement; provided that (I) nothing herein shall constitute a commitment by any SPV to make any Loan, (II) if an SPV elects not to exercise such option or otherwise fails to provide all or any part of such Loan, the Designating Lender shall be obligated to make such Loan pursuant to the terms hereof, (III) the Designating Lender shall remain liable for any indemnity or other payment obligation with respect to its Commitment hereunder and (IV) each such SPV would satisfy the requirements of Section 3.10 if such SPV was a Lender hereunder. The making of a Loan by an SPV hereunder shall utilize the Commitment of the Designating Lender to the same extent, and as if, such Loan were made by such Designating Lender. (ii) As to any Loans or portion thereof made by it, each SPV shall have all the rights that a Lender making such Loans or portion thereof would have had under this Credit Agreement; provided, however that each SPV shall have granted to its Designating Lender an irrevocable power of attorney, to deliver and receive all communications and notices under this Credit Agreement (and any related documents) and to exercise on such SPV's behalf, all of such SPV's voting rights under this Credit Agreement. No additional Note shall be required to evidence the Loans or portion thereof made by an SPV; and the related Designating Lender shall be deemed to hold its Note as agent for such SPV to the extent of the Loans or portion thereof funded by such SPV. In addition, any payments for the account of any SPV shall be paid to its Designating Lender as agent for such SPV. (iii) Each party hereto hereby agrees that no SPV shall be liable for any indemnity or payment under this Credit Agreement for which a Lender would otherwise be liable for so long as, and to the extent, the Designating 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 Credit Agreement) that, prior to the date that is one year and one day after the payment in full of all outstanding prior indebtedness of any SPV, it will not institute against, or join any other person in instituting against, such SPV any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or similar proceedings under the laws of the United States or any State thereof. (iv) In addition, notwithstanding anything to the contrary contained in this Section 10.3 or otherwise in this Credit Agreement, any SPV may (I) at any time and without paying any processing fee therefor, assign or participate all or a portion of its interest in any Loans to the Designating Lender (or to any other SPV of such Designating Lender) or to any financial institutions providing liquidity and/or credit support to or for the account of such SPV to support the funding or maintenance of Loans and (II) disclose on a confidential basis any non-public information relating to its Loans to any rating agency, commercial paper dealer or provider of any surety, guarantee or credit or liquidity enhancements to such SPV. This Section 10.3 may not be amended without the written consent of any Designating Lender affected thereby. 10.4 No Waiver; Remedies Cumulative. No failure or delay on the part of the Administrative Agent or any Lender in exercising any right, power or privilege hereunder or under any other Credit Document and no course of dealing between the Administrative Agent or any Lender and the Borrower shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or under any other Credit Document preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder or thereunder. The rights and remedies provided herein are cumulative and not exclusive of any rights or remedies which the Administrative Agent or any Lender would otherwise have. No notice to or demand on the Borrower in any case shall entitle the Borrower to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the Administrative Agent or the Lenders to any other or further action in any circumstances without notice or demand. 10.5 Payment of Expenses, etc. The Borrower agrees to: (a) pay all reasonable out-of-pocket costs and expenses (i) of the Administrative Agent in connection with the negotiation, preparation, execution and delivery and administration of this Credit Agreement and the other Credit Documents and the documents and instruments referred to therein (including, subject to agreed upon limitations, the reasonable fees and expenses of Moore & Van Allen, PLLC, special counsel to the Administrative Agent and non-duplicative allocated costs of internal counsel) and any amendment, waiver or consent relating hereto and thereto including, but not limited to, any such amendments, waivers or consents resulting from or related to any work-out, renegotiation or restructure relating to the performance by the Borrower under this Credit Agreement and (ii) of the Administrative Agent and the Lenders in connection with enforcement of the Credit Documents and the documents and instruments referred to therein (including, without limitation, in connection with any such enforcement, the reasonable fees and disbursements of counsel (including non-duplicative allocated costs of internal counsel) for the Administrative Agent and each of the Lenders); (b) pay and hold each of the Lenders harmless from and against any and all future stamp and other similar taxes with respect to the foregoing matters and save each of the Lenders harmless from and against any and all liabilities with respect to or resulting from any delay or omission (other than to the extent attributable to such Lender) to pay such taxes; and (c) indemnify each Lender, its officers, directors, employees, representatives, agents and Affiliates from and hold each of them harmless against any and all losses, liabilities, claims, damages or expenses incurred by any of them as a result of, or arising out of, or in any way related to, or by reason of (i) any investigation, litigation or other proceeding (whether or not any Lender is a party thereto, but excluding any investigation initiated by the Person seeking indemnification hereunder) related to the entering into and/or performance of any Credit Document or the use of proceeds of any Loans (including other extensions of credit) hereunder or the consummation of any other transactions contemplated in any Credit Document, including, without limitation, the reasonable fees and disbursements of counsel (including non-duplicative allocated costs of internal counsel) incurred in connection with any such investigation, litigation or other proceeding or (ii) the presence or Release of any Materials of Environmental Concern at, under or from any Property owned, operated or leased by the Borrower or any of its Subsidiaries, or the failure by the Borrower or any of its Subsidiaries to comply with any Environmental Law (but excluding, in the case of either of clause (i) or (ii) above, any such losses, liabilities, claims, damages or expenses to the extent (A) incurred by reason of gross negligence or willful misconduct on the part of the Person to be indemnified, (B) owing to the Borrower or (C) owing to another Person entitled to indemnification hereunder). 10.6 Amendments, Waivers and Consents. Neither this Credit Agreement nor any other Credit Document nor any of the terms hereof or thereof may be amended, changed, waived, discharged or terminated unless such amendment, change, waiver, discharge or termination is in writing entered into by, or approved in writing by, the Required Lenders and the Borrower, provided, however, that: (a) no such amendment, change, waiver, discharge or termination shall, without the consent of each Lender directly affected thereby, (i) reduce the rate or extend the time of payment of interest (other than as a result of (x) waiving the applicability of any post-default increase in interest rates or (y) an amendment approved by the Required Lenders as set forth in the definition of "Applicable Percentage" following the withdrawal by S&P and Moody's of their ratings on the Borrower's senior unsecured (non-credit enhanced) long term debt) on any Loan or fees hereunder, (ii) reduce the rate or extend the time of payment of any fees owing hereunder, (iii) extend (A) the Commitments of the Lenders, or (B) the final maturity of any Loan, or any portion thereof, or (iv) reduce the principal amount on any Loan; (b) no such amendment, change, waiver, discharge or termination shall, without the consent of each Lender directly affected thereby, (i) except as otherwise permitted under Section 3.4(b), increase the Commitments of the Lenders over the amount thereof in effect (it being understood and agreed that a waiver of any Default or Event of Default shall not constitute a change in the terms of any Commitment of any Lender), (ii) amend, modify or waive any provision of this Section 10.6 or Section 3.6, 3.10, 3.11, 3.12, 3.13, 8.1(a), 10.2, 10.3, 10.5 or 10.9, (iii) reduce or increase any percentage specified in, or otherwise modify, the definition of "Required Lenders," or (iv) consent to the assignment or transfer by the Borrower of any of its rights and obligations under (or in respect of) the Credit Documents to which it is a party; (c) no provision of Section 2.3 may be amended without the consent of the Swingline Lender and no provision of Section 9 may be amended without the consent of the Administrative Agent; and (d) designation of the Master Account or of any Financial Officer may not be made without the written consent of at least two Financial Officers of the Borrower. 10.7 Counterparts. This Credit Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be an original, but all of which shall constitute one and the same instrument. It shall not be necessary in making proof of this Credit Agreement to produce or account for more than one such counterpart. 10.8 Headings. The headings of the sections and subsections hereof are provided for convenience only and shall not in any way affect the meaning or construction of any provision of this Credit Agreement. 10.9 Survival. All indemnities set forth herein, including, without limitation, in Section 3.9, 3.11, 9.7 or 10.5 shall survive the execution and delivery of this Credit Agreement, the making of the Loans, the repayment of the Loans and other obligations under the Credit Documents and the termination of the Commitments hereunder, and all representations and warranties made by the Borrower herein shall survive delivery of the Notes and the making of the Loans hereunder. 10.10 Governing Law; Submission to Jurisdiction; Venue. (a) THIS CREDIT AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. Any legal action or proceeding with respect to this Credit Agreement or any other Credit Document may be brought in the courts of the State of New York in New York County, or of the United States for the Southern District of New York, and, by execution and delivery of this Credit Agreement, the Borrower hereby irrevocably accepts for itself and in respect of its property, generally and unconditionally, the nonexclusive jurisdiction of such courts. The Borrower further irrevocably consents to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to it at the address set out for notices pursuant to Section 10.1, such service to become effective three (3) days after such mailing. Nothing herein shall affect the right of the Administrative Agent to serve process in any other manner permitted by law or to commence legal proceedings or to otherwise proceed against the Borrower in any other jurisdiction. (b) The Borrower hereby irrevocably waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Credit Agreement or any other Credit Document brought in the courts referred to in subsection (a) hereof and hereby further irrevocably waives and agrees not to plead or claim in any such court that any such action or proceeding brought in any such court has been brought in an inconvenient forum. (c) TO THE EXTENT PERMITTED BY LAW, EACH OF THE AGENT, THE LENDERS AND THE BORROWER HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS CREDIT AGREEMENT, ANY OF THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY. 10.11 Severability. If any provision of any of the Credit Documents is determined to be illegal, invalid or unenforceable, such provision shall be fully severable and the remaining provisions shall remain in full force and effect and shall be construed without giving effect to the illegal, invalid or unenforceable provisions. 10.12 Entirety. This Credit Agreement together with the other Credit Documents represent the entire agreement of the parties hereto and thereto, and supersede all prior agreements and understandings, oral or written, if any, including any commitment letters or correspondence relating to the Credit Documents or the transactions contemplated herein and therein. 10.13 Binding Effect; Termination. (a) This Credit Agreement shall become effective at such time on or after the Closing Date when it shall have been executed by the Borrower and the Administrative Agent, and the Administrative Agent shall have received copies hereof (telefaxed or otherwise) which, when taken together, bear the signatures of each Lender, and thereafter this Credit Agreement shall be binding upon and inure to the benefit of the Borrower, the Administrative Agent and each Lender and their respective successors and assigns. (b) The term of this Credit Agreement shall be until no Loans or any other amounts payable hereunder or under any of the other Credit Documents shall remain outstanding and until all of the Commitments hereunder shall have expired or been terminated. 10.14 Confidentiality. The Administrative Agent and the Lenders agree to keep confidential (and to cause their respective affiliates, officers, directors, employees, agents and representatives to keep confidential) all information, materials and documents furnished to the Administrative Agent or any such Lender by or on behalf of the Borrower (whether before or after the Closing Date) which relates to the Borrower or any of its Subsidiaries (the "Information"). Notwithstanding the foregoing, the Administrative Agent and each Lender shall be permitted to disclose Information (i) to its affiliates, officers, directors, employees, agents and representatives in connection with its participation in any of the transactions evidenced by this Credit Agreement or any other Credit Documents or the administration of this Credit Agreement or any other Credit Documents; (ii) to the extent required by applicable laws and regulations or by any subpoena or similar legal process, or requested by any Governmental Authority; (iii) to the extent such Information (A) becomes publicly available other than as a result of a breach of this Credit Agreement or any agreement entered into pursuant to clause (iv) below, (B) becomes available to the Administrative Agent or such Lender on a non-confidential basis from a source other than the Borrower or (C) was available to the Administrative Agent or such Lender on a non-confidential basis prior to its disclosure to the Administrative Agent or such Lender by the Borrower; (iv) to any assignee or participant (or prospective assignee or participant) so long as such assignee or participant (or prospective assignee or participant) first specifically agrees in a writing furnished to and for the benefit of the Borrower to be bound by the terms of this Section 10.14; (v) to the extent required in connection with the exercise of remedies under this Credit Agreement or any other Credit Documents; or (vi) to the extent that the Borrower shall have consented in writing to such disclosure. Nothing set forth in this Section 10.14 shall obligate the Administrative Agent or any Lender to return any materials furnished by the Borrower. 10.15 Source of Funds. Each of the Lenders hereby represents and warrants to the Borrower that at least one of the following statements is an accurate representation as to the source of funds to be used by such Lender in connection with the financing hereunder: (a) no part of such funds constitutes assets allocated to any separate account maintained by such Lender in which any employee benefit plan (or its related trust) has any interest; (b) to the extent that any part of such funds constitutes assets allocated to any separate account maintained by such Lender, such Lender has disclosed to the Borrower the name of each employee benefit plan whose assets in such account exceed 10% of the total assets of such account as of the date of such purchase (and, for purposes of this subsection (b), all employee benefit plans maintained by the same employer or employee organization are deemed to be a single plan); (c) to the extent that any part of such funds constitutes assets of an insurance company's general account, such insurance company has complied with all of the requirements of the regulations issued under Section 401(c)(1)(A) of ERISA; or (d) such funds constitute assets of one or more specific benefit plans which such Lender has identified in writing to the Borrower. As used in this Section 10.15, the terms "employee benefit plan" and "separate account" shall have the respective meanings assigned to such terms in Section 3 of ERISA. 10.16 Conflict. To the extent that there is a conflict or inconsistency between any provision hereof, on the one hand, and any provision of any Credit Document, on the other hand, this Credit Agreement shall control. [Signature Pages to Follow] IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Credit Agreement to be duly executed and delivered as of the date first above written.     BORROWER:                                   AUTOZONE, INC.                                                              a Nevada corporation > > > > > > By:  /s/ Robert J. Hunt > > > > > > Name: Robert J. Hunt > > > > > > Title: EVP & CFO > > > > > > > > > > > > By: /s/ Harry L. Goldsmith > > > > > > Name: Harry L. Goldsmith > > > > > > Title: Sr. V.P. & General Counsel > > > > > >   LENDERS:                                          BANK OF AMERICA, N.A.,                                                               individually in its capacity as a                                                               Lender and in its capacity as Administrative Agent > > > > > > By: /s/ Timothy H. Spanos > > > > > > Name: Timothy H. Spanos > > > > > > Title: Managing Director                                                              THE CHASE MANHATTAN BANK > > > > > > By: /s/ Barry K. Bergman > > > > > > Name: Barry K. Bergman > > > > > > Title: Vice President > > > > > > BANK ONE, NA > > > > > > > > > > > > By:  /s/ Catherine A. Muszynski > > > > > > Name: Catherine A. Muszynski > > > > > > Title: Vice President > > > > > >                                                                FLEET NATIONAL BANK > > > > > > By:  /s/ Thomas J. Bullard > > > > > > Name: Thomas J. Bullard > > > > > > Title: Director                                                              THE BANK OF NEW YORK > > > > > > By:  /s/ Howard F. Bascom, Jr. > > > > > > Name: Howard F. Bascom, Jr. > > > > > > Title: Vice President > > > > > >   > > > > > > CITICORP USA, INC. > > > > > > > > > > > > By:  /s/ Robert Spence > > > > > > Name: > > > > > > Title: > > > > > >                                                                FIRST UNION NATIONAL BANK > > > > > > By:  /s/ Anthony D. Braxton > > > > > > Name: Anthony D. Braxton > > > > > > Title: Vice President                                                              THE FIFTH THIRD BANK > > > > > > By: /s/ Megan Heisel > > > > > > Name: Megan Heisel > > > > > > Title: Large Corporate Accounts                                                              FIRST TENNESSEE BANK                                                              NATIONAL ASSOCIATION > > > > > > By: /s/ James H. Moore, Jr. > > > > > > Name: James H. Moore, Jr. > > > > > > Title: Senior Vice President > > > > > > FIRSTAR BANK, NA > > > > > > > > > > > > By: /s/ Amanda Smith > > > > > > Name: Amanda Smith > > > > > > Title: Banking Officer > > > > > >                                                                HIBERNIA NATIONAL BANK > > > > > > By: /s/ Laura K. Watts > > > > > > Name: Laura K. Watts > > > > > > Title: Assistant Vice President                                                              THE INDUSTRIAL BANK OF JAPAN,                                                              LIMITED > > > > > > By: /s/ Minami Miure > > > > > > Name: Minami Miure > > > > > > Title: Senior Vice President                                                              KEYBANK NATIONAL ASSOCIATION > > > > > > By: /s/ Mark A. LoSchiavo > > > > > > Name: Mark A. LoSchiavo > > > > > > Title: Assistant Vice President                                                              MERRILL LYNCH BANK USA > > > > > > By: /s/ Raymond J. Dardano > > > > > > Name: Raymond J. Dardano > > > > > > Title: Senior Credit Officer                                                              NATIONAL CITY BANK > > > > > > By: /s/ James Ritchie > > > > > > Name: James Ritchie > > > > > > Title: Account Officer > > > > > > SUNTRUST BANK > > > > > > > > > > > > By: /s/ Bryan W. Ford > > > > > > Name: Bryan W. Ford > > > > > > Title: Vice President > > > > > >                                                                UNION BANK OF CALIFORNIA, N.A. > > > > > > By: /s/ J. William Bloore > > > > > > Name: J. William Bloore > > > > > > Title: Vice President                                                              UNION PLANTERS BANK > > > > > > By:  /s/ Shea Buchignani > > > > > > Name: Shea Buchignani > > > > > > Title: Assistant Vice President                                                              WACHOVIA BANK, N.A. > > > > > > By:  /s/ Elizabeth Witherspoon > > > > > > Name: Elizabeth Witherspoon > > > > > > Title: Assistant Vice President -------------------------------------------------------------------------------- Schedule 1.1 APPLICABLE PERCENTAGE Pricing  Level S&P/Moody's Rating Applicable Margin for Eurodollar Loans Applicable Margin for Base Rate Loans Applicable Percentage for  Facility Fee Applicable Percentage for Utilization Premium Level I A-/A3 or above 37.5 bps 0 12.5 bps 12.5 bps Level II BBB+/Baa1 47.5 bps 0 15.0 bps 12.5 bps Level III BBB/Baa2  57.5 bps 0 17.5 bps 25.0 bps Level IV BBB-/Baa3 87.5 bps 0 25.0 bps 25.0 bps Level V BB+/Ba1 or below  117.5 bps  0 32.5 bps 25.0 bps The Applicable Percentage shall be based on the applicable Pricing Level corresponding to the Rating(s) then in effect. In the event of a Split Rating, the applicable Pricing Level shall be based on the higher Rating. In the event of a Double Split Rating, the applicable Pricing Level shall be based on the Pricing Level which is one above that corresponding to the lower Rating. If no Rating exists, the applicable Pricing Level shall be based on Pricing Level V until the earlier of (A) such time as S&P and/or Moody's provides another Rating or (B) the Required Lenders have agreed to an alternative pricing grid or other method for determining Pricing Levels pursuant to an effective amendment to this Credit Agreement. As used herein: "Rating" means the senior unsecured (non-credit enhanced) long term debt rating of the Borrower, as published by S&P and/or Moody's. "Split Rating" means the ratings of S&P and Moody's would indicate different Pricing Levels, but the Pricing Levels are not more than one Pricing Level apart. "Double Split Rating" means the ratings of S&P and Moody's would indicate different Pricing Levels, but the Pricing Levels are two or more Pricing Levels apart. -------------------------------------------------------------------------------- Schedule 2.1(a) LENDERS Lender Commitment Percentage Revolving Commitment Bank of America, N.A. Bank of America Corporate Center 100 N. Tryon Street, 16th Floor Charlotte, NC 28255 Attn: Timothy H. Spanos  Tel: (704) 386-4507 Fax: (704) 388-8268 11.53846153% $75,000,000 The Chase Manhattan Bank 220 Park Avenue, 48th Floor New York, NY 10017 Attn: Barry Bergman Tel: (212) 270-0203 Fax: (212) 270-5646 11.53846153% $75,000,000 Fleet National Bank 100 Federal Street MHDE 10009E Boston, MA 02110 Attn: Thomas J. Bullard Tel: (617) 434-3824 Fax: (617) 434-6685 10.96153861% $71,250,000 Bank One, NA 1 Bank One Plaza, 14th Floor IL1-0086 Chicago, IL 60670 Attn: John D. Runger Tel: (312) 732-7101 Fax: (312) 732-1117 10.96153861% $71,250,000 The Bank of New York One Wall Street, 8th Floor Retailing Industry Division New York, NY 10286 Attn: Lucille Cuttone Telephone: (212) 635-7879 Facsimile: (212) 635-1481 1.92307692% $12,500,000 Citicorp USA, Inc. 399 Park Avenue, 5th Floor New York, NY 10043 Attn: Robert Kane Tel: (212) 559-3414 Fax: (212) 793-7460 9.61538462% $62,500,000 First Union National Bank PA4843 Widener Building, 12th Floor 1339 Chestnut Street Philadelphia, PA 19107 Attn: Mark S. Supple Tel: (215) 973-8933 Fax: (215) 786-2877 9.61538462% $62,500,000 The Fifth Third Bank 38 Fountain Square Plaza MD 109054 Cincinnati, OH 45263 Attn: Megan Heisel Tel: (513) 744-8662 Fax: (513) 744-5947 1.92307692% $12,500,000 First Tennessee Bank National Association 165 Madison Avenue, 9th Floor Memphis, TN 38103-2723 Attn: James H. Moore, Jr. Tel: (901) 523-4108 Fax: (901) 523-4267 1.53846154% $10,000,000 Firstar Bank, NA 1 Firstar Plaza, TRAM 12-3 St. Louis, MO 63101-0524 Attn: Amanda Smith Tel: (314) 418-3638 Fax: (314) 418-1963 3.84615385% $25,000,000 Hibernia National Bank 313 Carondelet St. New Orleans, LA 70130 Attn: Laura K. Watts Tel: (504) 533-2029 Fax: (504) 533-5344 0.76923077% $5,000,000 The Industrial Bank of Japan, Limited One Ninety One Peachtree Tower Suite 3825 191 Peachtree Street, N.E. Atlanta, GA 30303-1757 Attn: James Masters Tel: (404) 524-8770 x106 Fax: (404) 524-8509 1.92307692% $12,500,000 KeyBank National Association 127 Public Square, OH-01-27-0606 Cleveland, OH 44114-1306 Attn: Mark A. LoSchiavo Tel: (216) 689-0598 Fax: (216) 689-4981 1.92307692% $12,500,000 Merrill Lynch Bank USA 15 W. South Temple, Suite 300 Salt Lake City, UT 84101 Attn: Raymond J. Dardano Tel: (801) 526-8309 Fax: (801) 363-8611 2.69230769% $17,500,000 National City Bank 1900 E. 9th Street, #2077 Cleveland, OH 44114 Attn: James C. Ritchie Tel: (216) 575-9918 Fax: (216) 22-0003 1.92307692% $12,500,000 SunTrust Bank 6410 Poplar Avenue, Suite 320 Memphis, TN 38119 Attn: Bryan W. Ford Tel: (901) 762-9862 Fax: (901) 766-7565 9.61538462% $62,500,000 Union Bank of California, N.A. 350 California Street, 6th Floor San Francisco, CA 94104 Attn: William Bloore Tel: (415) 705-5041 Fax: (415) 705-7085 3.84615385% $25,000,000 Union Planters Bank 6200 Poplar Avenue, HQ4 Memphis, TN 38119 Attn: Shea Buchignani Tel: (901) 580-5583 Fax: (901) 580-5451 1.92307692% $12,500,000 Wachovia Bank, N.A. 191 Peachtree Street, NE 29th Floor Atlanta, GA 30303 Attn: Karin E. Reel Tel: (404) 332-5187 Fax: (404) 332-5016 1.92307692% $12,500,000 Total: 100% $650,000,000.00 -------------------------------------------------------------------------------- Schedule 2.1(b)(i) FORM OF NOTICE OF BORROWING Bank of America, N.A., as Administrative Agent for the Lenders Agency Administrative Services 1850 Gateway Boulevard, 5th Floor Concord, California 94520-3281 Attention: Jennifer Reeves Ladies and Gentlemen: The undersigned, AUTOZONE, INC. (the "Borrower"), refers to the Five-Year Credit Agreement dated as of May 23, 2000 (as amended, modified, extended or restated from time to time, the "Credit Agreement"), among the Borrower, the Lenders, Bank of America, N.A., as Administrative Agent and The Chase Manhattan Bank, as Syndication Agent. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement. The Borrower hereby gives notice pursuant to Section 2.1 of the Credit Agreement that it requests a Revolving Loan advance under the Credit Agreement, and in connection therewith sets forth below the terms on which such Loan advance is requested to be made: (A)   Date of Borrowing         (which is a Business Day)     _______________________ (B)   Principal Amount of         Borrowing                           _______________________ (C)   Interest rate basis                _______________________ (D)   Interest Period and the         last day thereof                    _______________________ In accordance with the requirements of Section 4.2, the Borrower hereby reaffirms the representations and warranties set forth in the Credit Agreement as provided in subsection (b) of such Section, and confirms that the matters referenced in subsections (c), (d) and (e) of such Section, are true and correct. Very truly yours, AUTOZONE, INC. By: Name: Title: -------------------------------------------------------------------------------- Schedule 2.1(e) FORM OF REVOLVING NOTE May 23, 2000   FOR VALUE RECEIVED, AUTOZONE, INC., a Nevada corporation (the "Borrower"), hereby promises to pay to the order of __________________________, its successors and assigns (the "Lender"), at the office of Bank of America, N.A., as Administrative Agent (the "Administrative Agent"), at 1850 Gateway Boulevard, 5th Floor, Concord, California 94520-3281, Attn: Agency Administrative Services (or at such other place or places as the holder hereof may designate), at the times set forth in the Five-Year Credit Agreement, dated as of May 23, 2000, among the Borrower, the Lenders, the Administrative Agent and the Syndication Agent (as it may be amended, modified, extended or restated from time to time, the "Credit Agreement"; all capitalized terms not otherwise defined herein shall have the meanings set forth in the Credit Agreement), but in no event later than the Termination Date, in Dollars and in immediately available funds, the aggregate unpaid principal amount of all Revolving Loans made by the Lender to the Borrower pursuant to the Credit Agreement, and to pay interest from the date hereof on the unpaid principal amount hereof, in like money, at said office, on the dates and at the rates selected in accordance with Section 2.1(d) of the Credit Agreement. Upon the occurrence and during the continuance of an Event of Default, the balance outstanding hereunder shall bear interest as provided in Section 3.1 of the Credit Agreement. Further, in the event the payment of all sums due hereunder is accelerated under the terms of the Credit Agreement, this Note, and all other indebtedness of the Borrower to the Lender shall become immediately due and payable, without presentment, demand, protest or notice of any kind, all of which are hereby waived by the Borrower. In the event this Note is not paid when due at any stated or accelerated maturity, the Borrower agrees to pay, in addition to the principal and interest, all costs of collection, including reasonable attorneys' fees. All borrowings evidenced by this Note and all payments and prepayments of the principal hereof and interest hereon and the respective dates thereof shall be endorsed by the holder hereof on a schedule attached hereto and incorporated herein by reference, or on a continuation thereof which shall be attached hereto and made a part hereof; provided, however, that any failure to endorse such information on such schedule or continuation thereof shall not in any manner affect the obligation of the Borrower to make payments of principal and interest in accordance with the terms of this Note. This Note and the Loans evidenced hereby may be transferred in whole or in part only by registration of such transfer on the Register maintained by or on behalf of the Borrower as provided in Section 10.3(c) of the Credit Agreement. IN WITNESS WHEREOF, the Borrower has caused this Note to be duly executed by its duly authorized officer as of the day and year first above written.   AUTOZONE, INC. By: Name: Title: By: Name: Title:     -------------------------------------------------------------------------------- Schedule 2.2(f) FORM OF COMPETITIVE NOTE May 23, 2000   FOR VALUE RECEIVED, AUTOZONE, INC., a Nevada corporation (the "Borrower"), hereby promises to pay to the order of __________________________, its successors and permitted assigns (the "Lender"), at the office of Bank of America, N.A., as Administrative Agent (the "Administrative Agent"), at 1850 Gateway Boulevard, 5th Floor, Concord, California 94520-3281, Attn: Agency Administrative Services (or at such other place or places as the holder hereof may designate), at the times set forth in the Five-Year Credit Agreement, dated as of May 23, 2000, among the Borrower, the Lenders, the Administrative Agent and the Syndication Agent (as it may be amended, modified, extended or restated from time to time, the "Credit Agreement"; all capitalized terms not otherwise defined herein shall have the meanings set forth in the Credit Agreement), but in no event later than the Termination Date, in Dollars and in immediately available funds, the aggregate unpaid principal amount of all Competitive Loans made by the Lender to the Borrower pursuant to the Credit Agreement, and to pay interest from the date hereof on the unpaid principal amount hereof, in like money, at said office, on the dates and at the rates selected in accordance with Section 2.2 of the Credit Agreement and in the respective Competitive Bid applicable to each Competitive Loan borrowing evidenced hereby. Upon the occurrence and during the continuance of an Event of Default, the balance outstanding hereunder shall bear interest as provided in Section 3.1 of the Credit Agreement. Further, in the event the payment of all sums due hereunder is accelerated under the terms of the Credit Agreement, this Note, and all other indebtedness of the Borrower to the Lender shall become immediately due and payable, without presentment, demand, protest or notice of any kind, all of which are hereby waived by the Borrower. In the event this Note is not paid when due at any stated or accelerated maturity, the Borrower agrees to pay, in addition to the principal and interest, all costs of collection, including reasonable attorneys' fees. All borrowings evidenced by this Note and all payments and prepayments of the principal hereof and interest hereon and the respective dates thereof shall be endorsed by the holder hereof on a schedule attached hereto and incorporated herein by reference, or on a continuation thereof which shall be attached hereto and made a part hereof; provided, however, that any failure to endorse such information on such schedule or continuation thereof shall not in any manner affect the obligation of the Borrower to make payments of principal and interest in accordance with the terms of this Note. This Note and the Loans evidenced hereby may be transferred in whole or in part only by registration of such transfer on the Register maintained by or on behalf of the Borrower as provided in Section 10.3(c) of the Credit Agreement. IN WITNESS WHEREOF, the Borrower has caused this Note to be duly executed by its duly authorized officer as of the day and year first above written. AUTOZONE, INC. By: Name: Title: By: Name: Title: -------------------------------------------------------------------------------- Schedule 2.3(d) FORM OF SWINGLINE NOTE May 23, 2000   FOR VALUE RECEIVED, AUTOZONE, INC., a Nevada corporation (the "Borrower"), hereby promises to pay to the order of BANK OF AMERICA, N.A., its successors and assigns (the "Swingline Lender"), at the office of Bank of America, N.A., as Administrative Agent (the "Administrative Agent"), at 1850 Gateway Boulevard, 5th Floor, Concord, California 94520-3281, Attn: Agency Administrative Services (or at such other place or places as the holder hereof may designate), at the times set forth in the Five-Year Credit Agreement, dated as of May 23, 2000, among the Borrower, the Swingline Lender the other Lenders, the Administrative Agent and the Syndication Agent (as it may be amended, modified, extended or restated from time to time, the "Credit Agreement"; all capitalized terms not otherwise defined herein shall have the meanings set forth in the Credit Agreement), but in no event later than the Termination Date, in Dollars and in immediately available funds, the aggregate unpaid principal amount of all Swingline Loans made by the Swingline Lender to the Borrower pursuant to the Credit Agreement, and to pay interest from the date hereof on the unpaid principal amount hereof, in like money, at said office, on the dates and at the rates selected in accordance with Section 2.3(c) of the Credit Agreement. Upon the occurrence and during the continuance of an Event of Default, the balance outstanding hereunder shall bear interest as provided in Section 3.1 of the Credit Agreement. Further, in the event the payment of all sums due hereunder is accelerated under the terms of the Credit Agreement, this Note, and all other indebtedness of the Borrower to the Swingline Lender shall become immediately due and payable, without presentment, demand, protest or notice of any kind, all of which are hereby waived by the Borrower. In the event this Note is not paid when due at any stated or accelerated maturity, the Borrower agrees to pay, in addition to the principal and interest, all costs of collection, including reasonable attorneys' fees. All borrowings evidenced by this Note and all payments and prepayments of the principal hereof and interest hereon and the respective dates thereof shall be endorsed by the holder hereof on a schedule attached hereto and incorporated herein by reference, or on a continuation thereof which shall be attached hereto and made a part hereof; provided, however, that any failure to endorse such information on such schedule or continuation thereof shall not in any manner affect the obligation of the Borrower to make payments of principal and interest in accordance with the terms of this Note. This Note and the Loans evidenced hereby may be transferred in whole or in part only by registration of such transfer on the Register maintained by or on behalf of the Borrower as provided in Section 10.3(c) of the Credit Agreement. IN WITNESS WHEREOF, the Borrower has caused this Note to be duly executed by its duly authorized officer as of the day and year first above written.     AUTOZONE, INC. By: Name: Title: By: Name: Title: -------------------------------------------------------------------------------- Schedule 3.2 FORM OF NOTICE OF EXTENSION/CONVERSION Bank of America, N.A., as Administrative Agent for the Lenders 1850 Gateway Boulevard, 5th Floor Concord, California 94520-3281 Attn: Agency Administrative Services Ladies and Gentlemen: The undersigned, AutoZone, Inc. (the "Borrower"), refers to the Five-Year Credit Agreement dated as of May 23, 2000 (as amended, modified, extended or restated from time to time, the "Credit Agreement"), among the Borrower, the Lenders, Bank of America, N.A., as Administrative Agent and The Chase Manhattan Bank, as Syndication Agent. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement. The Borrower hereby gives notice pursuant to Section 3.2 of the Credit Agreement that it requests an extension or conversion of a Revolving Loan outstanding under the Credit Agreement, and in connection therewith sets forth below the terms on which such extension or conversion is requested to be made: (A)     Date of Extension or Conversion           (which is the last day of the            the applicable Interest Period)         _______________________ (B)     Principal Amount of           Extension or Conversion                   _______________________ (C)     Interest rate basis                             _______________________ (D)     Interest Period and the            last day thereof                                _______________________ In accordance with the requirements of Section 4.2, the Borrower hereby reaffirms the representations and warranties set forth in the Credit Agreement as provided in subsection (b) of such Section, and confirms that the matters referenced in subsections (c), (d) and (e) of such Section, are true and correct. Very truly yours, AUTOZONE, INC. By: Name: Title: -------------------------------------------------------------------------------- Schedule 3.4(b) FORM OF NEW COMMITMENT AGREEMENT Reference is made to the Five-Year Credit Agreement dated as of May 23, 2000, as amended and modified from time to time thereafter (the "Credit Agreement") among AutoZone, Inc., the Lenders party thereto, Bank of America, N.A., as Administrative Agent and The Chase Manhattan Bank, as Syndication Agent. Terms defined in the Credit Agreement are used herein with the same meanings. 1. The undersigned Lender hereby confirms its Commitment, effective as of the Effective Date set forth below, to make Loans under the Credit Agreement up to the principal amount of such Commitment as set forth below. If the undersigned Lender is already a Lender under the Credit Agreement, such Lender acknowledges and agrees that such Commitment is in addition to any existing Commitment of such Lender under the Credit Agreement. If the undersigned Lender is not already a Lender under the Credit Agreement, such Lender hereby acknowledges, agrees and confirms that, by its execution of this New Commitment Agreement, such Lender will, as of the Effective Date, be a party to the Credit Agreement and be bound by the provisions of the Credit Agreement and, to the extent of its Commitment, have the rights and obligations of a Lender thereunder. 2. This New Commitment Agreement shall be governed by and construed in accordance with the laws of the State of New York. 3. This New Commitment Agreement may be executed in any number of counterparts, each of which where so executed and delivered shall be an original, but all of which shall constitute one and the same instrument. It shall not be necessary in making proof of this New Commitment Agreement to produce or account for more than one such counterpart.   Amount of Revolving Commitment $____________________ Effective Date of Revolving Commitment _____________________, 20___ The terms set forth above are hereby agreed to:   [Lender] By: Name: Title:     CONSENTED TO: BANK OF AMERICA, N.A., as Administrative Agent By: Name: Title:     AUTOZONE, INC. By: Name: Title: -------------------------------------------------------------------------------- Schedule 4.1(f) FORM OF LEGAL OPINION This is the form of legal opinion delivered by AutoZone in connection with prior AutoZone credit facilities. [DATE] Bank of America, N.A., as Administrative Agent, and each of the Lenders party to the Credit Agreements referred to below c/o Bank of America, N.A. Agency Administrative Services 1850 Gateway Boulevard, 5th Floor Concord, California 94520-3281 RE: AutoZone, Inc. 364-Day Syndicated Credit Agreement Ladies and Gentlemen: I am the Senior Vice President, Secretary and General Counsel of AutoZone, Inc., a Nevada corporation ("AutoZone"), and am familiar with the transactions contemplated by the Credit Agreement dated as of November 13, 1998, as amended by that certain Amendment No. 1 to Credit Agreement dated as of July 16, 1999 among AutoZone, Inc., as Borrower, the several Lenders from time to time party thereto, Bank of America, N.A. as Agent, SunTrust Bank, Nashville, N.A., as Syndication Agent and The First National Bank of Chicago, as Documentation Agent ("Credit Agreement"). Unless the context otherwise requires, all terms used in this opinion which are specifically defined in the Credit Agreement shall have the meanings given such terms in the Credit Agreement. In connection with the opinions expressed below, I have examined, or caused to be examined, the Credit Documents. I have relied upon the representations and warranties contained in each of such documents and upon originals or copies, certified or otherwise identified to my satisfaction, of such corporate records, documents and other instruments as in my judgment are relevant to rendering the opinions expressed below. As to all matters of fact covered by such documents, I have relied, without independent investigation or verification on such documents. In such examination, I have assumed that each of the parties to the Credit Agreement, other than AutoZone, had and has, as the case may be, full power, authority and legal right to enter into each Credit Document to which it is a party and that each such Credit Document was or has been, as the case may be, duly authorized, executed and delivered by each of such parties. Based on the foregoing, it is my opinion that: (i) Each of the Company and its subsidiaries has been duly organized and is validly existing as a corporation or limited partnership under the laws of the jurisdiction of its organization, with corporate or partnership, as the case may be, power and authority to own its properties and conduct its ordinary course of business; (ii) Each of the Company and its subsidiaries has been duly qualified as a foreign corporation or limited partnership, as the case may be, for the transaction of business and is in good standing under the laws of each jurisdiction in which it owns or leases properties, or conducts any business, so as to require such qualification, or is subject to no material liability or disability by reason of failure to be so qualified in any such jurisdiction; (iii) Each of the Credit Documents to which AutoZone is a party, was or has been, as the case may be, duly authorized, executed and delivered by AutoZone and together constitute the legal, valid and binding obligations of AutoZone enforceable against AutoZone in accordance with its and their terms. The opinions expressed in paragraph (iii) above are based upon the assumption for purposes of such opinions and without independent analysis that notwithstanding the respective choice of law clauses in the Credit Documents, the governing law with respect to each of the Credit Documents is identical in all relevant respects to the law of the State of Tennessee. Insofar as such opinion relates to the enforceability of any instrument, such enforceability is subject to applicable bankruptcy, insolvency and other similar laws affecting the enforcement of creditors' rights generally whether such enforceability is considered in a proceeding in equity or at law). The enforceability of the remedies provided under the Credit Agreement may also be limited by applicable laws which may affect the remedies provided therein but which do not in my opinion affect the validity of the Credit Agreement or make such remedies inadequate for the practical realization of the benefits intended to be provided. I do not express any opinion as to matters governed by any law other than the Federal laws of the United States of America, the corporation law of the State of Nevada and the laws of the State of Tennessee. Further, I express no opinion as to the enforceability of the choice of law provisions contained in any of the Credit Documents. This opinion is rendered solely for your benefit in connection with the transactions described above. This opinion may not be used or relied upon by any other person, and may not be disclosed, quoted, filed with a governmental agency or otherwise referred to without my prior written consent except to your bank examiners, auditors and counsel and to prospective transferees of your interests under the Credit Documents and their professional advisers, or as required by law or pursuant to legal process. Very truly yours,     Harry L. Goldsmith -------------------------------------------------------------------------------- Schedule 5.5 MATERIAL LITIGATION Quinnie AutoZone, Inc., is a defendant in a purported class action lawsuit entitled "Melvin Quinnie on behalf of all others similarly situated v. AutoZone, Inc., and DOES 1 through 100, inclusive" filed in the Superior Court of California, County of Los Angeles, in November 1998. The plaintiff claims that the defendants failed to pay overtime to store managers as required by California law and failed to pay terminated managers in a timely manner as required by California law. The plaintiff is seeking injunctive relief, restitution, statutory penalties, prejudgment interest, and reasonable attorneys' fees, expenses and costs. On April 3, 2000, the court certified the class as consisting of all AutoZone store managers, and Chief managers who became AutoZone employees in standardized stores on January 1, 1999, for their claims since January 1, 1999, only. The Company will continue to vigorously defend this action. Rusch AutoZone, Inc., and Chief Auto Parts Inc. are defendants in a purported class action lawsuit entitled "Paul D. Rusch, on behalf of all other similarly situated, v. Chief Auto Parts Inc. and AutoZone, Inc." filed in the Superior Court of California, County of Los Angeles, in May 1999. The plaintiffs claim that the defendants have failed to pay their store managers overtime pay from March 1997 to the present. The plaintiffs are seeking back overtime pay, interest, an injunction against the defendants committing such practices in the future, costs, and attorneys' fees. We are unable to predict the outcome of this lawsuit at this time, but believe that the potential damages recoverable by any single plaintiff against us are minimal. However, if the plaintiff class were to be certified and to prevail on all of its claims, the aggregate amount of damages could be substantial. We are vigorously defending against this action. Coalition For a Level Playing Field AutoZone, Inc., is a defendant in a lawsuit entitled "Coalition for a Level Playing Field, L.L.C., et al., v. AutoZone, Inc., et al.," filed in the U.S. District Court for the Eastern District of New York on February 16, 2000. The case was filed by over 100 plaintiffs, which are principally automotive aftermarket warehouse distributors and jobbers, against eight defendants, which are principally automotive aftermarket parts dealers. The plaintiffs claim that the defendants have knowingly receiving volume discounts, rebates, slotting and other allowances, fees, free inventory, sham advertising and promotional payments, a share in the manufacturers' profits, and excessive payments for services purportedly performed for the manufacturers in violation of the Robinson Patman Act. Plaintiffs seek approximately $1 billion in damages (including statutory trebling) and a permanent injunction prohibiting defendants from committing further violations of the Robinson-Patman Act and from opening up any further stores to compete with plaintiffs as long as defendants continue to violate the Act. The Company believes this suit to be without merit and will vigorously defend against it.   Newlin AutoZone, Inc., is a defendant in a lawsuit entitled "Ty Newlin, individually, and on behalf of others similarly situated, v. AutoZone, Inc., and Does 1 through 50, inclusive," filed in the Kern County, California, Superior Court on May 9, 2000. The plaintiff, on behalf of a class of employees, alleges that AutoZone failed to pay overtime to its store management employees. The plaintiff is seeking unpaid overtime compensation, penalties, punitive damages, interest, attorneys' fees, and an injunction requiring AutoZone to pay overtime compensation as required under California and federal law. The Company intends to vigorously defend this action.     -------------------------------------------------------------------------------- Schedule 5.12 SUBSIDIARIES AutoZone, Inc. as of May 17, 2000 Status: Active Incorporation Nevada Federal ID# 62-1482048   Subsidiaries ADAP, Inc. ALLDATA LLC AutoZone de Mexico, S. de R.L. de C.V. AutoZone Development Corporation AutoZone Properties, Inc. AutoZone Stores, Inc. AutoZone Texas, L.P. AutoZone.com, Inc. AutoZoners, Inc. BBH Development, Inc. Chief Auto Parts, Inc. DataZone, S. de R.L. de C.V. ServiceZone, S. de R. L. de C.V. Speedbar, Inc. TruckZone, Inc. Zone Compra, S. de R.L. de C.V.     -------------------------------------------------------------------------------- Schedule 6.1(c) FORM OF OFFICER'S COMPLIANCE CERTIFICATE For the fiscal quarter ended _________________, 20___. I, ______________________, [Title] of AutoZone, Inc. (the "Borrower") hereby certify that, to the best of my knowledge and belief, with respect to that certain Five-Year Credit Agreement dated as of May 23, 2000 (as amended, modified, extended or restated from time to time, the "Credit Agreement"; all of the defined terms in the Credit Agreement are incorporated herein by reference) among the Borrower, the Lenders party thereto, Bank of America, N.A., as Administrative Agent and The Chase Manhattan Bank, as Syndication Agent: a. The company-prepared financial statements which accompany this certificate are true and correct in all material respects and have been prepared in accordance with GAAP applied on a consistent basis, subject to changes resulting from normal year-end audit adjustments. b. Since ___________ (the date of the last similar certification, or, if none, the Closing Date) no Default or Event of Default has occurred under the Credit Agreement; and Delivered herewith are detailed calculations demonstrating compliance by the Borrower with the financial covenants contained in Section 6.10 and Section 6.11 of the Credit Agreement as of the end of the fiscal period referred to above. This ______ day of ___________, 20__.     AUTOZONE, INC. By: Name: Title: -------------------------------------------------------------------------------- Attachment to Officer's Certificate Computation of Financial Covenants       -------------------------------------------------------------------------------- Schedule 7.5 SUBSIDIARY INDEBTEDNESS AutoZone, Inc. as of May 6, 2000 Subsidiary Indebtedness Indebtedness Subsidiary as of 5/06/00 Chief Auto Parts, Inc. $5,021,898.47 TruckZone, Inc. $64,331.40 AutoZone Texas, L.P. $18,325,000.00 -------------------------------------------------------------------------------- Schedule 10.3(b) FORM OF ASSIGNMENT AND ACCEPTANCE THIS ASSIGNMENT AND ACCEPTANCE dated as of _______________, 2000 is entered into between ________________ ("Assignor") and ____________________ ("Assignee"). Reference is made to the Five-Year Credit Agreement dated as of May 23, 2000, as amended and modified from time to time thereafter (the "Credit Agreement") among AutoZone, Inc., the Lenders party thereto, Bank of America, N.A., as Administrative Agent and The Chase Manhattan Bank, as Syndication Agent. Terms defined in the Credit Agreement are used herein with the same meanings. 1. The Assignor hereby sells and assigns, without recourse, to the Assignee, and the Assignee hereby purchases and assumes from the Assignor, effective as of the Effective Date set forth below, the interests set forth below (the "Assigned Interest") in the Assignor's rights and obligations under the Credit Agreement, including, without limitation, the interests set forth below in the Commitments and outstanding Loans of the Assignor on the effective date of the assignment designated below (the "Effective Date"), together with unpaid Fees accrued on the assigned Commitments to the Effective Date and unpaid interest accrued on the assigned Loans to the Effective Date. Each of the Assignor and the Assignee hereby makes and agrees to be bound by all the representations, warranties and agreements set forth in Section 10.3(b) of the Credit Agreement, a copy of which has been received by the Assignee. From and after the Effective Date (i) the Assignee, if it is not already a Lender under the Credit Agreement, shall be a party to and be bound by the provisions of the Credit Agreement and, to the extent of the interests purchased and assumed by the Assignee under this Assignment and Acceptance, have the rights and obligations of a Lender thereunder and (ii) the Assignor shall, to the extent of the interests sold and assigned by the Assignor under this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Credit Agreement. 2. This Assignment and Acceptance shall be governed by and construed in accordance with the laws of the State of New York. 3. Terms of Assignment (a)     Date of Assignment: (b)     Legal Name of Assignor: (c)     Legal Name of Assignee: (d)     Effective Date of Assignment: (e)     Revolving Commitment of Assignee           after giving effect to this           Assignment and Acceptance as           of the Effective Date                                                  $_________________ (f)     Revolving Commitment of Assignor          after giving effect to this         Assignment and Acceptance as         of the Effective Date                                                     $_________________ (g)     Commitment Percentage of Assignee          after giving effect to this         Assignment and Acceptance         as of the Effective Date         (set forth to at least 8 decimals)                                                                         % (h)    Commitment Percentage of Assignor         after giving effect to this         Assignment and Acceptance         as of the Effective Date         (set forth to at least 8 decimals)                                                                           % 4. This Assignment and Acceptance shall be effective only upon consent of the Borrower and the Administrative Agent, if applicable, delivery to the Administrative Agent of this Assignment and Acceptance together with the transfer fee payable pursuant to Section 10.3(b) in connection herewith and recordation in the Register pursuant to Section 10.3(b) of the terms hereof. 5. This Assignment and Acceptance may be executed in any number of counterparts, each of which where so executed and delivered shall be an original, but all of which shall constitute one and the same instrument. It shall not be necessary in making proof of this Assignment and Acceptance to produce or account for more than one such counterpart. The terms set forth above are hereby agreed to: ____________________, as Assignor By: Name: Title:     _____________________, as Assignee By: Name: Title: Notice address of Assignee: <<Assignee>> __________________________ __________________________ Attn:_____________________ Telephone: (___) ________ Telecopy: (___) ________     CONSENTED TO: BANK OF AMERICA, N.A., as Administrative Agent By: Name: Title:   AUTOZONE, INC. By: Name: Title:

EXHIBIT 10.2   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 Bagwell No. 6 Family L.P., a Texas limited partnership, ("Buyer"). The purpose of this Agreement is to set out the terms and condition by which Buyer will acquire 1.5% working interest, being 12.2449% 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"), 12.2449% of Seller's 12.25% right, title and interest, it being the intent to convey 1.5% 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 $82,040.82 (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 12.2449% 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:       BAGWELL NO. 6 FAMILY L.P.       By:           /s/ Donald L. Bagwell                                             Title:    President of Bagwell Co., its General Partner             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 & Res. #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 Bagwell No. 6 Family L. P. from Gladstone Energy, Inc. Working Net Revenue Interest Interest U WX RB SU Reservoirwide Unit Ragley #2 .01500000 .01092849 BPO Shut-In .01431523 .00919741 APO-I .01314219 .00885022 APO-II Ragley #3 .01500000 .01093684 BPO Producing .01431523 .00919741 APO-I .01314219 .00885022 APO-II U WX RD SU Reservoirwide Unit Cavenham #1 .01500000 .01093684 Producing Cavenham #2 .01500000 .01093684 Producing Cavenham #3 .01500000 .01093684 Injection Well Crosby Land & Resources #1 .01500000 .01093684 Producing Powell Lumber #1 .01500000 .01093684 Producing Ragley Lumber Co. #1 .01500000 .01093684 Shut-In* Ragley Lumber Co. #4 .01500000 .01093684 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.      

QuickLinks -- Click here to rapidly navigate through this document EXHIBIT 10.32     **  Text Omitted and Filed Separately Confidential Treatment Requested Under 17 C.F.R. §§ 200.80(b)(4), 200.83 and 240.246-2 RESEARCH AND LICENSE AGREEMENT     THIS RESEARCH AND LICENSE AGREEMENT (this "Agreement") is entered into and made on July 10, 2000 (the "Effective Date") by and among BIOCHEM PHARMA INC. ("BIOCHEM"), a corporation organized and existing under the laws of Canada and having its principal office at 275 Armand-Frappier Boulevard, Laval, Quebec, Canada H7V 4A7, and CYTOVIA, INC. ("CYTOVIA"), a corporation incorporated and existing under the laws of the State of Delaware, having its principal office at 6650 Nancy Ridge Drive, San Diego, California, 92121. BIOCHEM and CYTOVIA are hereinafter collectively referred to as "Parties" or individually as a "Party." RECITALS     WHEREAS, CYTOVIA is the owner of certain intellectual property consisting of pending patent applications, know-how and inventions relating to Products (as defined below) (including methods of manufacturing such Products) for the treatment of human diseases;     WHEREAS, the parties wish to pursue research to design, synthesize, identify and characterize candidates from among the Products for clinical development and BIOCHEM wishes to pursue such development;     WHEREAS, CYTOVIA desires to grant, and BIOCHEM desires to acquire, an exclusive license (with the right to sublicense) to research, develop and commercially exploit CYTOVIA's intellectual property relating to the Products, including the right to make, have made, use, sell and have sold the Products.     NOW, THEREFORE, in consideration of the mutual covenants contained herein, and for other good and valuable consideration, the amount and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: ARTICLE 1 DEFINITIONS     1.1    "Affiliate" means at the time of determination (i) any Person which is directly or indirectly controlled by any Party hereto; (ii) any Person which directly or indirectly controls any Party hereto; or (iii) any Person which is under the direct or indirect control of any such Person as described in (i) or (ii). "Control" shall in this context mean ownership of greater than fifty percent (50%) of the voting stock or other voting interests in the Person in question. In any country of the Territory in which local law prohibits the ownership by BIOCHEM or CYTOVIA of greater than fifty percent (50%) of the voting stock or other voting interests of an entity, the entity shall be deemed an Affiliate if BIOCHEM or CYTOVIA owns the maximum percentage permitted by law, as long as such maximum percentage is at least thirty percent (30%).     1.2    "Agency" means any governmental regulatory authority responsible for granting Regulatory Approvals for the sale of Product.     1.3    "CD" means a Product designated as a candidate drug by BIOCHEM.     1.4    "Control" or "Controlled" in the context of intellectual property rights means rights to intellectual property sufficient to grant the applicable license or sublicense under this Agreement, without violating the terms of any agreement or other arrangement with any Third Party, provided that where a license or sublicense under this Agreement shall be exclusive, if the granting Party does not have the right under a Third Party agreement entered into prior to the Effective Date to grant an exclusive license or sublicense, such license or sublicense shall be non-exclusive. --------------------------------------------------------------------------------     1.5    "CYTOVIA Know-How" means all proprietary Technical Information owned or Controlled by CYTOVIA as of the Effective Date or during the term of this Agreement and that relates to, or is necessary or useful for the design, synthesis, identification, research, development, manufacture, use or sale of Products.     1.6    "CYTOVIA Patent Rights" means all Patents in any country within the Territory which are owned or Controlled by CYTOVIA as of the Effective Date or during the term of this Agreement that relate to, or are necessary or useful for the design, synthesis, identification, research, development, manufacture, use or sale of Products, including those Patents which claim a Product, formulation, process of manufacture, or method of use of such Product. CYTOVIA Patent Rights as they exist as of the Effective Date are set forth on Exhibit B attached hereto. CYTOVIA Patent Rights include Dominated Patent Rights.     1.7    "Dominated Patent Rights" and "Dominated BIOCHEM Patent Rights" have the meaning set forth in Section 11.1.1.     1.8    "Effective Date" has the meaning set forth in the first paragraph of this Agreement.     1.9    "FDA" shall mean the United States Food and Drug Administration, or any successor thereto.     1.10    "Field" means the treatment of human diseases.     1.11    "FTE" means the equivalent of a full-time twelve (12) months' (including normal vacations, sick days and holidays) work of a qualified person, carried out by one or more employees or agents of a Party, who devotes a portion of his or her time to the Research Program.     1.12    "GCP" means "Good Clinical Practices" as defined under applicable FDA rules and regulations and Guideline E-6 of the International Council of Harmonization.     1.13    "IND" means an "Investigational New Drug" application, as defined in the United States Food, Drug and Cosmetic Act, as amended, and applicable FDA rules and regulations or non-U.S. equivalent thereof in a Major Country.     1.14    "Initiation of Phase II Clinical Trials" means dosing of the first patient at the first site of Phase II Clinical Trials.     1.15    "Initiation of Phase III Clinical Trials" means dosing of the first patient at the first site of Phase III Clinical Trials.     1.16    "Joint Patent Rights" has the meaning set forth in Section 11.1.1. Joint Patent Rights exclude Dominated Patent Rights.     1.17    "Launch" means the date of first commercial shipment of the Product by BIOCHEM, its Affiliates, distributors or sublicensees to Third Party customers in each respective country of the Territory after the receipt of Regulatory Approval for the Product from the relevant Agency, as may be necessary in such country.     1.18    "Loss" has the meaning set forth in Section 8.1.     1.19    "Major Countries" means the following countries of the Territory: (a) France, (b) Germany, (c) United Kingdom, (d) Italy, (e) Spain, (f) United States and (g) Japan.     1.20    "NDA" means a "New Drug Application," as defined in the United States Food, Drug and Cosmetic Act, as amended, and applicable FDA rules and regulations, or any non-U.S. equivalent thereof.     1.21    "Net Sales" means the total gross sales (number of units shipped times the invoiced price per unit) to Third Parties representing sales invoiced by BIOCHEM and its Affiliates of the Product in the Territory, less deductions for the following to the extent actually paid or allowed:     (a)    sales and excise taxes and duties (including import duties) paid or allowed by a selling party and any other governmental charges imposed upon the manufacture or sale of the Product; --------------------------------------------------------------------------------     (b)    normal and customary trade, quantity and cash discounts (up to the amount normal and customary in the country of the Territory for early payment of invoices) and rebates, chargebacks and administrative fees (including rebates to social and welfare systems);     (c)    allowances, chargebacks and credits to Third Parties on account of rejected, damaged, outdated, returned, withdrawn or recalled Product or on account of retroactive price reductions affecting the Product;     (d)    amounts due to Third Parties on account of rebate payments, including Medicaid rebates; and     (e)    transport, freight, insurance, handling and distribution transportation charges and insurance through the whole distribution pipeline (e.g., from BIOCHEM through to the Third Party customer).     In addition, BIOCHEM shall be entitled to deduct from Net Sales any receivables which are deemed to be uncollectible according to BIOCHEM's internal accounting principles and generally accepted accounting principles consistently applied. Such bad debt deduction shall be applied to Net Sales in the period in which such receivables are written off and shall be exclusive of any bad debt or uncollectible receivables of BIOCHEM or its Affiliates unrelated to the Product.     Sales between BIOCHEM and its Affiliates shall be excluded from the computation of Net Sales, but Net Sales shall include the first sales to Third Parties by any such Affiliates. The supply of Product as commercial samples (in quantities customary within the pharmaceutical industry) or for use in clinical studies shall not be included within the computation of Net Sales. Where (i) the consideration for the Product shall include any non-cash element; or (ii) the Product shall be transferred by BIOCHEM or an Affiliate in any manner other than an invoiced sale, the Net Sales applicable to any such transaction shall be deemed to be BIOCHEM's average Net Sales for the applicable quantity of Product at that time.     If a Product is sold or provided as part of a system, package, or combination product or service that contains one or more other active ingredients or other parts that could be sold separately (each, a "Combination Product" and collectively, "Combination Products"), Net Sales shall be calculated by multiplying the Net Sales received by BIOCHEM or an Affiliate from the sale of Combination Products by the fraction A/B, where "A" is the fair market value of the Product when supplied or priced separately and "B" is the fair market value of the Combination Product. In the event that no market price is available for the Product when supplied or priced separately, fair market value shall be determined in good faith by BIOCHEM and CYTOVIA. In the event that CYTOVIA and BIOCHEM disagree regarding determination of fair market value, the Parties agree to submit such disagreement to arbitration in accordance with Section 15.5.     1.22    "Patent" (which term may be used either in the singular or plural form) means any patent and patent applications, and all additions, divisions, continuations, continuations in-part, pipeline protection, substitutions, reissues, extensions, registrations, patent term extensions, supplementary protection certificates and renewals of any of the above.     1.23    "Person" shall include a corporation, partnership or other entity.     1.24    "Phase I Clinical Trials" means "Phase 1" investigational studies as defined within 21 CFR 312.21 and other applicable regulations promulgated by the U.S. Department of Health and Human Services or FDA or non-U.S. equivalent thereof.     1.25    "Phase II Clinical Trials" means "Phase 2" investigational studies as defined within 21 CFR 312.21 and other applicable regulations promulgated by the U.S. Department of Health and Human Services or FDA or non-U.S. equivalent thereof.     1.26    "Phase III Clinical Trials" means "Phase 3" investigational studies as defined within 21 CFR 312.21 and other applicable regulations promulgated by the U.S. Department of Health and Human Services or FDA or non-U.S. equivalent thereof. --------------------------------------------------------------------------------     1.27    "Product" means any member of the class of [***], analogs and derivatives as set forth on Exhibit A including all formulations and modes of administration thereof.     1.28    "Regulatory Approval" means the product license or marketing approval necessary as a prerequisite for marketing a Product in a particular country in the Territory, including any approval for price or reimbursement (hereinafter, "pricing approval") as may be necessary or appropriate in such country.     1.29    "Research Program" has the meaning set forth in Section 4.1.     1.30    "Research Term" has the meaning set forth in Section 3.1.1.     1.31    "Sublicensee" shall mean a Third Party to whom BIOCHEM has granted rights pursuant to Section 2.1.1 beyond the mere right to purchase Product from BIOCHEM or its Affiliates.     1.32    "Sublicensing Fees" means the amount actually paid to BIOCHEM or an Affiliate of BIOCHEM by a Sublicensee arising from the sublicense of the right to research, develop, make, have made, use, distribute for sale, promote, market, offer for sale, sell, have sold, import or export Products. Sublicensing Fees shall include up-front or license fees, milestone payments, premiums above market price on sales of securities and any other payments in respect of the CYTOVIA Patent Rights or CYTOVIA Know-How but shall not include any payments tied directly to the provision of goods and services by BIOCHEM or its Affiliate to such sublicensee (including research and development and manufacturing) to compensate BIOCHEM or its Affiliate for the provision of such goods and services, royalties payable to BIOCHEM or its Affiliates by a Sublicensee based on such Sublicensee's sale of Products, or payments for securities (other than premiums above market price).     1.33    "Technical Information" means all techniques and data and other know-how and technical information including inventions (whether or not patentable), improvements and developments, practices, methods, concepts, know-how, trade secrets, documents, computer data, source code, apparatus, clinical and regulatory strategies, test data, analytical and quality control data, manufacturing, patent data or descriptions, development information, drawings, specifications, designs, plans, proposals and technical data and manuals and all other proprietary information.     1.34    "Territory" means all the countries of the world.     1.35    "Third Party" means any Person other than a Party to this Agreement or an Affiliate.     1.36    "Valid Patent Claim" means a claim of an issued and unexpired patent or a claim of a pending patent application (subject to the limitations of the last two sentences of this definition) within the CYTOVIA Patent Rights (excluding any Dominated BIOCHEM Patent Rights), which claim has not lapsed, been canceled, become abandoned, or been revoked or declared invalid or unenforceable by an unreversed and unappealable decision or judgment of a court or other governmental agency of competent jurisdiction, and which has not been admitted to be invalid or unenforceable through reissue or disclaimer or otherwise. For the purposes of this Agreement, a claim of a pending patent application shall only be deemed a Valid Patent Claim for a period of five (5) years from the date of first publication of such application in those countries where applications are published or, in those countries where applications are not published, for a period of five (5) years from filing of such application. If a claim of a pending patent application does not mature into an issued patent within the aforementioned five (5) year period of time, such a claim will no longer qualify as a Valid Patent Claim. ARTICLE 2 LICENSE GRANTS     2.1    CYTOVIA License Grants.     2.1.1    Subject to the terms and conditions of this Agreement, during the term of this Agreement, CYTOVIA hereby grants to BIOCHEM an exclusive, worldwide, royalty-bearing license, including the right to grant sublicenses (which themselves may include the right to grant *  Confidential Treatment Requested -------------------------------------------------------------------------------- further sublicenses), under the CYTOVIA Patent Rights and CYTOVIA Know-How to research, develop, make and have made, use, distribute for sale, promote, market, offer for sale, sell, have sold, import and export Products in the Field.     2.1.2    The term "exclusive" as used in Section 2.1.1 shall operate to exclude all others, including CYTOVIA and its Affiliates, from the rights conferred by CYTOVIA pursuant to Section 2.1.1, except to the extent explicitly permitted pursuant to the collaborative research program set forth in Article 4 of this Agreement. CYTOVIA shall not, during the term of this Agreement either itself or through any Affiliate, conduct any research or development with respect to the Products except pursuant to this Agreement or enter into any agreement with any Third Party with respect to any Product without prior written consent of BIOCHEM.     2.1.3    Notwithstanding the foregoing provisions of this Section 2.1 or any other provision of this Agreement, BIOCHEM shall not have any right or license under the CYTOVIA Patent Rights or CYTOVIA Know-How to use any CYTOVIA screens or assays for caspase activity, and any such screening or assaying as provided under the Research Program shall be performed by CYTOVIA. ARTICLE 3 TERM     3.1    Term     3.1.1    Research Term. The term of the collaborative research program contemplated pursuant to Article 4 (the "Research Term") shall commence on the Effective Date and unless sooner terminated by mutual agreement or pursuant to any other provision of this Agreement shall expire twenty-four (24) months after the Effective Date unless renewed by mutual agreement in writing at least ninety (90) days prior to the expiration of such term. If so renewed, the Research Term shall be extended by additional one (1) year terms, subject to mutual agreement to renew in writing at least ninety (90) days prior to the expiration of the then current term.     3.1.2    License Term. The term of this Agreement, in all respects except as provided for by Section 3.1.1 (Research Term), shall commence on the Effective Date and unless sooner terminated by mutual agreement or pursuant to any other provision of this Agreement shall expire, on a country-by-country basis upon the later of (i) expiration of the last to expire of the Valid Patent Claims covering the manufacture, use or sale of each Product in a particular country on a Product-by-Product basis or (ii) ten (10) years from Launch of the first Product in a particular country. ARTICLE 4 RESEARCH; OBLIGATION TO COOPERATE AND SUPPORT, AND REGULATORY APPROVAL     4.1    Research Program; Steering Committee; Work Plan. BIOCHEM and CYTOVIA shall engage in a collaborative research program relating to the Products (the "Research Program") and shall use reasonable commercial efforts to design, synthesize, identify, screen and characterize Products pursuant to the delegation of work responsibilities set forth within the Work Plan attached hereto as Exhibit C, subject in all cases to BIOCHEM's right to terminate this Agreement pursuant to Article 13. The Parties shall make available appropriate scientific, engineering and other personnel to perform tasks under the Research Program in accordance with the Work Plan. Without in any way limiting CYTOVIA'S responsibilities pursuant to the Work Plan, CYTOVIA shall, during the term of this Agreement, conduct CYTOVIA caspase activity screens or assays of the Products and record and report the results of such screens or assays to BIOCHEM in accordance with Section  4.2 herein. Although the Parties shall cooperate with respect to the Research Program, BIOCHEM shall have ultimate control over the Research Program, subject to the terms and conditions of this Agreement. BIOCHEM alone shall have the right to designate a Product as a CD. The Parties shall participate in the Steering Committee described in Section 4.4. The Parties shall each bear their own costs incurred in -------------------------------------------------------------------------------- performing activities under the Work Plan, including the costs of the FTE's assigned to the Research Program which are provided in the Work Plan. The Steering Committee shall have the authority to amend the Work Plan, provided that the costs and obligations of the parties shall not be materially increased by any such amendment or by all such amendments in the aggregate. BIOCHEM shall not have the right to file an IND with respect to any Product without first designating such Product as a CD.     4.2    Record Keeping. Each party shall record, to the extent practical, all Technical Information relating to its research activities under the Research Program in written form, which writing shall be signed, dated and witnessed, consistent with standard practices of each Party and what is normal and customary in the industry. To the extent practical, such written records shall be kept separately from written records documenting other research of such Party. All such written records of the Parties shall be maintained in a form sufficient to satisfy Agencies and shall be open to inspection by the other party during normal business hours upon reasonable prior written notice. Without in any way limiting the foregoing, data relating to the results of screens or assays performed by CYTOVIA pursuant to the Research Program shall be recorded and stored by CYTOVIA, using its customary means, and in a computer searchable file or computer database (that may be separate from other CYTOVIA data not related to caspase screens) on a storage device. The information stored will include the target, screen type, the concentration, structure and activity of the compound tested, and date of testing. Upon written request of BIOCHEM, CYTOVIA will provide BIOCHEM with a written report of the results of screening, in the manner described in the preceding sentence, performed by CYTOVIA pursuant to the Research Program.     4.3    Support and Cooperation. The Parties shall cooperate with and assist each other in performing the various aspects of the Research Program and the tasks set forth within the Work Plan for performance by each Party. In addition, CYTOVIA shall provide BIOCHEM with all assistance, technology, information and documents reasonably requested by BIOCHEM to the extent sufficient to allow BIOCHEM or BIOCHEM's Affiliates to manufacture the Product. CYTOVIA shall also provide or make available to BIOCHEM all other available background and supporting information relating to the Products as reasonably requested by BIOCHEM.     4.4    Steering Committee Responsibilities, Composition, and Procedure. BIOCHEM and CYTOVIA shall promptly after the Effective Date organize a steering committee (the "Steering Committee"), which will plan, manage and oversee work on the Research Program and update and modify the Work Plan as may be necessary, consisting of three (3) members from BIOCHEM and three (3) members from CYTOVIA. The responsibilities of the Steering Committee shall include, without limitation, maintaining records of Products designed, synthesized, screened or identified under the Research Program and of CDs designated by BIOCHEM. BIOCHEM shall have the right to appoint one of its three (3) members to be the chairperson of the Steering Committee. The Parties shall each have the right, upon notifying the other, to change its members of the Steering Committee at any time during the term of this Agreement. The Parties shall hold meetings of the Steering Committee as mutually agreed by the Parties (but in no event less than four (4) quarterly meetings per year) to review the Research Program and to discuss future activities under this Agreement. The first meeting of the Steering Committee following the Effective Date shall be held in San Diego, CA. Thereafter, meetings shall alternate between Laval, Canada and San Diego, CA. Interim meetings may be held by telephone or video conference if requested by either Party in writing to the other, provided that the Parties shall meet in person at least four (4) times per year. Minutes of all meetings setting forth decisions of the Steering Committee relative to the Research Program shall be prepared by the host Party and circulated to both Parties within fifteen (15) days after each meeting, but minutes shall not become official until approved by both Parties. Any vote of the Steering Committee shall include at least one (1) representative of each of BIOCHEM and CYTOVIA. Steering Committee decisions shall be made by unanimous consent of the Parties after good faith discussions. In the event of a disagreement that cannot be resolved within thirty (30) days after the date on which the disagreement arose through such good faith discussions, the matter shall be referred to the CEOs of the Parties for good faith discussion, and in the event that the CEOs shall not have reached agreement within sixty (60) days after the date on which the disagreement arose, then the decision of BIOCHEM shall be -------------------------------------------------------------------------------- final. The Steering Committee shall terminate upon termination of the Research Program, with BIOCHEM being responsible for further development of the Products as provided in Article 5. ARTICLE 5 REGULATORY ACTIVITIES, APPROVALS, and COMPLIANCE     5.1    Regulatory Activities and Approvals.     5.1.1    BIOCHEM shall be responsible for, either itself or through its designee (and with CYTOVIA's assistance when reasonably requested by BIOCHEM), and fund, all pre-clinical and non-clinical work (other than CYTOVIA's responsibilities under the Research Program), all clinical trials and all other regulatory matters relating to the Products, including all communications with the relevant Agencies with respect to the Products in the Territory. BIOCHEM shall be responsible for the preparation, filing and prosecution of all INDs, as well as all other Agency filings for obtaining and maintaining Regulatory Approvals in the Territory. BIOCHEM shall own all such filings and Regulatory Approvals during and after the term of this Agreement. CYTOVIA shall provide reasonable assistance to BIOCHEM, free of charge, in preparing, filing, prosecuting, obtaining and maintaining Regulatory Approvals in the Territory, as requested by BIOCHEM. CYTOVIA shall provide BIOCHEM (or BIOCHEM's designee), free of charge, for purposes of preparing the Agency filings for the Products, the required data, properly formatted, for that portion of the Agency filings for the Products which relates to any work by CYTOVIA and all other data owned or controlled by CYTOVIA which is reasonably necessary for obtaining and maintaining Regulatory Approvals in the Territory (including any required adverse event information that may be in CYTOVIA's possession or control). Without in any way limiting the foregoing, CYTOVIA shall provide to BIOCHEM, free of charge, all Technical Information in CYTOVIA's possession or control that BIOCHEM may require to file IND's for the Products and for any subsequent modification or amendment thereto. BIOCHEM shall reimburse CYTOVIA for reasonable out of pocket expenses incurred by CYTOVIA in connection with the assistance requested by and provided to BIOCHEM under this Section 5.1.1.     5.1.2    Subject to BIOCHEM's right of termination as provided in Article 13, BIOCHEM shall use commercially reasonable efforts to:     (a) develop, or have developed, at least one (1) Product under this Agreement for an oncology indication in at least one (1) Major Country;     (b) with respect to any Product for which Regulatory Approval is obtained in any Major Country, obtain, or have obtained, Regulatory Approvals of such Product in the other Major Countries; and     (c) following Regulatory Approval in any Major Country, market and sell, or have marketed and sold, at least one (1) Product in such Major Country.     BIOCHEM shall be deemed to be using commercially reasonable efforts with respect to the provisions of this Section 5.1.2 if BIOCHEM is actively undertaking diligent, commercially reasonable efforts, similar to those used for other BIOCHEM products of comparable commercial potential, for the continuing development and the commercialization of a Product in the Field. Without limiting BIOCHEM's obligations pursuant to parts (a), (b), and (c) of this Section, BIOCHEM shall be responsible for and retain control of all decisions regarding commercialization of the Products including development of Product, where and when to seek Regulatory Approval and where and when to market the Product(s), (including without limitation the sole discretion to decide in which Major Country to commercially exploit the Product.) In any event, BIOCHEM shall have the right to take into consideration commercial and business factors when making any determination concerning whether to file for Regulatory Approval or to Launch any Product in a country of the Territory, how to market any Product in a country of the Territory and whether to continue to market any Product in a country of the Territory, and in making such determinations shall act in accordance with its reasonable business practices and judgment in such regard. For example, it would be commercially reasonable, -------------------------------------------------------------------------------- notwithstanding the language of Section 5.1.2(b), not to file for Regulatory Approval in Japan where a Product is suited to Western markets but not suited to Japan.     5.1.3    In the event that CYTOVIA shall allege that BIOCHEM is failing to use commercially reasonable efforts in a Major Country as provided in Section 5.1.2 above, CYTOVIA shall notify BIOCHEM in writing. BIOCHEM shall thereafter have a period of six (6) months in which to remedy the deficiency claimed by CYTOVIA or if such deficiency cannot be remedied within six (6) months, to commence and continue good faith efforts to remedy such deficiency and remedy such deficiency within a reasonable period thereafter. If following such period, CYTOVIA claims that such deficiency has not been remedied, then CYTOVIA may submit such matter to arbitration pursuant to Section 15.5 for a determination of whether BIOCHEM is using commercially reasonable efforts provided herein. In the event that the arbitrators determine that BIOCHEM is not using such commercially reasonable efforts in a Major Country, then the arbitrators shall require each party to submit a development and/or marketing plan to remedy such deficiency in such Major Country and the arbitrators shall choose which of the two (2) plans is most reasonable and BIOCHEM shall implement such plan. This Section  5.1.3 shall not apply in the event that a discontinued Product has been returned to CYTOVIA pursuant to Section 6.11. ARTICLE 6 LICENSE PAYMENTS, CLINICAL TRIAL AND REGULATORY APPROVAL MILESTONES; ROYALTIES AND REPORTS     6.1    License Payments. BIOCHEM shall make the following payments to CYTOVIA in consideration of the exclusive license granted under this Agreement:     (a)    Upon the execution of this Agreement, BIOCHEM shall make a payment of [***] to CYTOVIA; and     (b)    In addition, BIOCHEM shall make four (4) payments to CYTOVIA of [***], the first upon the execution of the Agreement and the subsequent three (3) payments by the end of the three (3) calendar quarters after the calendar quarter in which the Effective Date shall occur, as well as four (4) further payments of [***] for the subsequent four (4) calendar quarters, for a total of [***].     6.2    Clinical Trial, Regulatory Approval and Commercialization Milestone Payments. BIOCHEM shall make payments to CYTOVIA in U.S. dollars as set forth within the table below within thirty (30) days after the achievement of each of the respective clinical trial, regulatory approval, and commercialization milestones, provided that, (i) only two (2) sets of milestones shall ever be payable notwithstanding the total number of Products developed or indications pursued or approved (which sets of milestones depend on the order in which Products shall be developed and approved and could be for either (a) a first and a second oncology Product, (b) a first oncology Product and a non-oncology indication for the same Product, or (c) a first oncology Product and a second non-oncology Product); (ii) in the event that a Product shall be discontinued after any milestone shall have been paid, such milestone shall be credited against the milestone due for any Product subsequently pursued; and (iii) each milestone under each of the columns, labeled (A), (B) and (C), in the table below shall be due once only. In the event that a subsequent milestone shall be triggered where a prior milestone has not been triggered (for example, Phase III trials shall be initiated without prior initiation of Phase II trials), then both milestones shall be payable upon the happening of the subsequent milestone. *Confidential Treatment Requested -------------------------------------------------------------------------------- Milestone --------------------------------------------------------------------------------   (A) First Product for Oncology related Indication --------------------------------------------------------------------------------   (B) Non-Oncology Indication for Product already approved or being developed for an Oncology related Indication --------------------------------------------------------------------------------   (C) Second Oncology Product for new Non-Oncology Product -------------------------------------------------------------------------------- (1) CD Designation   $[***] million   Not Applicable   Not Applicable (2) First dosing of the first human subject   $[***] million   Not Applicable   Not Applicable (3) Initiation of Phase II Clinical Trials   $[***] million   $[***] million   $[***] million (4) Initiation of Phase III Clinical Trials   $[***] million   $[***] million   $[***] million (5) First NDA filing for a Product in any Major Country   $[***] million   $[***] million   $[***] million (6) First commercial sale of a Product in any Major Country   $[***] million   $[***] million   $[***] million Total   $[***] million   $[***] million   $[***] million With respect to milestones (5) and (6) above only, in the event that the Product shall not be covered by a Valid Patent Claim in one or more selected Major Countries as provided in Exhibit D ("Selected Major Countries") at the time that such milestone(s) shall be triggered, or if such a Valid Patent Claim is predicated only upon a pending patent application which does not mature into an issued patent within five (5) years of filing (or five (5) years of first publication in those countries where the relevant governmental agency publishes such applications), then the milestone(s) shall be reduced, or refunded to BIOCHEM (or in lieu of such refund, BIOCHEM may set off such amounts against any payments owed by BIOCHEM to CYTOVIA) as provided in Exhibit D. In the event that a Valid Patent Claim covering the Product shall subsequently issue in a Selected Major Country where the milestone had previously been paid at a reduced level, or a refund had been made by CYTOVIA, then BIOCHEM shall pay to CYTOVIA the amount of the reduction in the milestone for the country in question, or the refund, together with interest on such amount from the date when the milestone was first paid at a reduced level or the date of the refund, at the prime or other equivalent rate of Citibank for the last day of each calendar quarter, or the highest interest rate under applicable law, whichever is lower, until the date of payment by BIOCHEM.     6.3    Royalties. In all countries of the Territory in which CYTOVIA holds a Valid Patent Claim that would, but for the licenses granted by CYTOVIA hereunder, be infringed by the manufacture, use or sale of the Product as commercialized by BIOCHEM (so long as any claim covering manufacture excludes others from selling the Product as commercialized by BIOCHEM in the country in question), BIOCHEM shall pay to CYTOVIA (subject to the remaining terms and conditions of this Section 6.3) following Launch a royalty of [***] percent ([***]%) of Net Sales of the Product for so long as such a Valid Patent Claim shall exist in such country. In all other countries, BIOCHEM shall pay to CYTOVIA a royalty of [***] percent ([***]%) of Net Sales of the Product, for a maximum of [***] years following Launch. In addition, such [***] percent ([***]%) royalty shall also apply with respect to a Product for the remainder of such [***] year period in any country where such a Valid Patent Claim covering manufacture, use or sale of such Product as commercialized by BIOCHEM has expired prior to such [***] year period. *Confidential Treatment Requested --------------------------------------------------------------------------------     6.3.1    However, if the Valid Patent Claim arises from a pending patent application then payments at the [***] percent ([***]%) royalty level shall only be required for a period of [***] years from first publication, or, in those countries where governmental agencies do not publish patent applications, for a period of [***] years from filing. In the event that the said patent application does not mature into an issued patent within this [***] year period of time, such a patent claim will no longer be deemed a Valid Patent Claim and CYTOVIA shall refund (or in lieu of such refund, BIOCHEM may set off such amount against any payments owed by BIOCHEM to CYTOVIA) one half of any corresponding payments made at the [***] percent ([***]%) royalty rate so as to yield the rate of [***] ([***]%) of Net Sales of Product set forth above for countries where CYTOVIA does not possess a Valid Patent Claim. In the event that CYTOVIA opts for a set off rather than an immediate refund of amounts owed to BIOCHEM, the amount owed shall accrue interest from the date due, and thus the set off shall also include such interest to be computed for such unpaid amount on the last day of each calendar quarter (accruing quarterly) at the prime or other equivalent rate of Citibank for the last day of the calendar quarter, or the highest interest rate permissible under applicable law, whichever is lower. In the event that a Valid Patent Claim covering the Product as commercialized by BIOCHEM shall issue in a country where royalty was paid at the [***] percent ([***]%) level as a result of pendency of a patent application for more than the [***] year as provided herein, then BIOCHEM shall pay to CYTOVIA (taking into account any refunds made by CYTOVIA) the difference between the royalty payable at the [***] percent ([***]%) level and that paid at the [***] percent ([***]%) level for the period of the reduced royalty payments until issue of the Patent, together with interest on such amount at the prime or other equivalent rate of Citibank on the last day of each calendar quarter, or the highest interest rate permissible under applicable law, whichever is lower, until payment of such amount by BIOCHEM.     6.4    Sublicenses. In the event that BIOCHEM or any of its Affiliates sublicenses to a Third Party its rights under the licenses granted by CYTOVIA, BIOCHEM shall pay CYTOVIA (i) [***] percent ([***]%) of the Sublicensing Fees, and (ii) [***] percent ([***]%) of the royalties received from such Sublicensee based on sales of Product by such Sublicensee, in each case after deducting any royalties or other payments due to Third Parties under bona fide licensing arrangements that are reasonably necessary for the manufacture, use or sale of Products; provided, however, that in no event shall the amounts payable to CYTOVIA under this Section 6.5 be less than an amount equal to [***] percent ([***]%) or greater than [***] percent ([***]%) of the net sales of Products by such Sublicensee (where "net sales" shall be calculated in the same manner as Net Sales under this Agreement).     6.5    Payments and Royalty Report. Payments due to CYTOVIA pursuant to Sections 6.3 and 6.4 shall be paid within forty five (45) days following the end of each calendar quarter in which BIOCHEM or any of its Affiliate makes Net Sales or receives payments from a sublicensee. All such payments shall be accompanied by a report which sets forth for the preceding calendar quarter the following information:     (a)    total Net Sales of Products sold in the Territory during such period;     (b)    deductions applicable to determining the Net Sales;     (c)    the exchange rate(s) used to determine amounts owing hereunder;     (d)    the amount of royalties due pursuant to Section 6.3; and     (e)    Sublicensing Fees.     If no payments are due to CYTOVIA for any reporting period following Launch, the written report shall so state. *Confidential Treatment Requested --------------------------------------------------------------------------------     6.6    Currency of Payment. All payments to be made under this Agreement shall be made in U.S. dollars. Net Sales outside the United States shall be first determined in the currency in which they are earned and shall then be converted into an amount in U.S. dollars using the noon buying rate as published in the Wall Street Journal for the last day of the calendar quarter for which such payment is being determined.     6.7    BIOCHEM Accounting Obligations and CYTOVIA Audit Rights. BIOCHEM shall keep accurate records for a period of at least five (5) years (or such longer period as may correspond to BIOCHEM's internal records retention policy) for each reporting period during the term of this Agreement and in which sales of Products occur showing sales of Products in sufficient detail to enable the reports provided under Section 6.5 to be verified. CYTOVIA shall have the right, for a period of three (3) years after receiving any report or statement with respect to Net Sales to appoint an independent certified public accountant to inspect the relevant records of BIOCHEM to verify such report or statement. BIOCHEM shall make its records available for inspection by such independent certified public accountant during regular business hours at such place or places where such records are customarily kept, upon reasonable notice, solely to verify the accuracy of the reports and payments. Such inspection right shall not be exercised more than once in any calendar year. Any examination by an independent accounting firm under this Section is to be made at the expense of CYTOVIA, except that if the results of the audit reveal that BIOCHEM has underpaid CYTOVIA by ten percent (10%) or more in any calendar year, then the audit fees shall be paid by BIOCHEM. Any such discrepancies shall be promptly corrected by payment by BIOCHEM to CYTOVIA. The accounting firm shall execute a confidentiality agreement reasonably acceptable to BIOCHEM prior to any such audit limiting the information to be provided to CYTOVIA to the numerical summary of royalties due and paid and prohibiting any disclosure to Third Parties.     6.8    Late Payments. In the event that any payment, including, without limitation, royalty and milestone payments and payments with respect to Sublicensing Fees, due hereunder is not made when due, the payment shall accrue interest from the date due, which interest shall be computed for such unpaid amounts on the last day of each calendar quarter (accruing quarterly) at the prime or other equivalent rate of Citibank for the last day of the calendar quarter plus two percent (2%), or the highest interest rate permissible under applicable law, whichever is lower. The payment of such interest shall not limit CYTOVIA from exercising any other rights it may have as a consequence of the lateness of any payment.     6.9    Exchange Control. If at any time legal restrictions prevent the prompt remittance of part or all of royalties owed by BIOCHEM to CYTOVIA hereunder with respect to any country in the world where the Product is sold, payment shall be made through any lawful means or methods that may be available as BIOCHEM shall reasonably determine.     6.10    Withholding Taxes. BIOCHEM or its Affiliates shall be entitled to deduct from its payments to CYTOVIA the amount of any withholding taxes required to be withheld by BIOCHEM or its Affiliates to the extent BIOCHEM or its Affiliates pay to the appropriate governmental authority on behalf of CYTOVIA such taxes. BIOCHEM shall deliver to CYTOVIA, upon CYTOVIA's request, proof of payment of all such taxes and the appropriate documentation which is necessary to obtain a tax credit, to the extent such tax credit can be obtained. Each Party shall provide assistance to the other Party in seeking any benefits available to such Party with respect to government tax withholdings by any relevant law or double tax treaty.     6.11    Discontinued Product. In the event that BIOCHEM shall in its discretion, discontinue development of a Product that has been designated a CD by BIOCHEM, then upon request by CYTOVIA, and provided that such discontinued Product is not similar to or otherwise competitive with a Product still under development by BIOCHEM, the Parties shall negotiate in good faith terms for the return of rights in such Product to CYTOVIA, which shall include (i) provision to CYTOVIA of data relating to such Product developed by BIOCHEM; (ii) payment by CYTOVIA to BIOCHEM of an upfront amount equal to fifty percent (50%) of all milestone payments made prior to discontinuation of the Product in question; and (iii) payment by CYTOVIA to BIOCHEM of a royalty on Net Sales of -------------------------------------------------------------------------------- the discontinued Product equal to [***] percent [***] in the event that the Product is discontinued after the start of Phase I Clinical Trials but before the start of Phase II Clinical Trials, [***] percent [***] if the Product is discontinued after the start of Phase II Clinical Trials but prior to the start of Phase III Clinical Trials and [***] percent [***] if the Product is discontinued after the start of Phase III Clinical Trials. The terms of such an agreement between BIOCHEM and CYTOVIA shall be based on the applicable provisions of this Agreement to the extent applicable. No further milestone or royalty payments shall be due under such agreement with respect to a discontinued Product returned to CYTOVIA, notwithstanding BIOCHEM's intellectual property rights with respect to such Product. ARTICLE 7 REPRESENTATIONS AND WARRANTIES     7.1    CYTOVIA's Representations and Warranties. CYTOVIA hereby represents and warrants the following to BIOCHEM:     7.1.1    CYTOVIA is (i) a company duly organized, validly existing, and in good standing under the laws of the State of Delaware with its principal place of business as indicated in the first paragraph of this Agreement; (ii) is duly qualified as a corporation and in good standing under the laws of each jurisdiction where its ownership or lease of property or the conduct of its business requires such qualification, where the failure to be so qualified would have a material adverse effect on its financial condition or its ability to perform its obligations hereunder; (iii) has the requisite corporate power and authority and the legal right to conduct its business as now conducted and hereafter contemplated to be conducted; (iv) has all necessary licenses, permits, consents, or approvals from or by, and has made all necessary notices to, all governmental authorities having jurisdiction, to the extent required for such ownership and operation; and (v) is in compliance with its certificate of incorporation and by-laws.     7.1.2    The execution, delivery and performance of this Agreement by CYTOVIA and all documents to be delivered by CYTOVIA hereunder: (i) are within the corporate power of CYTOVIA; (ii) have been duly authorized by all necessary or proper corporate action; (iii) are not in contravention of any provision of the certificate of incorporation or by-laws of CYTOVIA; (iv) will not violate any law or regulation or any order or decree of any court of governmental instrumentality; (v) will not violate the terms of any indenture, mortgage, deed of trust, lease, agreement, or other instrument to which CYTOVIA is a party or by which CYTOVIA or any of its property is bound; and (vi) do not require any filing or registration with or the consent or approval of, any governmental body, agency, authority or any other Person, which has not been made or obtained previously.     7.1.3    This Agreement has been duly executed and delivered by CYTOVIA and constitutes a legal, valid and binding obligation of CYTOVIA, enforceable against CYTOVIA in accordance with its terms.     7.1.4    As of the Effective Date, CYTOVIA is the sole owner of the entire right, title and interest in and to the CYTOVIA Patent Rights and the CYTOVIA Know-How, and no other Person (including any government) has any license, claim or other right or interest in or to the CYTOVIA Patent Rights or the CYTOVIA Know-How and the CYTOVIA Patent Rights and the CYTOVIA Know-How may be licensed hereunder without payment of any royalty, fee or incurring any other obligation to any other Person (including any government) except for payments by CYTOVIA to Aurora Biosciences Corporation ("AURORA") as provided on Exhibit E.     7.1.5    To the knowledge of CYTOVIA, as of the Effective Date, the claims included in the CYTOVIA Patent Rights are valid and enforceable in each Major Country.     7.1.6     CYTOVIA has diligently conducted a due diligence review and investigation of Third Party intellectual property rights and prior art as part of CYTOVIA's preparation, prosecution or acquisition of the CYTOVIA Patent Rights, and has reviewed all relevant information and prior *  Confidential Treatment Requested -------------------------------------------------------------------------------- art obtained or derived from such due diligence review and investigation and has disclosed to BIOCHEM all prior art and other information obtained or derived from such due diligence review and investigation as of the Effective Date that has been or will be required to be disclosed to the U.S. Patent and Trademark Office under applicable laws and regulations.     7.1.7    The making, using, selling, offering for sale or importing of those Products identified by CYTOVIA as of the Effective Date will not misappropriate any trade secret or confidential information of any Third Party, and, except with respect to payments by CYTOVIA to AURORA as provided on Exhibit E, such Products may be made, used sold or offered for sale or imported hereunder without payment of any royalty, fee or incurring any other obligation to any other Person (including any government), except that with respect to patents of Third Parties, such representation and warranty is given only to the knowledge of CYTOVIA.     7.1.8    As of the Effective Date, CYTOVIA is not aware of any infringement of the CYTOVIA Patent Rights, or any misappropriation of the CYTOVIA Know-How by any Third Party.     7.1.9    Except as provided on Exhibit E, all of the research and development work performed in connection with any of the CYTOVIA Know-How prior to the Effective Date was performed solely by CYTOVIA through its employees or through the consultants listed on Exhibit E (the "CYTOVIA Consultants") and not with any other Third Parties, and was performed in accordance with applicable law and in compliance with all applicable regulatory requirements, and all such rights have been properly assigned (or licensed if specifically indicated as such on Exhibit E) to CYTOVIA including any and all rights of the CYTOVIA Consultants.     7.1.10    As of the Effective Date, there are no judicial, arbitral, regulatory or administrative proceedings or investigations, claims, actions or suits relating to the CYTOVIA Patent Rights, the CYTOVIA Know-How or any Product pending against CYTOVIA or its Affiliates in any court or by or before any governmental body or agency including, product liability or compliance with good manufacturing practices or state or federal food and drug laws and, to the best of CYTOVIA's knowledge, no such judicial, arbitral, regulatory or administrative proceedings or investigations, actions or suits have been threatened in writing against CYTOVIA, its Affiliates inside the Territory or outside the Territory, or orally to any of their respective officers or directors.     7.1.11    CYTOVIA follows reasonable commercial practices common in the industry to protect its proprietary and confidential information, including requiring its employees, consultants and agents to be bound in writing by obligations of confidentiality and non-disclosure, and requiring its employees, consultants and agents to assign to it any and all inventions and discoveries discovered by such employees, consultants and/or agents made within the scope of, and during their employment, and only disclosing proprietary and confidential information to Third Parties pursuant to written confidentiality and non-disclosure agreements.     7.1.12    CYTOVIA has not, up through and including the Effective Date, omitted to furnish BIOCHEM with any information in its possession or control or of which it is aware, concerning (a) the CYTOVIA Patent Rights, (b) the CYTOVIA Know-How, (c) Products, or (d) the activities contemplated by this Agreement, including the development and commercialization of the Products, which would be material to BIOCHEM's decision to enter into this Agreement and to undertake the commitments and obligations set forth herein.     7.2    BIOCHEM's Representations and Warranties. BIOCHEM hereby represents and warrants the following to CYTOVIA:     7.2.1    BIOCHEM (i) is a corporation duly organized, validly existing, and in good standing under the laws of Canada, with its principal place of business as indicated in the first paragraph of this Agreement; (ii) is duly qualified as a corporation and in good standing under the laws of each jurisdiction where its ownership or lease of property or the conduct of its business requires such qualification, where the failure to be so qualified would have a material adverse effect on the financial condition of BIOCHEM or the ability of BIOCHEM to perform its obligations -------------------------------------------------------------------------------- hereunder; (iii) has the requisite corporate power and authority and the legal right to conduct its business as now conducted and hereafter contemplated to be conducted; (iv) has all necessary licenses, permits, consents, or approvals from or by, and has made all necessary notices to, all governmental authorities having jurisdiction, to the extent required for such ownership and operation; and (v) is in compliance with its certificate of incorporation and bylaws.     7.2.2    The execution, delivery and performance of this Agreement by BIOCHEM and all instruments and documents to be delivered by BIOCHEM hereunder: (i) are within the corporate power of BIOCHEM; (ii) have been duly authorized by all necessary or proper corporate action; (iii) are not in contravention of any provision of the certificate of incorporation or bylaws of BIOCHEM; (iv) will not violate any law or regulation or any order or decree of any court of governmental instrumentality; (v) will not violate the terms of any indenture, mortgage, deed of trust, lease, agreement, or other instrument to which BIOCHEM is a party or by which BIOCHEM or any of its property is bound, which violation would have a material adverse effect on the financial condition of BIOCHEM or on the ability of BIOCHEM to perform its obligations hereunder; and (vi) do not require any filing or registration with or the consent or approval of, any governmental body, agency, authority or any other person.     7.2.3    This Agreement has been duly executed and delivered by BIOCHEM and constitutes a legal, valid and binding obligation of BIOCHEM, enforceable against BIOCHEM in accordance with its terms, except as such enforceability may be limited by applicable insolvency and other laws affecting creditors' rights generally or by the availability of equitable remedies.     7.2.4    BIOCHEM follows reasonable commercial practices common in the industry to protect its proprietary and confidential information, including requiring its employees, consultants and agents to be bound in writing by obligations of confidentiality and non-disclosure and requiring its employees, consultants and agents to assign to it any and all inventions and discoveries discovered by such employees, consultants and/or agents made within the scope of, and during their employment, and only disclosing proprietary and confidential information to the Third Parties pursuant to written confidentiality and non-disclosure agreements. ARTICLE 8 INDEMNIFICATION     8.1    Indemnification. Each Party (the "Indemnifying Party") agrees to indemnify and hold forever harmless the other Party and its Affiliates and each of their agents, directors, officers and employees from and against any loss, damage, action, proceeding, cost, expense or liability (including reasonable attorneys' fees) (collectively, "Loss") arising from or in connection with: (a) the breach or inaccuracy of any representations or warranties made by the Indemnifying Party in this Agreement; (b) Third Party product liability claims related to the development, manufacture, packaging, labeling, handling, storage, transportation, use, distribution, promotion, marketing and sale of any product by the Indemnifying Party or any of its Affiliates or any of their distributors, sublicensees or agents.     8.2    Procedure. The indemnities set forth in this Article 8 are subject to the condition that the Party seeking indemnity shall forthwith notify the Indemnifying Party on being notified or otherwise made aware of a suit, action or claim and that the Indemnifying Party defend and control any proceedings with the other Party being permitted to participate at its own expense (unless there shall be a conflict of interest which would prevent representation by joint counsel, in which event the Indemnifying Party shall pay for the other Party's counsel); provided that the Indemnifying Party may not settle the suit or otherwise consent to any judgment in such suit without the written consent of the Indemnified Party (such consent not to be unreasonably withheld). The Parties shall cooperate in the defense of any Third Party claim.     8.3    Payment. Without in any way limiting CYTOVIA's indemnification obligations pursuant to Article 8 or any other remedies BIOCHEM may have, if CYTOVIA shall not fully compensate BIOCHEM as required pursuant to its indemnification obligations pursuant to this Article 8, until such -------------------------------------------------------------------------------- time as CYTOVIA shall do so, BIOCHEM shall have the right to credit the remaining balance owed to BIOCHEM against the royalties and other payments payable to CYTOVIA under this Agreement, and if this Agreement terminates or expires prior to CYTOVIA fully compensating BIOCHEM or CYTOVIA is no longer receiving royalties or other payments under this Agreement, such remaining balances owed to BIOCHEM pursuant to this Article 8 shall continue to be due and payable in full. Without in any way limiting CYTOVIA's indemnification obligations pursuant to this Article 8 or any other remedies BIOCHEM may have, if CYTOVIA shall not fully compensate BIOCHEM as required pursuant to its indemnification obligations pursuant to this Article 8, CYTOVIA shall pay BIOCHEM interest to be computed for such unpaid amount on the last day of each calendar quarter (accruing quarterly) at the prime or other equivalent rate of Citibank for the last day of the calendar quarter plus two percent (2%), or the highest interest rate permissible under applicable law, whichever is lower.     8.4    Disclaimer Concerning Technology. Except as expressly provided in Article 7 of this Agreement, THE TECHNOLOGY AND INTELLECTUAL PROPERTY RIGHTS PROVIDED BY EACH PARTY HEREUNDER ARE PROVIDED "AS IS," AND EACH PARTY EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION THE WARRANTIES OF DESIGN, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR ARISING FROM A COURSE OF DEALING, USAGE OR TRADE PRACTICES, IN ALL CASES WITH RESPECT THERETO. Except as expressly provided in Article 7, each Party disclaims any implied warranty as to the noninfringement of the intellectual property rights of third parties. Without limiting the generality of the foregoing, each Party expressly does not warrant (i) the success of any study or test commenced under the Research Program or (ii) the safety or usefulness for any purpose of the technology it provides hereunder. None of the foregoing shall limit each Party's obligations to indemnify pursuant to Section 8.1.     8.5    DISCLAIMER. EXCEPT AS PROVIDED IN SECTION 8.1, NEITHER PARTY SHALL BE LIABLE TO THE OTHER UNDER THIS AGREEMENT FOR ANY SPECIAL, CONSEQUENTIAL OR INCIDENTAL DAMAGES, INCLUDING ANY LOSS OF PROFITS OR LOSS OF ANY BUSINESS OPPORTUNITY. ARTICLE 9 NON-DISCLOSURE; PRESS RELEASES AND PUBLICATIONS     9.1    Nondisclosure.     9.1.1    During the term of this Agreement and for seven (7) years thereafter without regard to the means of termination, neither BIOCHEM nor CYTOVIA shall use, for any purpose other than the purpose of this Agreement, reveal or disclose to any Third Party information and materials disclosed by the other Party (whether prior to or during the term of this Agreement), and marked as confidential or which the receiving Party knows or has reason to know are or contain trade secrets or other proprietary information of the other Party, including information provided by a Party to another Party prior to the Effective Date ("Confidential Information") without first obtaining the written consent of the other Party, except (i) as may be required for securing Regulatory Approval, including pricing approval in the Territory or as may otherwise be required to be disclosed to an Agency in the Territory; or (ii) as required by law or court order (subject to seeking confidential treatment where available and prior notification to the disclosing Party); or (iii) as required in connection with any filings made with, or by the disclosure policies of a major stock exchange (subject to seeking confidential treatment where available; or (iv) in the case of BIOCHEM, to provide Confidential Information of CYTOVIA to BIOCHEM's Affiliates and BIOCHEM's and its Affiliates' sublicensees, distributors and partners (and to their potential sublicensees, distributors and partners) for use consistent with the purposes and terms of this Agreement. This confidentiality obligation shall not (a) apply to such information which is or becomes a matter of public knowledge; (b) is already in the possession of the receiving Party; (c) is disclosed non-confidentially to the receiving Party by a Third Party having the right to do so; (d) is subsequently and independently developed by employees of the receiving Party or Affiliates thereof -------------------------------------------------------------------------------- who had no knowledge of the Confidential Information disclosed. The Parties shall take reasonable measures to assure that no unauthorized use or disclosure is made by others to whom access to such information is granted.     9.1.2    CYTOVIA and BIOCHEM agree to limit the disclosure of any Confidential Information received hereunder to such of its employees and consultants and its Affiliates and with respect to BIOCHEM, BIOCHEM's and its Affiliates' sublicensees, distributors and partners (and to their potential sublicensees, distributors and partners) as are necessary to carry out the provisions of this Agreement and who are likewise bound by written obligations of confidentiality which are comparable to, or more stringent than, the provisions of Section 9.1.     9.2    Press Releases and Public Announcements. It is understood that either party may, subject to the terms and conditions of this Section, issue a press release announcing the execution of this Agreement as well as subsequent press releases relating to the Agreement or activities thereunder. The Parties agree to consult with each other reasonably and in good faith with respect to the text and timing of such press releases prior to the issuance thereof. Neither Party may issue a press release relating to this Agreement or its execution without the prior written consent of the other Party, provided that a Party may not unreasonably withhold consent to such releases. Either Party may issue such press releases (after providing three weeks advance written notice as to text and timing of such release) as it determines, based on advice of counsel, are reasonably necessary to comply with laws or regulations or for appropriate market disclosure. In addition, following the initial press release announcing this Agreement, either Party shall be free to disclose, without the other Party's prior written consent, the existence of this Agreement, the identity of the other Party and those terms of the Agreement which have already been publicly disclosed in accordance herewith. BIOCHEM acknowledges and agrees that all references to CYTOVIA and its Affiliates in any press release or other public announcement will refer to Maxim Pharmaceuticals, Inc., CYTOVIA's parent.     9.3    Termination. The Parties agree that if this Agreement is terminated, neither Party shall disclose to any Third Party any reason for not proceeding without the express written consent of the other Party, and the Parties shall agree on statements for public disclosure, such agreement not to be unreasonably withheld or delayed.     9.4    Publications. CYTOVIA shall not make any publications or presentations relating to the Products or the Research Program without BIOCHEM's prior written consent, provided that CYTOVIA shall not be prevented from disclosing in presentations or publications after the Effective Date, information relating to the Products disclosed on a non-confidential basis in presentations or publications prior to the Effective Date (which information CYTOVIA represents and warrants did not contain any Product structures). ARTICLE 10 TRADEMARKS     10.1    BIOCHEM Trademarks. BIOCHEM shall have the right to select and shall own all trademarks, service marks, designs and trade dress used by BIOCHEM or its Affiliates or their distributors or sublicensees in connection with the Products in each country of the Territory. ARTICLE 11 OWNERSHIP AND RIGHTS; PATENT PROSECUTION AND MAINTENANCE     11.1    Invention Ownership and Rights.     11.1.1    Inventorship shall be determined by reference to United States laws pertaining to inventorship. Subject to the last sentence of this Section 11.1.1, if an invention is made in connection with the Research Program or otherwise under this Agreement by one (1) or more employees or consultants of each Party, it shall be jointly owned and if one or more claims included in an issued Patent or pending Patent application, which is filed in a patent office in the -------------------------------------------------------------------------------- Territory, claim such an invention, such claims shall be jointly owned (such jointly owned patent claims, excluding Dominated Patent Rights as defined below, hereafter designated as "Joint Patent Rights"). If an invention is made in connection with the Research Program or otherwise under this Agreement solely by an employee or consultant of a Party, it shall be solely owned by such Party, and any Patent filed claiming such solely owned invention shall also be solely owned by such Party. Each inventor of any invention developed in connection with the Research Program shall assign his/her interest in such invention to his/her respective Party employer, as the case may be, and such rights shall therefore vest in the respective Party employer to whom the inventor assigns his/her rights. Notwithstanding the foregoing, in the event that one (1) or more employees or consultants of each Party shall make an invention that is a type of Product, or a method of use of a Product, or a caspase screen of a type developed by CYTOVIA, or in the event that employees or consultants of BIOCHEM shall make such an invention, in each case under the Research Program or otherwise under this Agreement, such invention shall be owned by CYTOVIA and if one or more claims included in an issued Patent or pending Patent application, which is filed in a patent office in the Territory, claim such an invention (a type of Product or method of use of a Product or a caspase screen of a type developed by CYTOVIA), such claims shall be owned by CYTOVIA ("Dominated Patent Rights") (Dominated Patent Rights invented solely by employees or consultants of BIOCHEM are referred to herein as "Dominated BIOCHEM Patent Rights").     11.1.2    BIOCHEM shall have a fully-paid, irrevocable right to use or grant any rights under or otherwise commercialize any Joint Patent Rights acquired or developed in connection with the Research Program or otherwise under this Agreement by CYTOVIA and BIOCHEM and BIOCHEM may disclose any associated Technical Information to any Third Party, all without obtaining the prior written consent of CYTOVIA and without any accounting obligations. CYTOVIA shall not commercialize any Joint Patent Rights or Dominated Patent Rights or associated Technical Information, either itself or through others, without prior written agreement with BIOCHEM on compensation to BIOCHEM for such commercialization. Notwithstanding the foregoing, in the event that such Joint Patent Rights or Dominated Patent Rights claim caspase screens, CYTOVIA shall have a fully-paid, irrevocable right to use or grant any rights under or otherwise commercialize any such Joint Patent Rights or Dominated Patent Rights acquired or developed in connection with the Research Program or otherwise under this Agreement by CYTOVIA and BIOCHEM and CYTOVIA may disclose any associated Technical Information to any Third Party, all without obtaining the prior written consent of BIOCHEM and without any accounting obligations.     11.1.3    Each Party shall use reasonable efforts to advise the other of any patentable invention relating to the Products or otherwise arising out of the Research Program. As soon as one of the Parties concludes that it wishes to file a patent application covering any such invention, it shall immediately inform the other Party thereof. For this purpose, such Party will provide the other Party with the draft application, preliminary determination of inventors and scope of claims as early as possible. CYTOVIA shall be responsible for diligently filing, prosecuting and maintaining all CYTOVIA Patent Rights in the Territory related to the Products. CYTOVIA shall consult with BIOCHEM as to where and when to file patent applications which are included in such CYTOVIA Patent Rights, as well as concerning the preparation, filing, prosecution, and maintenance of such CYTOVIA Patent Rights. BIOCHEM, in collaboration with CYTOVIA, shall diligently prosecute and maintain all Joint Patent Rights. BIOCHEM shall consult with CYTOVIA as to where and when to file patent applications which are included in the Joint Patent Rights. If either Party, prior or subsequent to filing such patent applications elects not to file or prosecute such patent applications or maintain any ensuing patents, it shall notify the other Party within a reasonable period of time prior to allowing such patents to lapse or become abandoned or unenforceable, and the other Party may prepare, file, prosecute, and maintain such patents. Costs of prosecuting and maintaining CYTOVIA Patent Rights and Joint Patent Rights shall be shared such that seventy-five percent (75%) of such cost will be borne by BIOCHEM, while CYTOVIA shall bear the remaining twenty-five percent (25%) of the cost. --------------------------------------------------------------------------------     11.1.4    Each Party shall provide a draft to the other Party of each application it shall intend to file pursuant to Section  11.1.3. Each Party shall also advise the other Party within ten (10) days of receiving any substantial action or development in the prosecution of such patent applications, in particular those involving into which countries to continue prosecution, the question of the scope of, the issuance of, the rejection of, an interference involving, or an opposition to any such patent application or resulting patent. CYTOVIA shall not file any application or take any other action in prosecution with respect to the CYTOVIA Patent Rights licensed hereunder without consulting with BIOCHEM, provided that in the event of a disagreement concerning a patent prosecution matter, interference or opposition, BIOCHEM's directions shall be followed by CYTOVIA. CYTOVIA shall not cancel any claim in a pending patent application within the CYTOVIA Patent Rights without notifying BIOCHEM. If BIOCHEM wishes the canceled claims to remain, it shall provide reasons to CYTOVIA why such claim should not be canceled and the parties shall discuss in good faith a resolution of such matter.     11.1.5    At the request of the Party performing the prosecution of any patent application under Section 11.1.3, the other Party shall cooperate, in all reasonable ways, in connection with the prosecution of all such patent applications. Each Party shall make available to the other or its respective authorized attorneys, agents or representatives such of its employees as the other Party in its reasonable judgment deems necessary in order to assist such other Party with the prosecution of such patents. Each Party shall sign or use its best efforts to have signed at no charge to the other Party all legal documents necessary in connection with such prosecution and maintenance.     11.1.6    The Party performing the prosecution of any patent application under Section 11.1.3 shall provide the other Party with a report no less frequently than once per year listing all such patents and patent applications, identifying them by country and patent or application number, and briefly describing the status thereof. ARTICLE 12 INFRINGEMENT OF THIRD PARTY PATENTS; ENFORCEMENT     12.1    Enforcement of CYTOVIA Patent Rights and Joint Patent Rights.     12.1.1    Upon learning of any infringement of CYTOVIA Patent Rights relating to any Product or any infringement of any Joint Patent Rights by a Third Party in the Territory, CYTOVIA or BIOCHEM, as the case may be, shall promptly provide notice to the other Party in writing of the fact and shall supply the other Party with all evidence possessed by the notifying Party pertaining to said infringement.     12.1.2    BIOCHEM shall have the first right, but not the obligation, to seek to abate the infringement, or to file suit against any such infringing party, at its sole expense, following consultation with CYTOVIA. CYTOVIA shall fully cooperate with BIOCHEM, at BIOCHEM's reasonable expense, in any action brought by BIOCHEM, including by being joined as a party. If BIOCHEM does not, within one hundred twenty (120) days of receipt of such notice, take steps to abate the infringement or file suit to enforce the CYTOVIA Patent Rights or Joint Patent Rights against such infringing party in a country in the Territory, CYTOVIA shall have the right (but not the obligation) to take action to enforce the CYTOVIA Patent Rights or Joint Patent Rights against such infringing party in such country.     12.1.3    The Party controlling any such action may not settle or consent to an adverse judgement without the express written consent of the non-controlling Party (such consent not to be unreasonably withheld). All monies recovered upon the final judgment or settlement of any such action, shall be used first, to reimburse each of BIOCHEM and CYTOVIA, on a pro rata basis for its out-of-pocket expenses relating to the action, second, any remaining balance that represents compensation for lost sales, a reasonable royalty or lost profits, shall be retained by or paid to BIOCHEM subject to payment of a royalty to CYTOVIA on such balance as if it were Net Sales of Products, and third, any remaining amount that represents additional damages (for example, -------------------------------------------------------------------------------- enhanced damages) shall be shared by the Parties on a pro-rata basis based upon the ratio of costs and expenses incurred by each Party respectively in connection with such action.     12.2    Third Party Royalties or Other Payments; Reduction in Royalties.     12.2.1    In the event that a Third Party shall make any claim or bring any suit or other proceeding against BIOCHEM or its sublicensees or customers, for infringement or misappropriation of any intellectual property rights with respect to any Product, BIOCHEM shall have the right to defend and control the defense of such claim, suit or other proceeding as well as to initiate and control any counterclaim or other similar action. CYTOVIA shall fully cooperate with BIOCHEM, at BIOCHEM's reasonable expense, in defense of such claim, suit or other proceeding, including by being joined as a party. The provisions of Section 12.1.3 shall apply to any proceeding covered by this Section  12.2.1, except that the negotiation of any license from the Third Party shall be subject to Section 12.2.2. BIOCHEM shall have the right to credit as incurred the amount of all Loss arising out of any claim, suit or other proceeding against royalties and/or other payments payable to CYTOVIA under this Agreement.     12.2.2    If BIOCHEM in its sole, reasonable business judgment determines or the Parties mutually agree that it is necessary or desirable to seek a license or immunity from suit from any Third Party in order for BIOCHEM to exercise its rights hereunder to develop, manufacture, commercialize, use or exploit Products in any country of the Territory, CYTOVIA shall have the obligation to obtain any such license or immunity from suit and the parties shall share equally as incurred in the amount of such royalties and other payments in such country to such Third Party applicable to BIOCHEM's activities under this Agreement. BIOCHEM shall be responsible for payment of such royalties and other payments, subject to the final sentence of this Section 12.2.2. BIOCHEM shall have the right, at BIOCHEM's option, to be the licensee of any license sought pursuant to this Section 12.2.2, and CYTOVIA shall consult with BIOCHEM in connection with obtaining, and the negotiation of the terms and conditions of any such license, and shall take into account BIOCHEM's comments related thereto and incorporate or act on such comments to the extent reasonable. If BIOCHEM notifies CYTOVIA that BIOCHEM does not want to be the licensee, CYTOVIA shall be the licensee. CYTOVIA shall obtain BIOCHEM's prior written consent (which consent shall not be unreasonably withheld) before entering into any license or other agreement pursuant to this Section. If CYTOVIA does not obtain such license or immunity from suit within ninety (90) days of the earlier of (i) BIOCHEM's, or the Parties mutual, determination to seek such license or immunity from suit, or (ii) the commencement of negotiations with such Third Party, BIOCHEM shall have the right (but not the obligation) to obtain such license or immunity from suit (and shall consult with CYTOVIA in connection with obtaining and negotiating of the terms and conditions of any such license), and the Parties shall share equally in the amount of such royalties and other payments in such country to such Third Party. BIOCHEM shall credit as incurred half the amount of any such royalties and other payments against royalties and other payments payable to CYTOVIA under this Agreement, including milestones, and in the event that the amount of such credit exceeds the amounts due to CYTOVIA in any quarter, BIOCHEM shall pay the excess, but may set off such excess against royalties and other payments payable to CYTOVIA hereunder in future quarters. ARTICLE 13 TERMINATION     13.1    Early Termination.     13.1.1    BIOCHEM shall have the right to terminate this Agreement for any reason upon one hundred eighty (180) days written notice to CYTOVIA.     13.1.2    If BIOCHEM commits a material breach of any material term or condition of this Agreement solely as a result of BIOCHEM's failure to pay CYTOVIA amounts owed to CYTOVIA (provided that neither the amount or the obligation to pay such amount is in dispute -------------------------------------------------------------------------------- between the Parties, and provided further that CYTOVIA is not in default of any payment obligations to BIOCHEM at such time), and BIOCHEM fails to cure such breach within thirty (30) days after receiving written notice of the breach from CYTOVIA, CYTOVIA shall have the right to terminate this Agreement upon written notice to BIOCHEM at the end of such thirty (30) day period for BIOCHEM's uncured breach. In the event of any dispute as to any amount payable to CYTOVIA, BIOCHEM shall pay the full amount not in dispute and the dispute regarding the remaining amount shall be submitted to arbitration pursuant to Section 15.5.     13.1.3    If either Party commits a material breach of any material term or condition of this Agreement (except as set forth in Section 5.1.3 and 13.1.2), the non-breaching Party may give the other Party written notice of the breach, and if the breach is not cured within ninety (90) days after receiving written notice of the breach, the non-breaching Party shall have the right to submit the matter to arbitration pursuant to Section 15.5 for resolution within thirty (30) days of the end of such ninety (90) day period by giving the other Party written notice requesting arbitration within such thirty (30) day period. The Parties shall continue to perform their obligations hereunder during the pendency of such arbitration, except to the extent mutually agreed otherwise by the Parties or except as directed by the arbitrators. The arbitrators decision shall be binding upon the Parties except that in no event shall the arbitrators have the power or authority to terminate this Agreement. ARTICLE 14 EXPIRATION; EFFECT OF TERMINATION     14.1    Expiration. Upon expiration of this Agreement (either in its entirety or with respect to any country), BIOCHEM shall continue to have the right, itself and/or through or with its Affiliates or any of their designees, to develop, have developed, make, have made, use, distribute, offer for sale, import, export and sell Products in such country or countries with respect to which this Agreement has expired and shall have a fully paid-up, non-exclusive, irrevocable license in such countries under the rights licensed to BIOCHEM pursuant to Article 2. The rights of the parties under Section 11.1.2 shall also survive expiration.     14.2    Effect of Termination. Except as otherwise expressly set forth in this Agreement, upon the termination of this Agreement in its entirety, all rights, licenses, properties and interests granted by each Party to the other Party shall immediately revert to and become fully vested in it and the other Party shall return to it all documents and any Confidential Information supplied to it or its Affiliates by the other Party. Notwithstanding the foregoing, (i) BIOCHEM's licenses pursuant to Article 2 under any Dominated Patent Rights and related CYTOVIA Know-How shall survive termination but shall be non-exclusive and fully paid up (without implying any license under any other CYTOVIA Patent Rights); (ii) the rights of the Parties under Section 11.1.2 shall survive termination.     14.3    Survivability. Expiration or termination of this Agreement shall not affect each Party's obligations to pay any amount accruing to the other Party under the provisions of this Agreement while it was in effect. Further, the expiration or termination of this Agreement shall not affect any rights and obligations of the Parties under this Agreement which are intended by the Parties to survive such termination. Without limiting the generality of the foregoing, the following provisions of this Agreement shall survive expiration or termination hereof: Articles 8, 9, 11, 14 and 15.     14.4    No Damages on Termination. Neither Party shall be entitled to any compensation whatsoever as a result of termination of this Agreement, but without limiting either Party's damages for any breach of this Agreement. ARTICLE 15 MISCELLANEOUS     15.1    Force Majeure. If either Party is prevented from complying, either totally or in part, with any of the terms or provisions of this Agreement, by reason of force majeure, including, but not limited -------------------------------------------------------------------------------- to fire, flood, earthquake, explosion, storm, strike, lockout or other labor trouble, riot, war, rebellion, accident, acts of God and/or any other cause or externally induced casualty beyond its reasonable control, whether similar to the foregoing matters or not, then, upon written notice by the Party liable to perform to the other Party, the requirements of this Agreement or such of its provisions as may be affected, and to the extent so affected, shall be suspended during the period of such disability.     15.2    No Assignment. Neither Party shall, without the prior written consent (not to be unreasonably withheld) of the other Party having been obtained, assign or transfer this Agreement to any Person, provided, however, that each Party may assign or transfer this Agreement to any successor by merger or sale of stock of such Party or its business unit to which this Agreement relates, or upon a sale of all or substantially all of such Party's assets, without the prior written consent of the other Party hereto (provided that, in the event of any such merger or stock or asset sale, no intellectual property rights of a Third Party involved in such transaction will be included in the technology licensed hereunder). Notwithstanding the foregoing, either Party shall be permitted to perform this Agreement, in whole or in part, through an Affiliate of such Party or assign this Agreement, in whole or in part, to an Affiliate of such Party, so long as the assigning Party shall remain liable for performance by such Affiliate. This Agreement shall be binding upon and shall inure to the benefit of the Parties and their successors and permitted assigns.     15.3    Notices. Any notices required or permitted to be given hereunder shall be in writing in the English language and shall be delivered in person or by DHL, Federal Express (or other courier service requiring signature upon receipt) or sent by air mail, postage prepaid, or facsimile (confirmed by a telephone conversation with the recipient) to the addresses set forth below. The Parties may change the address at which notice is to be given by giving notice to the other Party as herein provided. All notices shall be deemed effective upon receipt by the Party to whom it is addressed.     If to CTOVIA: Cytovia, Inc. 6650 Nancy Ridge Drive San Diego, California 92121 Attention: Chief Executive Officer Fax: (858) 860-2300 Phone: (858) 860-0500     If To BIOCHEM: Biochem Pharma Inc. 275 Armand-Frappier Boulevard Laval, Quebec, Canada H7V 4A7 Attention: V.P., Legal Affairs Fax: (450) 978-7739 Phone: (450) 978-7768     15.4    Governing Law. This Agreement and its execution, validity and interpretation shall be governed in all respects in accordance with the laws of the State of New York, the United States of America, other than its conflict of law rules except for Section 5-1401 of the New York General Obligations Law. The Parties expressly exclude any application of the United Nations Convention on Contract for the Sale of Goods to this Agreement.     15.5    Dispute Resolution.     15.5.1    The Parties shall initially attempt in good faith to resolve any significant controversy, claim, or dispute arising out of or relating to this Agreement or any significant breach thereof (hereinafter collectively referred to as a "Dispute") through face-to-face negotiations between the Chief Executive Officers of CYTOVIA and BIOCHEM. If the Dispute is not resolved within thirty (30) days (or such other period of time mutually agreed upon by the Parties) of commencing such face-to-face negotiations, or if the Party against which a claim has been asserted -------------------------------------------------------------------------------- refuses to attend such negotiations or does not otherwise participate in such negotiations within thirty (30) days (or such other period of time mutually agreed upon by the Parties) from the date of notice of a Dispute, then the Parties agree to mediation with a mutually agreed mediator. If the mediation of such Dispute does not commence within thirty (30) days (or such other period of time mutually agreed upon by the Parties) of the end of such face-to-face negotiations, or if the Dispute is not resolved within thirty (30) days (or such other period of time mutually agreed upon by the Parties) of commencing such mediation, or if the Party against which a claim has been asserted refuses to attend either face-to-face negotiations or such mediation, or the Parties are unable to agree upon a mediator, then the Parties agree to submit the Dispute to arbitration as provided herein. Unless otherwise mutually agreed by the Parties, only if the Dispute is not resolved through face-to-face negotiations or mediation as set forth above in this Section 15.5, may a Party resort to arbitration.     15.5.2    Except as provided in this Section 15.5, all Disputes relating in any way to this Agreement shall be resolved exclusively through arbitration conducted under the auspices of the Center for Public Resources (the "CPR") pursuant to CPR's Model ADR Procedure: Non-Administered International Arbitration Rules and Commentary. The arbitration shall be conducted in the English language before three (3) arbitrators, one selected by each Party and the third to be selected by the other two. Unless otherwise mutually agreed by the Parties, any arbitration brought hereunder shall be brought only and exclusively in New York, New York. The arbitrators shall hear evidence by each Party and resolve each of the issues identified by the Parties. The arbitrators shall render a formal, binding non-appealable resolution and award on each issue as expeditiously as possible, but not more than fifteen (15) business days after the hearing. In any arbitration, the prevailing Party shall be entitled to reimbursement of its reasonable attorneys' fees and the Parties shall use all reasonable efforts to keep arbitration costs to a minimum.     15.5.3    In no event shall arbitrators have the power or authority to terminate this Agreement in whole or in part.     15.5.4    Nothing in this Agreement shall be deemed as preventing either Party from seeking injunctive relief (or any other provisional remedy) from any court having jurisdiction over the Parties and the subject matter of the dispute as necessary to protect either Party's intellectual property.     15.6    Interpretation. This Agreement is executed in the English language. This Agreement shall be deemed to comprise the language mutually chosen by the Parties, has been prepared jointly and no rule of strict construction shall be applied against either Party. In this Agreement, the singular shall include the plural and vice versa and the word "including" shall be deemed to be followed by the phrase "without limitation". Les parties reconnaissent leur volonté expresse que la présente convention ainsi que tous les documents et conventions qui s'y rattachent directment ou indirectment soient rédigés en langue anglaise.     15.7    Severability. In the event that any provision of this Agreement shall be held to be unenforceable, invalid or in contravention of applicable law, such provision shall be of no effect, and the Parties shall negotiate in good faith to replace such provision with a provision which effects to the extent possible the original intent of such provision.     15.8    Complete Agreement. This Agreement together with all Exhibits hereto, supersedes all prior understandings, agreements, representations and warranties between the Parties, oral or written with respect to the present subject matter, and comprises the complete agreement between the Parties with respect to the present subject matter.     15.9    Modifications. No terms or provisions of this Agreement shall be varied or modified by any prior or subsequent statement, conduct or act of either of the Parties, except that the Parties may amend this Agreement by written instruments specifically referring to this Agreement and executed by a duly authorized officer of each of the Parties. --------------------------------------------------------------------------------     15.10    No Agency. Neither Party shall by virtue of this Agreement have any power to bind the other to any obligation nor shall this Agreement create any relationship of agency, partnership or joint venture or any fiduciary relationship.     15.11    No Waiver. No term or condition of this Agreement shall be considered waived unless reduced to writing and duly executed by a duly authorized officer of the waiving Party. Any waiver by any Party of a breach of any term or condition of this Agreement will not be considered as a waiver of any subsequent breach of this Agreement, of that term or condition or any other term or condition hereof.     15.12    License Survival During Bankruptcy. All rights and licenses granted under or pursuant to this Agreement are, and shall otherwise be deemed to be, for purposes of Paragraph 365(n) of the U.S. Bankruptcy Code, licenses of rights to "intellectual property" as defined under Paragraph 101(35A) of the U.S. Bankruptcy Code. The Parties agree that BIOCHEM, as a licensee of such rights under this Agreement, shall retain and may fully exercise all of its rights and elections under the U.S. Bankruptcy Code. The Parties further agree that, in the event of the commencement of a bankruptcy proceeding by or against CYTOVIA, including under the U.S. Bankruptcy Code, BIOCHEM shall be entitled to a complete duplicate of (or complete access to, as appropriate) any such intellectual property and all embodiments of such intellectual property, including the CYTOVIA Know-How, and the same, if not already in BIOCHEM's possession, shall be promptly delivered to BIOCHEM upon any such commencement of a bankruptcy proceeding upon written request therefor by BIOCHEM.     15.13    Counterparts. The Agreement may be executed simultaneously in one or more counterparts, each one of which need not contain the signature of more than one Party but such counterparts taken together shall constitute one and the same agreement. * * * * * *     IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first above written. CYTOVIA, INC.   BIOCHEM PHARMA INC. By: /s/ Larry G. Stambaugh   By: /s/ [illegible] --------------------------------------------------------------------------------   -------------------------------------------------------------------------------- Title: Chief Executive Officer   Title: President and COO --------------------------------------------------------------------------------   -------------------------------------------------------------------------------- Date: July 10, 2000   Date: July 10, 2000 --------------------------------------------------------------------------------   --------------------------------------------------------------------------------     By: /s/ [illegible]     --------------------------------------------------------------------------------     Title: Ex VP Contract Dvt.     --------------------------------------------------------------------------------     Date: July 10, 2000     -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Exhibit A PRODUCTS     The "Product" as defined in Article 1.27 means any member of the class of [***] analogs and derivatives set forth below: A compound of Formula 1: [***]     In addition, the "Product" as defined in Article 1.27 shall also mean any further member of the broader class of [***] analogs and derivatives as described in any claim of U.S. application no. [***] as filed that shall be included in the Research Program pursuant to this Agreement. Exhibit A-1 *Confidential Treatment Requested -------------------------------------------------------------------------------- Exhibit B EXISTING CYTOVIA PATENT RIGHTS     CYTOVIA Patent Rights as they exist as of the Effective Date are the following provisional patent applications: [***] Exhibit B-1 *Confidential Treatment Requested -------------------------------------------------------------------------------- Exhibit C WORK PLAN     BIOCHEM/CYTOVIA COLLABORATION PROPOSED ACTIVITIES AND RESOURCES Year 1 CYTOVIA --------------------------------------------------------------------------------   BIOCHEM -------------------------------------------------------------------------------- [***]   [***] [***]     [***]   [***] Exhibit C-1 *Confidential Treatment Requested -------------------------------------------------------------------------------- CYTOVIA --------------------------------------------------------------------------------   BIOCHEM -------------------------------------------------------------------------------- [***]   [***] Exhibit C-2 *Confidential Treatment Requested -------------------------------------------------------------------------------- Year 2 CYTOVIA --------------------------------------------------------------------------------   BIOCHEM -------------------------------------------------------------------------------- [***]   [***] [***]   [***] [***]   [***] [***]   [***] Exhibit C-3 *Confidential Treatment Requested -------------------------------------------------------------------------------- Exhibit D MILESTONE REDUCTION     Solely with respect to the milestones numbered (5) and (6) in Section 6.2, in the event that the manufacture, use or sale of the Product as developed by BIOCHEM shall not be covered by a Valid Patent Claim in one or more Selected Major Countries as provided below at the time that such milestone(s) shall be triggered (with any such Valid Patent Claim covering manufacture excluding others from selling the Product as developed by BIOCHEM), then the amount of the applicable milestone payment owed to CYTOVIA shall re reduced by the sum of the applicable percentage(s) in the following table: Selected Major Country in which no Valid Patent Claim covers manufacture, use or sale of Product: --------------------------------------------------------------------------------   Percentage by which applicable milestone shall be reduced -------------------------------------------------------------------------------- United States   [***] France   [***] Germany   [***] United Kingdom   [***]   Maximum Aggregate Milestone Reduction   [***]     Notwithstanding any provisions to the contrary, milestone payments shall be due only at the reduced level (as indicated in the table above) if a pending patent application containing such a Valid Patent Claim covering the manufacture, use or sale of the Product as developed by BIOCHEM does not mature into an issued patent within five (5) years of first publication of such patent application by the relevant governmental agency, or, in those countries which do not publish applications, within five (5) years of filing such application. Any payments made by BIOCHEM to CYTOVIA upon triggering of milestones for Product as developed by BIOCHEM covered by a Valid Patent Claim during the pendency of a patent application shall be refunded (or in lieu of such refund, BIOCHEM may, subject to the terms discussed below, set off such amount against any payments owed by BIOCHEM or CYTOVIA) by CYTOVIA so as to bring the net amount of payments made by CYTOVIA down to the reduced level (in the same manner as indicated for milestones triggered in the absence of a Valid Patent Claim) set forth in the table above in the event of failure of such patent claim to issue during such time period. In lieu of such refund, either CYTOVIA or BIOCHEM may opt to deduct amounts so owed by CYTOVIA from other payments, including royalty or milestone payments, owed by BIOCHEM to CYTOVIA, provided that the amount owed shall accrue interest from the date due, and thus the set off shall also include such interest. The interest on amounts owed by CYTOVIA and the resultant amount to be setoff pursuant to this Section shall be computed for such unpaid amount Exhibit D-1 *Confidential Treatment Requested -------------------------------------------------------------------------------- on the last day of each calendar quarter (accruing quarterly) at the prime or other equivalent rate of Citibank for the last day of the calendar quarter, or the highest interest rate permissible under applicable law, whichever is lower.     For purposes of clarification, BIOCHEM shall be entitled to milestone reduction(s) in Selected Major Country(ies) in which, at the time of occurrence of the applicable milestone no Valid Patent Claim covers the manufacture, use or sale of the applicable Product as developed by BIOCHEM (with any such Valid Patent Claim covering manufacture excluding others from selling the Product as developed by BIOCHEM) or where a milestone is paid, but no patent issues within the five (5) year period discussed in the previous paragraph. For example, if upon the first NDA filing for a Product as developed by BIOCHEM in any Major Country, the manufacture, use or sale of such Product is covered by at least one such Valid Patent Claim in France and the United Kingdom but by no Valid Patent Claim in Germany or the United States, then the milestone payment due to CYTOVIA shall be reduced by [***]% (which represents the sum of the United States milestone reduction ([***]%) and the Germany milestone reduction ([***]%). In no event shall any milestone payment be reduced by more than [***]% in the aggregate. If a Valid Patent Claim covering the manufacture, use or sale of the Product as developed by BIOCHEM subsequently issues in the United States (with any such Valid Patent Claim covering manufacture excluding others from selling the Product as developed by BIOCHEM), BIOCHEM would pay the amount of [***]% of the milestone as provided herein. If a Valid Patent Claim covering the manufacture, use of sale of the Product no longer existed in the United Kingdom as a result of the expiration of the five (5) year period, the amount of [***]% would be refunded or set off as provided herein. Exhibit D-2 *Confidential Treatment Requested -------------------------------------------------------------------------------- Exhibit E DISCLOSURES     The original compound which led to the CYTOVIA Patent Rights was identified under a collaboration between CYTOVIA and AURORA and is subject to the terms of the Collaboration Agreement between CYTOVIA and AURORA dated July 16, 1998 (the "AURORA Agreement"), a copy of which was furnished to BIOCHEM on April 3, 2000.     Under the terms of the AURORA Agreement, CYTOVIA is obligated to pay milestone payments to AURORA as Products are developed, and to pay to AURORA a royalty of [***]% of the Net Sales of such Products. Exhibit E-1 *Confidential Treatment Requested -------------------------------------------------------------------------------- QuickLinks RESEARCH AND LICENSE AGREEMENT ARTICLE 1 DEFINITIONS ARTICLE 2 LICENSE GRANTS ARTICLE 3 TERM ARTICLE 4 RESEARCH; OBLIGATION TO COOPERATE AND SUPPORT, AND REGULATORY APPROVAL ARTICLE 5 REGULATORY ACTIVITIES, APPROVALS, and COMPLIANCE ARTICLE 6 LICENSE PAYMENTS, CLINICAL TRIAL AND REGULATORY APPROVAL MILESTONES; ROYALTIES AND REPORTS ARTICLE 7 REPRESENTATIONS AND WARRANTIES ARTICLE 8 INDEMNIFICATION ARTICLE 9 NON-DISCLOSURE; PRESS RELEASES AND PUBLICATIONS ARTICLE 10 TRADEMARKS ARTICLE 11 OWNERSHIP AND RIGHTS; PATENT PROSECUTION AND MAINTENANCE ARTICLE 12 INFRINGEMENT OF THIRD PARTY PATENTS; ENFORCEMENT ARTICLE 13 TERMINATION ARTICLE 14 EXPIRATION; EFFECT OF TERMINATION ARTICLE 15 MISCELLANEOUS PRODUCTS EXISTING CYTOVIA PATENT RIGHTS WORK PLAN Year 2 MILESTONE REDUCTION DISCLOSURES

EXHIBIT 10.43 EXCLUSIVE PRODUCT PURCHASE AGREEMENT              THIS PRODUCT PURCHASE AGREEMENT (“Agreement”) is made and entered into effective as of August 7, 2000 by and between Photo-Me International Plc., a company governed by the laws of England and Wales (“PMI”), and DigitalPortal Inc. (“DPI”) a Delaware corporation.              WHEREAS, PMI and SanDisk Corporation (a Delaware corporation) have signed the Definitive Agreement to Form Vending Business pursuant to which DPI shall operate units of Product (defined below);              WHEREAS, PMI will develop and manufacture Products under the DPI, PMI and SanDisk brands and names;              WHEREAS, DPI or a third party in a leasing transaction with DPI (“Lessor”) desires to purchase from PMI the Products;              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.         1.1  “Product” shall mean those self service photo printing kiosks designed and manufactured by PMI or one of its subsidiaries, which constitute self-service digital photo printing kiosks which can be connected to an Internet photo portal capable of reading and printing on silver-halide paper digitized images from flash memory cards, floppy diskettes, CD-ROM discs and an Internet photo portal, including those kiosks containing multiple terminals connected to a single print processor.         1.2  “Technical Specifications” shall mean the technical description of the Product and the functionality which they provide as described in Exhibit A attached hereto and incorporated by reference herein.         1.3  “Territory” means the United States of America and Canada and such other regions as the Board of Directors of DPI may approve pursuant to Section 6.03 of the Definitive Agreement. 2.      Agreement of Sale And Purchase.         2.1  PMI agrees to sell or lease to DPI or Lessor, and DPI agrees to purchase or lease from PMI, 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, *. PMI will be the exclusive and sole source to DPI of self-service digital photo printing kiosks capable of printing digital photographic images on silver halide paper obtained from flash memory cards, internet photo portals and/or other sources. DPI shall also purchase spare parts for the Product from PMI, as provided in Article 9 of this Agreement.         2.2  The terms and conditions of this Agreement shall control over any terms contained in any purchase order, invoice or confirmation or other business form provided by either party. 3.      Purchase Order Provisions.         3.1  Purchase and delivery of Products shall be made pursuant to individual purchase orders issued in writing by DPI. Each purchase order will be deemed accepted and binding upon PMI unless, within ten (10) business days after receipt of such purchase order, PMI gives DPI written notice that such purchase order (a) does not comply with the terms and conditions for ordering Products as set forth herein, or (b) cannot be accepted due to reasons of Force Majeure as set forth in Article 18. Any such notice from PMI shall provide a reasonably detailed explanation of the basis for such rejection. 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.    *   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 --------------------------------------------------------------------------------         3.2  The individual purchase orders shall set forth the following: Purchase Order number and date; the quantities of each Product ordered, identified by DPI Catalog Number; price per unit in U.S. Dollars (U.S. $); requested delivery dates and instructions; destination.         3.3  Purchase Orders shall be sent by telecopy and express delivery to:   *  Immediate copy must be sent to:   *   * 4.      Prices For Products.         4.1  DPI will purchase exclusively from PMI each unit of Product ex works (as such term is defined in according to the Incoterms ICC Edition 2000), Grenoble, France, not to exceed US $20,000 per unit * for the initial * units. 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 “Exchange 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.         4.2  Those prices shall be fixed for the period covering the purchase of the first 2,500 Products. After said period and until the end of this Agreement, PMI reserves the right to change such prices once a year to account for material and labor cost increases net of manufacturing cost decreases, but not to exceed the published value in the latest monthly report issued pursuant to *.         4.3  Purchase Orders issued by DPI and accepted by PMI prior to the effective date of any price changes will be honored at the previously existing prices.    *   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.      Terms of Delivery.              PMI shall deliver units of Product to DPI ex works Grenoble, France as such term is defined by Incoterms ICC Edition 2000, within * months after the receipt of order for such units unless a longer period is specified in the order. DPI shall be free to reschedule the delivery of any Product which is scheduled for delivery beyond * months from the date of such request to reschedule. Any such rescheduled delivery may be rescheduled for up to an additional * months from the originally scheduled date of delivery. 6.      Terms of Payment.         6.1  Products purchased by DPI shall be paid in U.S. dollars.         6.2  PMI shall issue invoices for the Products and deliver such invoices to DPI on the date of delivery of the Products. DPI shall pay the price of the Products as invoiced by PMI within forty-five (45) days from the delivery. -------------------------------------------------------------------------------- 7.      Inspection – Warranty And Remedies.         7.1  PMI warrants to DPI that the Products shipped by PMI under this Agreement shall conform to the Technical Specifications and shall be free from defects in materials and parts for * months from the date of delivery ex works Grenoble, France (herein “Warranty Period”).         7.2  DPI shall have the right to inspect the Products (i) at PMI’s factory prior to shipment, (ii) at the offices of Photo-Me USA, LLC in Grand Prairie, Texas within ten (10) days of the date of arrival or (iii) at such other place as the parties shall mutually agree, for the relevant Products (the “Receipt Date”).         7.3  A representative of PMI will be present for the inspection by DPI.         7.4  If the Products do not conform to Technical Specifications or are shown to be defective in materials and workmanship (herein collectively “Nonconforming Warranted Product”) before the end of the Warranty Period, DPI shall promptly provide PMI with documentation substantiating such nonconformance.         7.5  In the event that DPI determines that the Products do not meet the Technical Specification attached hereto as Exhibit 1, or are defective upon such incoming inspection, DPI shall provide PMI with documentation substantiating such nonconformance (the “Nonconformance Notice”) within fifteen (15) days of the Receipt Date. If Nonconformance notice is not provided within fifteen (15) days of the Receipt Date for such Products, such Products shall be deemed accepted.         7.6  During the Warranty Period, PMI shall provide the following remedy for any nonconforming Product:         (a)  PMI at its own cost shall sort and inspect the entire shipment lot of Products which contained nonconforming Products at the destination specified by DPI. If such inspection by PMI identifies any conforming Products, DPI will accept such conforming Products.         (b)  PMI shall provide one or more qualified technicians to repair nonconforming Products at the destination specified by DPI. Such repair shall be completed by PMI or Photo-Me USA, LLC within ten (10) days of the written Nonconformance Notice from DPI, and PMI shall pay all costs (including without limitation, for materials, parts and direct labor, including PMI’s overhead, and overnight parts deliveries, if necessary to meet the ten (10) day deadline) incurred in repairing Products.         7.7  The foregoing warranty shall not be applicable to any Products which are modified or altered, other than by PMI, after delivery thereof to DPI or to any Products which are misused or mishandled after delivery thereof to DPI.              EXCEPT FOR THE EXPRESS WARRANTIES SET FORTH ABOVE IN THIS ARTICLE PMI IS MAKING NO OTHER WARRANTIES, EXPRESS OR IMPLIED, REGARDING THE PRODUCTS, INCLUDING BUT NOT LIMITED TO IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.    *   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 8.      Change in Products; Enhancements and Modifications.         8.1  Changes to Technical Specifications shall be made with both parties’ written agreement.         8.2  PMI shall provide DPI with copies of any software upgrades or enhancements to the Product which are developed by PMI. 3 -------------------------------------------------------------------------------- 9.      Spare Parts Upon Termination of the Maintenance Agreement.         9.1  In the event that the Maintenance Agreement is terminated, PMI will supply Spare Parts to DPI at the lowest price that such spare parts are sold by PMI to other parties. Such obligation by PMI shall survive for as long as either PMI or SanDisk remains at least a * shareholder of DPI.         9.2  Upon termination of the Maintenance Agreement, DPI or its designee shall exclusively order Spare Parts from PMI provided that DPI may purchase non-custom parts meeting PMI specifications from other suppliers.         9.3  PMI shall warrant the installation of Spare Parts by PMI, and shall warrant that the Spare Parts shall be free from any defect or error, from a period of * months from the date of such delivery ex works Grenoble, France, or if applicable, installation by PMI of such Spare Parts.         9.4  The provisions of this Article 9 shall survive termination of this Agreement. 10.      Regulatory Approvals.              DPI shall, at its cost and responsibility, obtain any necessary approvals and authorizations of regulatory agencies and other governmental organizations to export from France and deploy the Products in the Territory. PMI shall give DPI the cooperation it reasonably requires in connection with any such obligations. 11.      Confidentiality.         11.1  The term “Confidential Information” as used herein shall mean any and all information relating to the Products disclosed by PMI to DPI in a written or other tangible form and clearly marked “Confidential” or a comparable legend, or any such other information which the parties would reasonably expect to be treated as confidential.         11.2  For a period from the date of the disclosure of such Confidential Information until three (3) years after the termination of this Agreement, DPI shall keep Confidential Information in strict confidence, and shall neither disclose it to any person, firm or corporation, nor use the same for any purpose other than those described herein. Notwithstanding the foregoing, DPI may disclose Confidential Information to its employees who have a need to know it; provided, however, that DPI shall bear all responsibility and liability to have such employees comply with terms and conditions hereof.         11.3  Notwithstanding the provision of Article 11.2 above to the contrary, DPI shall have no confidentiality obligation and no use restriction hereunder with respect to any information which:         (a)  is or becomes publicly known through no fault of DPI at or subsequent to the time of disclosure thereof; or         (b)  is approved for release or disclosure to any third party by the prior written authorization of PMI. 12.      Term.              This Agreement shall commence on the Closing Date and shall expire on December 31, 2010, unless terminated earlier as provided herein. This Agreement shall be automatically renewed thereafter on a year-to-year basis, unless either party hereto gives the other party a written notice not to renew this Agreement at least 180 days before expiration of the initial term or any extension hereof.    *   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 13.      Termination.         13.1  Either party may terminate this Agreement for either of the following reasons by giving a written notice thereof: 4 --------------------------------------------------------------------------------         (a)  In the case of bankruptcy or insolvency of the other party; or         (b)  Upon voluntary or involuntary liquidation, or inability or retirement from the business of the other party.         13.2  This Agreement may be terminated immediately by the non-breaching party upon written notice in the event of any material breach by the other party of the terms and conditions hereof, provided that the defaulting party is given written notice of such breach and sixty (60) days from receipt of the notice to cure such breach.         13.3  Notwithstanding the above, this Agreement will automatically terminate in the event that the Definitive Agreement is terminated for reasons other than the closing of an initial public offering. If this Agreement is terminated pursuant to this Section, PMI shall agree to sell to DPI units of Product at the last invoice price by PMI to DPI with a multiple of * of this Agreement, with delivery to be ex works Grenoble, France and all remaining terms to be negotiated in good faith. Notwithstanding the foregoing, PMI shall provide DPI with sixty (60) days written notice of the new pricing terms, during which time PMI shall accept new orders at the last invoice price by PMI to DPI.         13.4  Termination under Article 13.1 or Article 13.2 above shall not relieve either party of obligations incurred prior thereto, including the obligation of PMI to deliver previously ordered Products or of DPI to pay for Products previously ordered.         13.5  DPI’s obligations to order units of Product in Section 2.1 of this Agreement shall be terminated in the event that Section 9 of the Stockholders’ Agreement is invoked by PMI, SanDisk or DPI. The invocation of Section 9 of the Stockholders’ Agreement shall not relieve either party of obligations incurred prior thereto, including the obligation of PMI to deliver previously ordered Products or of DPI to pay for Products previously ordered. 14.      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. 15.      Assignability.              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 that 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 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. 16.      Force Majeure.              Neither party shall be liable to the other in any manner for failure or delay to fulfill all or part of this Agreement, directly or indirectly, owing to act of God, governmental orders, restrictions, war, threat of war, warlike conditions, , sanctions, mobilization of government personnel, blockade, embargo, revolution, riot, accident or any other cause for circumstances beyond their reasonable control.              Either party which is prevented from complying with its obligation under this Agreement, due to Force Majeure, shall notify the other party, without delay, and shall supply such other party, if requested, with any supporting documents. In the same manner, the party which has invoked the Force Majeure shall inform the other party without delay of the termination of such Force Majeure.    *   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 --------------------------------------------------------------------------------              If necessary the obligations of both parties shall be postponed for the duration of the event, and the current contractual period shall be extended for the duration of the event.              However, should such event persist for a period of three (3) months, it will be open to either party to terminate the affected purchase order forthwith without being entitled to any indemnity whatsoever. 17.      Severability.              Any term, condition or provision of this Agreement determined to be illegal, invalid or void under applicable state or federal law, shall be deemed severable, and the remaining provisions, terms and conditions shall not be impaired thereby, such that the remaining Agreement shall be interpreted and given effect as far as possible to accomplish its stated purpose. 18.      Waiver of Default.              Any failure of either party at any time, or from time to time, to require or enforce the strict keeping and performance by either party of any of the terms and conditions of this Agreement shall not constitute a waiver by either party of a breach of any such terms or conditions in the future and shall not affect or impair such terms or conditions in any way, or the right of either party at any time to avail itself of such remedies as it may have for any such breach of any term or condition. No waiver of any right or remedy hereunder shall be effective unless expressly stated in writing by the waiving part. 19.      Notice.              Any notice made in connection with this Agreement or performance hereunder shall be addressed,  If to PMI:   Photo-Me International, Plc. c/o KIS 2110, avenue du Général de Gaulle 38130 Echirolles France Attn: Directeurr Juridique Fax Number : 334-76-339647.  With a copy to:   Stephen A. Kennedy, Esq. Wolin, Ridley & Miller LLP 3100 Bank One Center 1717 Main Street Dallas, Texas 75201  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  In all cases, with a copy to:   SanDisk Corporation 140 Caspian Court Sunnyvale, CA 94089 Attn: Vice President and General Counsel Fax: 408-548-0385 6 -------------------------------------------------------------------------------- or to such other addresses as the parties may notify each other from time to time, by registered mail or facsimile, followed immediately by a confirmation letter by registered mail. 20.      Entire Agreement/Amendment.              This Agreement, including all constitutes the entire agreement and understanding between PMI and DPI relative to the subject matter hereof and supersedes any previous agreements or understandings whether oral or written. This Agreement may not be amended, except in writing, signed by authorized representatives of both parties. 21.      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. 22.      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. 23.      Counterparts.              This Agreement may be executed in two counterparts, each of which shall be an original and together which shall constitute one and the same instrument. 24.      Survival.              The following provisions shall survive the termination of this Agreement: Sections 1, 7.1, 7.6, 7.7, 9, 11, and 14 through and including 24.              IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first above written.      PHOTO-ME INTERNATIONAL, PLC   By:   /S/ Serge Crasnianski      --------------------------------------------------------------------------------      Name: Serge Crasnianski Title: Chief Executive Officer      DIGITALPORTAL INC.   By:   /s/ Nelson Chan      --------------------------------------------------------------------------------      Name: Nelson Chan Title: President & Chief Executive Officer

Exhibit 10(g)         ASSET PURCHASE AGREEMENT by and among SECURE PHARMACY PLUS, INC., STADTLANDER OPERATING COMPANY, L.L.C., STADTLANDER LICENSING COMPANY, LLC, STADTLANDER DRUG OF CALIFORNIA, L.P. and STADTLANDER DRUG OF HAWAII, L.P.   FOR PURCHASE AND SALE OF STADTLANDERS CORRECTIONS DIVISION Dated as of September 20, 2000           --------------------------------------------------------------------------------   TABLE OF CONTENTS (Not a part of the Agreement) 1. PURCHASE AND SALE OF ASSETS 1 1.1 Purchase And Sale Of Assets 1 1.1.1 Leased Real Property 1 1.1.2 Tangible Personal Property 1 1.1.3 Inventories And Supplies 2 1.1.4 Contract Rights 2 1.1.5 Intellectual Property 2 1.1.6 Governmental Licenses, Permits and Approvals 2 1.1.7 Computer Software 2 1.1.8 Business Data 2 1.1.9 Web Sites 3 1.1.10 Claims 3 1.1.11 Other Assets 3 1.2 Excluded Assets 3 1.2.1 Ordinary Course of Business Dispositions; ProCare/CVS Transaction 3 1.2.2 Cash 3 1.2.3 Nonassignable Permits 3 1.2.4 Rights Under This Agreement 3 1.2.5 Minute Books and Stock Ledger 3 1.2.6 Accounts Receivable 4 1.2.7 Employee Benefit Plans 4 1.2.8 Prepaid Expenses 4 1.2.9 Inter- or Intra-Company Receivables 4 1.3 Conveyance 4 2. PURCHASE PRICE 4 2.1 Closing Payment 4 2.2 Purchase Price Adjustment 4 2.3 Method of Payment 6 2.4 Allocation 6 3. ASSUMPTION OF LIABILITIES 6 3.1 Assumed Liabilities 6 3.2 Purchaser's Obligations 7 3.3 Excluded Liabilities 7 3.4 Breach of Representations 7 3.5 Insurance 7 4. REPRESENTATIONS AND WARRANTIES 9 4.1 Representations and Warranties of Sellers 9 4.1.1 Corporate Organization 9 4.1.2 Authorization and Effect of Agreement 9 4.1.3 No Restrictions Against Sale of the Assets 9 4.1.4 Financial Statements 9 4.1.5 No Material Adverse Change Relating to the Business 9 4.1.6 Compliance with Laws 9 4.1.7 Assets used in the Business 9 4.1.8 Assets other than Real Property 9 4.1.9 Real Property 10     4.1.10 Insurance 10 4.1.11 Intellectual Property 10 4.1.12 Litigation; Decrees 11 4.1.13 Contract Rights 11 4.1.14 Employee Contracts, Union Agreements and Benefit Plans 13 4.1.15 Labor Relations 14 4.1.16 Divisional Personnel 15 4.1.17 No Undisclosed Liabilities 15 4.1.18 Environmental Protection 15 4.1.19 Tax Matters 16 4.1.20 Brokers' and Finders' Fees 17 4.1.21 Licenses and Permits 17 4.1.22 Books and Records 17 4.1.23 [Intentionally omitted.] 18 4.1.24 Major Suppliers and Customers 18 4.1.25 Inventory 18 4.1.26 Pharmaceutical Regulation 18 4.2 Representations, Warranties And Certain Covenants of Purchaser 19 4.2.1 Corporate Organization 19 4.2.2 Authorization And Effect Of Agreement 20 4.2.3 No Restrictions Against Purchase Of The Assets 20 4.2.4 Brokers' and Finders' Fees 20 5. COVENANTS 20 5.1 Employees 20 5.2 Transfer Taxes 21 5.3 Press Release 21 5.4 Pharmacy Licenses 21 6. CLOSING DELIVERIES 6.1 Deliveries of Sellers 6.1.1 Transfer Documents 22 6.1.2 Certificates 22 6.1.3 Consents Under Key Agreements 22 6.1.4 Power of Attorney 22 6.1.5 Termination Statements 22 6.1.6 Employment Agreements 22 6.1.7 Non-Competition Agreements 22 6.1.8 Accounts Receivable Collection Agreement 22 6.1.9 Transition Services Agreement 22 6.1.10 BBC Guaranty 22 6.2 Deliveries of Purchaser 22 6.2.1 Instruments Of Assumption 23 6.2.2 Purchase Price 23 6.2.3 Certificates 23 6.2.4 Prime Vendor Contract 23 6.2.5 ASG Guaranty 23 7. THE CLOSING 23 7.1 The Closing 23 8. SURVIVAL AND INDEMNIFICATION 23 8.1 Survival 23 8.1.1 Survival of Representations And Warranties 23 8.1.2 Survival of Covenants 23 8.2 Limitations On Indemnification; Right of Offset 24 8.2.1 With Respect To Certain Representations And Warranties 24 8.2.2 With Respect To Sellers' Obligations 24 8.3 Indemnification 24 8.3.1 Indemnification By Sellers 24 8.3.2 Indemnification By Purchaser 24 8.3.3 Cumulative Rights 25 8.3.4 Indemnity Payment; Indemnitee; Indemnifying Party 25 8..4 Defense of Claims 25 8.4.1 Third Party Claims 25 8.4.2 Direct Claims 26 8.4.3 Failure to Give Timely Notice 26 8.4.4 Subrogation 26 8.4.5 Payment 27 8.4.6 Limitation on the Scope of Indemnification 27 9. OTHER POST-CLOSING COVENANTS 27 9.1 General Post-Closing Matters 27 9.1.1 Post-Closing Notifications 27 9.1.2 Access 27 9.1.3 Guarantees, Etc. 27 9.1.4 Rights of Endorsement 27 9.2 Nonassignable Contracts 28 9.2.1 Nonassignability 28 9.2.2 Sellers To Use Reasonable Efforts 28 9.2.3 If Waivers Or Consents Cannot Be Obtained 28 9.2.4 Obligation of Purchaser To Perform 29 10. MISCELLANEOUS PROVISIONS 29 10.1 Notices 29 10.2 Expenses 30 10.3 Successors And Assigns 30 10.4 Waiver 30 10.5 Entire Agreement 31 10.6 Amendments, Supplements, Etc. 31 10.7 Rights Of The Parties 31 10.8 Further Assurances 31 10.9 Bulk Sales 31 10.10 Transfer 32 10.11 Governing Law 32 10.12 Execution in Counterparts 32 10.13 Titles And Headings 32 10.14 Certain Interpretive Matters And Definitions 32 10.15 Cross-References 32 10.16 Severability 33 10.17 Arbitration 33   --------------------------------------------------------------------------------     Table of Schedules         Schedule 1.1.1 Leased Real Property Schedule 1.1.2 Tangible Personal Property Schedule 1.1.5 Intellectual Property Schedule 1.1.6 Permits Schedule 1.1.7A Owned Software Schedule 1.1.7B Licensed Software Schedule 1.2.3 Non-Assignable Permits Schedule 2.2(b) Inventory Methodology and Costing Schedule 2.4 Purchase Price Allocation Schedule 3.1 Assumed Software Liabilities Schedule 4.1.1 Corporate Organization Schedule 4.1.3 Restrictions on Sale Schedule 4.1.4 Financial Statements Schedule 4.1.5 Material Adverse Changes Schedule 4.1.6 Violations of Law Schedule 4.1.7 Excluded Assets Schedule 4.1.8 Liens Schedule 4.1.10 Insurance Matters Schedule 4.1.12 Litigation Schedule 4.1.13 Contracts Schedule 4.1.14(a) Employee Benefit Plans Schedule 4.1.15 Labor Relations Matters Schedule 4.1.16 Divisional Personnel Schedule 4.1.18(b) Environmental Matters Schedule 4.1.19(b) Tax Matters Schedule 4.1.21 Permits Schedule 4.1.24 Suppliers and Customers Schedule 4.1.25 Inventory Claims Schedule 4.1.26 Pharmaceutical Regulation Schedule 4.2.3 Purchaser's Restrictions Schedule 6.1.1 Transfer Documents Schedule 6.1.4 Form of Power of Attorney Schedule 6.1.5 Required Termination Statements Schedule 6.1.6(a) Form of Employment Agreement for Trey Hartman Schedule 6.1.6(b) Form of Employment Agreement for Grant Bryson Schedule 6.1.6(c) Form of Employment Agreement for Larry Brown Schedule 6.1.7 Form of Noncompetition Agreement Schedule 6.1.8 Form of Accounts Receivable and Payable Management Agreement Schedule 6.1.9 Form of Transition Services Agreement Schedule 6.1.10 Form of BBC Guaranty Schedule 6.2.1 Assumption Instruments Schedule 6.2.4 Form of Prime Vendor Contract Schedule 6.2.5 Form of ASG Guaranty Schedule 9.1.3 Seller Guarantees   --------------------------------------------------------------------------------     Table of Defined Terms     Term Page     Accounts Receivable Collection Agreement 25 Affiliate 37 Agreement 1 Ancillary Documents 8 Apportioned Amounts 5 Arbitrator 5 ASG 1 ASG Guaranty 26 Assets 1 Assumed Liabilities 7 Assumed Liability Claim 27 Assumption Instruments 26 BBC 1 BBC Guaranty 26 Business 1 Business Data 3 Closing 26 Closing Date 26 Code 6 Consents 32 Contracts 2 DEA 7 Direct Claim 30 Division 1 Employee Benefit Plans 14 Environmental Laws 17 ERISA 14 ERISA Affiliate 15 Estimated Purchase Price Increase 4 Estimated Purchase Price Reduction 4 Excluded Assets 3 FDA 21 Final Purchase Price Adjustment Schedule 5 Financial Statements 9 FMLA 15 GAAP 9 Governmental Agency 37 Hazardous Substances 17 Indemnifiable Losses 28 Indemnifying Party 29 Indemnitee 29 Indemnity Payment 29 Insurance 8 Intellectual Property Rights 2 Inventory 2 Inventory Valuation 5 Key Agreements 25 Key Licenses 25 Laws 37 Leased Real Property 1 License Fee Amount 5 Licensed Software 11 Licenses 19 Liens 10 NLRB 15 OSHA 16 Patent and Trademark Rights 11 Permits 2 Permitted Liens 10 Pharmaceutical Products 20 Pre-Billed Amounts 5 Preliminary Purchase Price Adjustment Schedule 4 Proprietary Software 11 Purchase Price 4 Purchase Price Increase 5 Purchase Price Reduction 5 Purchaser 1 Records 31 Related Person 20 Retained A/P Amount 5 Securities Act 37 Sellers 1 Sellers' Guarantees 32 Software 11 Subsidiary 37 Tangible Personal Property 2 Taxes 18 Third Party Claim 29 Transfer 1 Upfront Collection Fee 5 Transfer Documents 24 WARN Act 16 Work-in-Process Amount 5   --------------------------------------------------------------------------------       ASSET PURCHASE AGREEMENT                  This ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered into as of the 20th day of September, 2000, by and among SECURE PHARMACY PLUS, INC., a Tennessee corporation ("Purchaser"), STADTLANDER OPERATING COMPANY, L.L.C., a Delaware limited liability company, STADTLANDER LICENSING COMPANY, LLC, a Delaware limited liability company, STADTLANDER DRUG OF CALIFORNIA, L.P., a Delaware limited partnership, and STADTLANDER DRUG OF HAWAII, L.P., a Delaware limited partnership (collectively, the "Sellers"); RECITALS                A.        Sellers, through Stadtlanders Corrections Division (the "Division"), presently conduct the business of providing pharmaceutical services to correctional facilities in several states (the "Business").                 B.        Sellers desire to sell and assign to Purchaser, and Purchaser desires to purchase and assume from Sellers, the assets and specified liabilities of the Business on the terms and subject to the conditions set forth in this Agreement.                C.        America Service Group Inc., a Delaware corporation ("ASG") and the parent corporation of Purchaser, has guaranteed all obligations of Purchaser pursuant to this Agreement.                D.        Bergen Brunswig Corporation, a New Jersey corporation ("BBC") and the parent corporation of Sellers, has guaranteed all obligations of Sellers pursuant to this Agreement.                NOW, THEREFORE, the parties hereto agree as follows: 1.          PURCHASE AND SALE OF ASSETS                 1.1.         Purchase And Sale Of Assets. On the terms and subject to the conditions hereof, at the Closing (as hereinafter defined), Sellers will sell, transfer, convey, assign and deliver ("Transfer") to Purchaser, and Purchaser will purchase and accept from Sellers, all of Sellers' right, title and interest in and to the assets and properties, associated with the Division described in this Section 1.1 (the "Assets"):                                 1.1.1 Leased Real Property. Subject to Section 9.2, all rights and incidents of interest of Sellers as of the Closing in and to the real property leases listed on Schedule 1.1.1 and all of Sellers' rights in and to the real property leased by Sellers pursuant thereto, including all buildings, structures, fixtures and improvements located thereon to the extent subject to such leases (the "Leased Real Property");                                 1.1.2. Tangible Personal Property. All furniture, fixtures, equipment, vehicles, office supplies, advertising materials and other tangible personal property (other than Inventory (as hereinafter defined)), (including without limitation, all transportation, laboratory, testing, office, computing, data processing and telecommunications equipment) held or owned by Sellers as of the Closing which is used primarily in the Business, including, without limitation, those items of tangible personal property described on Schedule 1.1.2 (collectively, the "Tangible Personal Property");                                 1.1.3. Inventories And Supplies. All pharmaceutical and medical supplies owned by Sellers for resale in connection with the Business as of the close of business on the day prior to the Closing Date (collectively, "Inventory").                                 1.1.4 Contract Rights. Subject to Section 9.2, all rights and incidents of interest of Sellers as of the Closing in and to all personal property leases, licenses, agreements, proposals or other contracts or contractual rights or obligations, including any security deposits provided by the Sellers with respect thereto (collectively "Contracts") of Sellers which relate primarily to the Business, including, without limitation, (i) those Contracts which are listed on Schedule  4.1.13 (unless indicated to the contrary thereon), or are of a type which would have been listed on Schedule 4.1.13 except that they provide for payments in an amount less than the applicable amount set forth in Section 4.1.13 and (ii) any non-disclosure letters executed by Sellers and certain other potential purchasers of the Division, to the extent assignable by Sellers, true and complete copies of which will be delivered to Purchaser prior to Closing.                                 1.1.5. Intellectual Property. The right to use the trade name "StadtRelease" for a period of six months following the Closing, and all trade secrets (including customer and supplier lists), personnel and marketing databases, know-how, manuals, processes, techniques and any and all applications for any of the foregoing, together with any and all rights to use any or all of the foregoing, and any and all goodwill associated with any of the foregoing (collectively, "Intellectual Property Rights") of Sellers used primarily in the Business, including without limitation, those listed or described on Schedule 1.1.5.                                 1.1.6. Governmental Licenses, Permits and Approvals. All rights and incidents of interest of Sellers as of Closing in and to all transferable licenses, permits and approvals ("Permits") issued to Sellers by any Governmental Agency (as hereinafter defined) relating primarily to the Business and in effect as of the Closing, including without limitation, those listed or described on Schedule 1.1.6.                                 1.1.7. Computer Software. All computer software programs owned by any Seller and used primarily in the Business, including those items listed on Schedule 1.1.7A, and a license, as described in Section 6.1.7, to use all other computer software programs licensed to any Seller and used primarily in the Business, including those items listed on Schedule 1.l.7B.                                 1.1.8. Business Data. The original documents representing all current and historical information, files, correspondence, records, marketing data and plans related to the Business, including, without limitation, all client financial information and all client reports in both hard and electronic form, all books and records, pending proposals and any lists of historical, current and potential customers, personnel and supplies of the Business (collectively, the "Business Data").                                 1.1.9. Web Sites. All rights and incidents of interest of Sellers in and to all world wide web or Internet sites and domain names related primarily to the Business, including, without limitation www.Stadtcorrections.com.                                 1.1.10 Claims. All claims, causes of action, choses in action, rights of recovery, rights of setoff and guarantees, including without limitation, any rights to the payment of rebates, any liens, mechanic's liens or any rights to payment or warranties or to enforce payment or warranties in connection with work performed for the Division or goods delivered to the Division on or prior to the Closing Date, and any and all claims to insurance proceeds due or to become due under any Seller's applicable insurance policies in connection with any Assumed Liabilities.                                 1.1.11 Other Assets. All other tangible or intangible properties and assets that are carried on the books of the Division that are owned or held by Sellers wherever located and that are used primarily in the Business as of the Closing, whether or not of a type falling within any of the categories of assets or properties described in Subsections 1.1.1 to 1.1.10, other than the Excluded Assets.                 1.2.         Excluded Assets. Notwithstanding anything contained in this Agreement to the contrary, and with the exception of any rights of the Purchaser with respect to any transition services provided by Sellers, the following properties, assets and rights (the "Excluded Assets") will not be included in the Assets:                                 1.2.1. Ordinary Course of Business Dispositions; ProCare/CVS Transaction. All of the properties and assets which shall have been transferred or disposed of by Sellers or any Affiliate of Sellers prior to the Closing in the ordinary course of business without violation of this Agreement, or which are being sold to ProCare Pharmacy, Inc. or its affiliates pursuant to an Asset Purchase Agreement dated July 3, 2000.                                 1.2.2 Cash. All cash or cash equivalents of Sellers on hand, in lock boxes in financial institutions or elsewhere.                                 1.2.3. Nonassignable Permits. Any Permits that are incapable of being Transferred with or without the consent, approval, novation or waiver of a third person or entity (including without limitation of a Governmental Agency), if the Transfer or attempted Transfer of such would constitute a breach of such Permit or a violation of any Law (as hereinafter defined) and if such consent, approval, novation or waiver is not obtained, including, without limitation, the Permits listed or described on Schedule 1.2.3.                                 1.2.4. Rights Under This Agreement. All consideration received and rights of Sellers under this Agreement and other agreements between the parties entered into in connection with the transactions contemplated hereby.                                 1.2.5 Minute Books and Stock Ledger. The corporate minute books and stock ledger records of Sellers.                               1.2.6 Accounts Receivable. Any right, title and interest of Sellers in and to any accounts and other receivables related to the Business, to the extent attributable to invoices sent or goods shipped or services performed prior to the close of business on the day prior to the Closing Date.                               1.2.7 Employee Benefit Plans. All Employee Benefit Plans (as hereinafter defined), including, without limitation, all assets held pursuant to such Employee Benefit Plans.                                1.2.8 Prepaid Expenses. Any prepaid expenses.                                1.2.9 Inter- or Intra-Company Receivables. Any receivables related to any transactions between or among the Sellers.                 1.3.         Conveyance. Subject to the provisions of Article 6 and Section 9.2, at the Closing Sellers will Transfer to Purchaser good and marketable title to the Assets, in each case free and clear of any Liens other than Permitted Liens (each as hereinafter defined). 2.         PURCHASE PRICE                 2.1.         Closing Payment. In consideration of the Transfer of the Assets and the other undertakings of Sellers hereunder, (i) Purchaser will pay to Sellers at Closing $6,250,000 U.S. Dollars, plus the amount of the Estimated Purchase Price Increase or less the amount of the Estimated Purchase Price Reduction (each as hereinafter defined), as the case may be (the "Purchase Price") and (ii) Purchaser will assume the Assumed Liabilities.                 2.2.         Purchase Price Adjustment.                 (a)         Not later than 5:00 p.m. Nashville time on September 18, 2000, the parties shall agree on the approximate amount of the Purchase Price Increase (as hereinafter defined) or the Purchase Price Reduction (as hereinafter defined), as the case may be. Such estimated amount is hereinafter referred to as the "Estimated Purchase Price Increase" or the "Estimated Purchase Price Reduction," as the case may be. If Purchaser and Sellers are unable to reach an agreement regarding the Estimated Purchase Price Increase or Reduction, as the case may be, Purchaser and Sellers agree that the Closing shall nevertheless occur and that Purchaser shall pay to Seller an amount equal to $6,250,000 U.S. Dollars, plus the amount of the Purchase Price Increase estimated by Purchaser or less the amount of the Purchase Price Reduction estimated by Purchaser, as the case may be, and Purchaser shall place in escrow an amount of money equal to the difference between the amount estimated by Sellers and the amount estimated by Purchaser (which deposit shall constitute partial payment of the Purchase Price).                 (b)         As promptly as practical following the Closing Date, Sellers will provide to Purchaser a schedule (the "Preliminary Purchase Price Adjustment Schedule") setting forth the following valuations as of the close of business on the day prior to the Closing Date: (i) the total collections by the Division with respect to services not yet performed or products not yet delivered by the Division (the "Pre-Billed Amounts"); (ii) the revenue attributable to customer contracts with respect to which invoices have not been sent (the "Work-in-Process Amount"); (iii) the pro rata share of the amounts previously paid by Sellers with respect to real property taxes and assessments, leases with respect to leased real and personal property, utilities, service and maintenance contracts and other contracts included in the Assets, to the extent that the same relate to periods after the Closing Date and any security deposits with respect to leased property (the "Apportioned Amounts"); (iv)  the estimated amount of the accounts payable of the Division as of the close of business on the day prior to the Closing Date (the "Retained A/P Amount"); and (v) the estimated net book value of the Inventory on hand as of the close of business on the day prior to the Closing Date calculated in accordance with the procedures set forth in Schedule 2.2(b) (the "Inventory Valuation"). The excess, if any, of (i) the sum of the Pre-Billed Amounts, the Retained A/P Amount, the fee payable to Purchaser pursuant to Section 3.1 of that certain Accounts Receivable and Payable Management Agreement ($175,000) (the "Upfront Collection Fee") and the amount attributable to unpaid software license fees ($82,500) (the "License Fee Amount") over (ii) the sum of the Work-in-Process Amount, the Apportioned Amounts and the Inventory Valuation shall constitute a "Purchase Price Reduction." The excess, if any, of (i) the sum of the Work-in-Process Amount, the Apportioned Amounts and the Inventory Valuation over (ii) the sum of the Pre-Billed Amount, the Retained A/P Amount, the Upfront Collection Fee and the License Fee Amount shall constitute a "Purchase Price Increase."                 (c)         Sellers shall deliver the Preliminary Purchase Price Adjustment Schedule to Purchasers as promptly as practical after Closing. Purchaser shall have 20 calendar days following receipt of the Preliminary Purchase Price Adjustment Schedule during which to notify Sellers of any dispute of any item contained in the Preliminary Purchase Price Adjustment Schedule, which notice shall set forth in reasonable detail the basis for such dispute. During such 20-day period, the Sellers shall give the Purchaser and its accountants access on reasonable notice to all books, records, personnel and work papers of the Sellers that relate to the preparation of the Preliminary Purchase Price Adjustment Schedule. If the Purchaser does not notify the Sellers of any dispute within such 20 calendar-day period, the Preliminary Purchase Price Adjustment Schedule shall be deemed to be the "Final Purchase Price Adjustment Schedule". The Purchaser and the Sellers shall cooperate in good faith to resolve any dispute as promptly as possible, and upon such resolution, the Final Purchase Price Adjustment Schedule shall be prepared in accordance with the agreement of the Purchaser and the Sellers. If the Purchaser and the Sellers are unable to resolve any dispute regarding the Preliminary Purchase Price Adjustment Schedule within 15 calendar days (or such longer period as the Purchaser and the Sellers shall mutually agree in writing) of notice of a dispute, the Purchaser and the Sellers shall engage a mutually agreeable "Big 5" accounting firm, other than Ernst & Young LLP (the "Arbitrator") to determine the Final Purchase Price Adjustment Schedule and such determination shall be final and binding on the parties. If the parties are unable to agree upon an accounting firm to serve as the Arbitrator, a representative of Ernst & Young LLP selected by Purchaser and a representative of the Sellers' independent accounting firm selected by Sellers shall select a "Big 5" accounting firm (other than themselves) to be such Arbitrator. The Arbitrator shall use commercially reasonable efforts to complete its work within 30 calendar days of its engagement. The expenses of the Arbitrator shall be shared equally by Purchaser and Sellers.                 (d)         Within five business days after the determination of the Final Purchase Price Adjustment Schedule, and absent any dispute regarding the Estimated Purchase Price Increase or Reduction, as the case may be, Purchaser shall pay Sellers an amount equal to (x) the amount by which the Purchase Price Increase as set forth on the Final Purchase Price Adjustment Schedule exceeds the Estimated Purchase Price Increase or (y) the amount by which the Estimated Purchase Price Reduction exceeds the Purchase Price Reduction set forth on the Final Purchase Price Adjustment Schedule, or Sellers shall pay Purchaser an amount equal to (x) the amount by which the Estimated Purchase Price Increase exceeds the Purchase Price Increase shown on the Final Purchase Price Adjustment Schedule or (y) the amount by which the Purchase Price Reduction as set forth on the Final Purchase Price Adjustment Schedule exceeds the Estimated Purchase Price Reduction. In the event a dispute regarding the Estimated Purchase Price results in a deposit of funds into escrow, then within five (5) business days after the determination of the Final Purchase Price Adjustment Schedule, the Purchaser or the Sellers shall pay the other the amount determined as follows:                 (A) (i)         if the Purchase Price Increase set forth on the Final Purchase Price Adjustment Schedule exceeds the amount estimated by Purchaser; (ii) if the amount of the Purchase Price Reduction estimated by Purchaser exceeds the amount of the Purchase Price Reduction set forth on the Final Purchase Price Adjustment Schedule; or (iii) if Purchaser estimated a Purchase Price Reduction and the Final Purchase Price Adjustment Schedule sets forth a Purchase Price Increase, Purchaser shall pay Sellers (which payment may be made in whole or in part by the disbursement of the amount placed in escrow to Sellers, with any remainder being returned to Purchaser) an amount equal to the excess of (x) the Purchase Price Increase set forth on the Final Purchase Price Adjustment Schedule over the amount of the Purchase Price Increase or Purchase Price Reduction, as the case may be, estimated by Purchaser or (y) the Purchase Price Reduction estimated by Seller over the Purchase Price Reduction set forth on the Final Purchase Price Adjustment Schedule; or                 (B) (i)         if the Purchase Price Reduction set forth on the Final Purchase Price Adjustment Schedule exceeds the amount estimated by Purchaser; (ii) if the Purchase Price Increase estimated by Purchaser exceeds the Purchase Price Increase set forth on the Final Purchase Price Adjustment Schedule; or (iii) if Purchaser estimated a Purchase Price Increase and the Final Purchase Price Adjustment Schedule sets forth a Purchase Price Reduction, the amount placed in escrow shall be paid to Purchaser and Sellers shall pay Purchaser an amount equal to the excess of (x) the Purchase Price Reduction set forth on the Final Purchase Price Adjustment Schedule over the amount of the Purchase Price Increase or Reduction, as the case may be, estimated by Purchaser or (y) the Purchase Price Increase set forth on the Final Purchase Price Adjustment Schedule; and                 (C)         Interest on the amount placed in escrow shall be disbursed to Purchaser or Sellers in proportion to the respective amounts disbursed to them.                 2.3.         Method of Payment. All payments from one party to another under this Agreement shall be made by wire transfer of immediately available federal funds to an account designated in writing by the person or entity to receive such payment at least two business days prior to the applicable payment date.                 2.4.         Allocation. For purposes of determining both Purchaser's basis in the Assets and Sellers' gain or loss with respect to the transactions contemplated by this Agreement pursuant to Section 1060 of the Internal Revenue Code of 1986, as amended from time to time (the "Code"), and the Treasury Regulations promulgated thereunder, certain of the Assets will be valued in accordance with Schedule 2.4. Purchaser and Sellers will use such values (subject to such changes as may be hereafter agreed to by Purchaser and Sellers in writing) in preparing and filing their respective Forms 8594 with the Internal Revenue Service with respect to the transactions contemplated by this Agreement. 3.         ASSUMPTION OF LIABILITIES                 3.1.         Assumed Liabilities. As partial consideration for the purchase of the Assets, Purchaser shall assume as of the Closing Date the following liabilities of the Sellers to the extent arising on or after the Closing Date: (i) all obligations of Sellers pursuant to the real property leases listed on Schedule 1.1.1 to the extent that the same are disclosed on the face of such real property lease or otherwise disclosed to Purchaser in writing at the time of the execution of this Agreement; (ii) all obligations of Sellers pursuant to the Contracts to the extent that the same are disclosed on the face thereof or otherwise disclosed to Purchaser in writing at the time of the execution of this Agreement, including, without limitation, the obligation of the applicable Seller to pay all amounts unpaid on the Closing Date with respect to the sorter equipment recently installed in the Division's Franklin, Tennessee headquarters; (iii) all obligations of Sellers pursuant to the Permits to the extent disclosed to Purchaser in writing at the time of the execution of this Agreement; (iv) all obligations of Sellers pursuant to any customer proposals outstanding on the Closing Date to the extent that the same are disclosed on the face thereof or otherwise disclosed to Purchaser in writing at the time of the execution of this Agreement; (v) the obligations of BBC with respect to the Division set forth in the Transition Support Agreement, by and between BBC and ProCare Pharmacy, Inc.; and (vi) the obligations of Sellers to pay license fees with respect to Sellers' unlicensed use of the software products named on Schedule 3.1 prior to the Closing Date (collectively, the "Assumed Liabilities"). Except to the extent specified in the previous sentence, Purchaser shall not assume any liability or obligation of Sellers whatsoever, and Sellers shall retain responsibility for all liabilities and obligations accrued or incurred prior to the close of business on the day prior to the Closing Date, whether known or unknown, and all liabilities and obligations arising from Sellers' operation of the Business prior to the close of business on the day prior to the Closing Date, whether or not accrued or whether or not disclosed. Sellers agree to pay and settle all of such liabilities and obligations (other than the Assumed Liabilities) in a timely manner.                 3.2.         Purchaser's Obligations. Purchaser hereby assumes and agrees to pay, discharge or perform, as appropriate, when due, the Assumed Liabilities. Purchaser shall also be responsible for any claim, loss, liability, damage, cost or expense which arises out of the conduct of the Business by Purchaser on or subsequent to the Closing Date.                 3.3.         Excluded Liabilities. Except for the Assumed Liabilities, in no event shall Purchaser assume, agree to pay, satisfy or discharge or otherwise have any responsibility for any liabilities or obligations of Sellers, and Assumed Liabilities shall not include any liabilities or obligations in respect of the following: (i) for accrued salary, severance pay, paid time off, officers' incentive sales bonuses, any other bonuses and the like related to employee compensation for any period or portion of a period prior to the Closing Date; (ii) for Taxes (as hereinafter defined) of Sellers or any prior owner of the Business of any kind or for any period; (iii) any liability or obligation of Sellers whatsoever which accrued at any time prior to the Closing Date, whether or not such liability or obligation arises prior or subsequent to the Closing Date, including, without limitation, any distributions payable, debt or notes payable (including, without limitation, bank overdrafts), insurance related liabilities (whether known or unknown), including workers' compensation claims (asserted or unasserted, whether or not reported and whether or not reserved for, and including liability for the payment of deductible amounts), and litigation or claims (including, without limitation, EEOC and employment practices claims); (iv) any liability or obligation of Sellers relating to or arising from Sellers' breach of, default under or failure to comply with, at any time prior to the Closing Date, whether or not such liability or obligation arises prior or subsequent to the Closing Date, any Assumed Liability or Sellers' failure in a timely manner to pay or perform any other liability or obligation which accrued at any time prior to the Closing Date, whether or not such liability or obligation arises prior to or subsequent to the Closing Date; (v) any liability or obligation of Sellers (whether or not such liability or obligation arises prior to or subsequent to the Closing Date) arising solely out of or with respect to any third party or governmental claim pending on the Closing Date or thereafter initiated based on or arising out of the operation of the Business prior to the Closing Date, including, without limitation, any liability or obligation of Sellers relating to any investigation by any governmental agency of any of the Division's facilities or operations that is pending on the Closing Date; (vi) any liability or obligation of Sellers relating to the breach of any Law (including, without limitation, Environmental Laws (as hereinafter defined) and labor laws); (vii) any liability or obligation of Sellers under or relating to any Employee Benefit Plan (including, without limitation, any employment agreements outstanding with Sellers), whether or not such liability or obligation arises prior to or subsequent to the Closing Date; (viii) any liability or obligation of Sellers arising out of or incurred in connection with the negotiation, preparation and execution of this Agreement and the transactions contemplated hereby and any fees and expenses of counsel, accountants, brokers, financial advisors or other experts of Sellers; and (ix) except for the Assumed Liabilities, any other claim, loss, liability, obligation, damage, cost or expense of Sellers.                 3.4.         Breach of Representations. Subject to Article 8, nothing in Section 3.1 shall limit Purchaser's right to indemnification for the breach by Sellers of any of its representations and warranties contained herein.                 3.5.         Insurance. With respect to any loss, liability or damage relating to, resulting from or arising out of the conduct of the Business of Sellers prior to the Closing Date for which Purchaser may be liable pursuant to Section 3.1 and for which Sellers would be entitled to assert, or cause any other person or entity to assert, a claim for recovery under any policy of insurance maintained by or for the benefit of Sellers ("Insurance"), at the request of Purchaser, Sellers will use reasonable efforts to assert, or to assist Purchaser to assert, one or more claims under such Insurance covering such loss, liability or damage, provided that all of Sellers' or any of Sellers' Affiliates' costs and expenses incurred with respect to third parties in connection with the foregoing are promptly reimbursed by Purchaser. Notwithstanding Section 3.1, Sellers will be deemed, solely for the purpose of asserting claims for Insurance pursuant to the immediately preceding sentence, to have retained liability for such loss, liability or damage to the extent of the policy limits of the applicable policy of Insurance. 4.         REPRESENTATIONS AND WARRANTIES                 4.1.         Representations and Warranties of Sellers. Sellers, jointly and severally, represent and warrant to Purchaser as follows:                                 4.1.1. Corporate Organization. Schedule 4.1.1 sets forth a complete and accurate list for Sellers of their respective names and jurisdictions of organization. Each Seller is a corporation or limited liability company, as the case may be, duly organized, validly existing and in good standing under the Laws of the State of its organization and has all requisite corporate power and authority and all Permits necessary to own, lease or otherwise hold the Assets and to carry on the Business as presently conducted. Insofar as is related to the Business, each Seller is duly licensed and qualified to do business as a foreign corporation or other entity and is in good standing in each jurisdiction listed in Schedule 4.1.1.                                 4.1.2. Authorization and Effect of Agreement. Sellers have all requisite power and authority to execute and deliver this Agreement and all of the other agreements, certificates and other documents delivered or to be delivered on or after the date hereof and at or prior to the Closing in connection with the transactions contemplated hereby (the "Ancillary Documents") to which each is or will be a party, and to consummate the transactions contemplated hereby and thereby. The execution and delivery by Sellers of this Agreement and the Ancillary Documents to which each is or will be a party and the consummation by Sellers of the transactions contemplated hereby and thereby to be consummated by the Sellers have been duly authorized by all necessary corporate action on the part of Sellers, including, without limitation, all requisite approval by the stockholders of the Sellers pursuant to the Articles of Incorporation or By-Laws or other organizational documents of Sellers or otherwise. This Agreement and the Ancillary Documents to which each Seller is or will be a party have been or will be, as the case may be, duly executed and delivered by each Seller and constitute or will constitute, as the case may be, valid and binding obligations of Sellers, enforceable in accordance with their respective terms, except as enforceability may be limited by bankruptcy, insolvency or other similar Laws of general application affecting the enforcement of creditors' rights or by general principles of equity limiting the availability of equitable remedies (whether applied in a proceeding at law or equity).                                 4.1.3. No Restrictions Against Sale of the Assets. The execution and delivery by the Sellers of this Agreement and the Ancillary Documents to which each Seller is or will be a party do not, and the performance by each Seller of the transactions contemplated hereby and thereby to be performed by it will not, conflict with, or result in any violation of, or constitute a default (with or without notice or lapse of time, or both) under, any provision of the organizational documents of any Seller or any Contract, Permit or Law applicable to the Division, the Business or the Assets, or give rise to any right by any third party to terminate or accelerate the performance or payment under any Contract, other than any such conflicts, violations, defaults or rights (i) which are listed or described on Schedule 4.1.3 or (ii) which individually or in the aggregate do not have a material adverse effect on the business, financial condition or results of operations of the Business. Except as listed or described on Schedule 4.1.3, no material consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Agency is required to be obtained or made by or with respect to any Seller in connection with the execution and delivery by the Sellers of this Agreement or the Ancillary Documents to which each Seller is or will be a party or the consummation by it of the transactions contemplated hereby and thereby to be consummated by the Sellers.                                 4.1.4. Financial Statements. Attached hereto as Schedule 4.1.4 are true and complete copies of the unaudited financial statements of the Division, consisting of: (i) the pro forma balance sheet of the Division together with the related statement of income of the Division for the fiscal year ended September 30, 1999 and (ii) the pro forma statement of income of the Division for the period ended on August 31, 2000 (collectively, the "Financial Statements.")  The Financial Statements referred to above are correct and complete, in all material respects, and present fairly, in all material respects, the financial position of the Business and the results of its operations as of and for the periods indicated, subject to year-end audit adjustments which are solely of a normal, recurring and immaterial nature. The Financial Statements are based on the books and records of the Business, which have been kept, and such Financial Statements have been prepared, in accordance with generally accepted accounting principles ("GAAP"), consistently applied. The monthly pro forma financial statements for the Division for each month in the period of January through July, 2000 provided to Purchaser were prepared on a basis consistent with the Financial Statements.                                 4.1.5. No Material Adverse Change Relating to the Business. Except as described on Schedule 4.1.5, since August 31, 2000, the Business has been conducted in the ordinary course and Sellers have not (a) suffered, individually or in the aggregate, any material adverse change in the business, financial condition or results of operations of the Business; (b) suffered any damage, destruction or casualty loss which individually or in the aggregate materially and adversely affects the business, financial condition or results of operations of the Business; (c) incurred or discharged any material obligation or liability except in the ordinary course of business; or (d) entered into any material transaction or made any material expenditures or commitments not in the ordinary course of its business consistent with past practice except as specified in or contemplated by other sections of this Agreement.                                 4.1.6. Compliance with Laws. Except as listed or described on Schedule 4.1.6, the Business is not being conducted in violation of, and none of Sellers nor any of Sellers' Affiliates has received any notice of any current violation of, any applicable Law, other than violations which do not, individually or in the aggregate, have a material adverse effect on the business, financial condition or results of operations of the Business.                                 4.1.7. Assets used in the Business. Except for the Excluded Assets, the Assets constitute all of the material assets and properties used primarily in the conduct of the Business as presently conducted. Except for the Excluded Assets, there are no assets or properties used in the conduct of the Business as presently conducted which, individually or in the aggregate, are material to the conduct of the Business, or necessary for its operation, or customarily used in the Business, and are not included in the Assets. Except for the Excluded Assets and except as set forth on Schedule 4.1.7, the Assets include all assets and properties reflected in any account set forth on the Schedule of Balance Sheet Accounts and all assets and properties from which any income of the Business was derived, other than assets and properties disposed of by Sellers or any Affiliate of Sellers since August 31, 2000, in the ordinary course of business without violation of this Agreement, including Section 5.6.                                 4.1.8. Assets other than Real Property. Sellers have good and marketable title to the Assets free and clear of all mortgages, liens, security interests, imperfections of title or other encumbrances (collectively, "Liens"), except for (a)  Liens that are listed or described on Schedule 4.1.8, (b) mechanics', carriers', workmen's, repairmen's or other like Liens arising or incurred in the ordinary course of business and (c) Liens for real estate taxes, assessments and other similar governmental charges which are not currently due and payable or which may thereafter be paid without penalty or which are being contested in good faith. The Liens referred to in clauses (b) and (c) of the exception in the immediately preceding sentence are hereinafter referred to as "Permitted Liens". Except as set forth on Schedule 4.1.8, all Tangible Personal Property is in good operating condition, having been maintained in accordance with the practices followed by comparable businesses, and is reasonably adequate for the operation of the Business as presently conducted, normal wear and tear excepted.                                 4.1.9. Real Property. Except for the Leased Real Property, Sellers do not own any fee or leasehold or other interests in any real property used in the conduct of the Business or necessary for the continued conduct of the Business as presently conducted. Schedule 1.1.1 lists the present lessor and lessee under each lease of the Leased Real Property. The condition of the Leased Real Property is such that it will not materially adversely affect the operations of the Business on or from such Leased Real Property. All of the improvements on land intended to be included in the Assets are in good operating condition, having been maintained in accordance with the practices followed by comparable businesses, in view of the purpose for which such improvements are being used, free of any material structural or engineering defects known to Sellers, normal wear and tear excepted.                                 4.1.10. Insurance. Schedule 4.1.10 sets forth a list and description, including policy numbers, names and addresses of insurers and expiration dates, of all material policies of fire, liability and other forms of insurance in effect as of the date hereof maintained by Sellers or any of Sellers' Affiliates with respect to the Business or the Assets (all of which (or similar policies) will be maintained in effect until the Closing). All such policies are in full force and effect and all premiums due and payable in respect thereof have been paid. Since the respective dates of such policies, no notice of cancellation or non-renewal with respect to any such policy has been received by Sellers. Schedule 4.1.10 sets forth a list of all pending claims and the status as of the date of this Agreement of all deductibles with respect to all such policies as of the date of this Agreement, and loss runs since January 1, 1999, with respect to such policies. No insurance coverage or insurance policy, or any interest therein, relating to the Business or the Assets will be conveyed by Sellers to Purchaser in connection with the consummation of the transactions contemplated by this Agreement.                                 4.1.11. Intellectual Property.                                 (a)         There are no material United States and foreign patents, trademarks, trade names, service marks, copyrights or applications therefor (hereinafter the "Patent and Trademark Rights") owned by Sellers and used primarily in the Business. To the knowledge of Sellers, the Business as now conducted does not conflict with and has not been alleged to conflict with any patents, trademarks, trade names, service marks or copyrights of others.                                 (b)         Schedules 1.1.7A and 1.1.7B set forth a complete and correct list of (i) all computer software programs that are proprietary to Sellers (the "Proprietary Software") and used primarily in the Business; (ii) all computer software programs licensed to Sellers that are material to the conduct of the Business (other than "off-the-shelf" software licensed to Sellers) (the "Licensed Software" and together with the Proprietary Software, collectively, the "Software"); (iii) all agreements relating to Licensed Software; and (iv) all agreements relating to the use by third parties of any Software. Sellers own or possess valid license rights to all Licensed Software. There are no infringement suits, actions or proceedings pending or, to the knowledge of Sellers, threatened against Sellers with respect to any Software. To the knowledge of the Sellers, there are no infringement suits, actions or proceedings pending or threatened against the owner of any Licensed Software. Sellers' license, sublicense, agreement or permission covering the Licensed Software is (i) legal, valid, binding and enforceable and is in full force and effect and (ii) has not been breached by any Sellers or, to the knowledge of the Sellers, the third-party. Subject to receipt of any consents described in Section 4.1.3 that are applicable to the Licensed Software, the consummation of the transactions contemplated hereby will not result in the loss or impairment of Sellers' right to use any Licensed Software that is material to the operations of the Business following the Closing.                                 4.1.12. Litigation; Decrees. Except as listed or described on Schedule 4.1.12, there are no lawsuits, claims, administrative or other proceedings and investigations pending or, to the knowledge of Sellers, threatened by, against or affecting Sellers or any of Sellers' Affiliates, arising out of or relating to the conduct of the Business or otherwise which, if determined adversely, could, individually or in the aggregate, reasonably be expected to have a material adverse effect on the business, financial condition or results of operations of the Business. Sellers are not aware of any facts or circumstances that could be reasonably expected to give rise to any such suits, claims, investigations or proceedings. Except as set forth on Schedule 4.1.12, no Seller is in default under any judgment, order or decree to which any Seller is a party, or that, to Sellers' knowledge, is applicable to the conduct of the Business or the Assets. There is no material condemnation proceeding pending or, to the knowledge of Sellers, threatened against any of the Real Property.                                 4.1.13. Contract Rights. Except as listed or described on Schedule 1.1.1, 4.1.13, or 4.1.14, no Seller is a party to or bound by any Contract relating to the Business that is of a type described below:                                (a)         Any written employment or consulting Contract (other than an Employee Benefit Plan (as hereinafter defined)) with an Employee that is not terminable at will by a Seller and that will require aggregate future payments in excess of $50,000 in the case of any one Contract or $100,000 in the aggregate for all Contracts of such type;                                  (b)         Any collective bargaining or other Contract with any labor union;                              (c)         Any Contract for capital expenditures or the acquisition, construction or modification of fixed assets which requires aggregate future payments of $50,000 or more in the case of any one Contract or $100,000 or more in the aggregate for all Contracts of such type;                                (d)         Any Contract (other than a Contract of the type referred to in clause (a) or (c) of this Section 4.1.13) (i) for the purchase of Inventory or (ii) for the purchase, maintenance or acquisition of materials, supplies, merchandise, equipment or other property or services (including consulting services) that, in the case of clause (ii), is not terminable at will and requires aggregate future payments or expenses in excess of $100,000;                                (e)         Any Contract for the sale of Inventory to customers and/or the provision of services to customers in connection with the Business (i) entered into in the ordinary course and for an amount of $50,000 or more, (ii) not entered into in the ordinary course of business or (iii) which is for a term of 12 months or more;                                (f)         Any purchase order not terminable at will by a Seller and requiring aggregate future payments of $50,000 or more;                                (g)         Any service contract not terminable at will by a Seller and for an amount of $50,000 or more;                                (h)         Any Contract relating to clean-up, abatement or other actions in connection with the remediation of any existing environmental liabilities or relating to the performance of any environmental audit or study;                                (i)         Any Contract not terminable at will by a Seller and granting to any person a right at such person's option to purchase or acquire any asset or property of the Business (or any interest therein) with a value in excess of $50,000 in the case of any one Contract or $100,000 in the aggregate for all Contracts of such type;                                (j)         Any license or royalty Contract providing for aggregate future payments in excess of $50,000 in the case of any one Contract or $100,000 in the aggregate for all Contracts of such type;                                (k)         Any Contract with any independent contractor or other agent having a remaining term in excess of one year and which by its terms is not terminable without penalty on 90 calendar days' or less notice;                                (l)         Any lease under which a Seller (i) is a lessee of, or holds or uses, any machinery, equipment, vehicle or other tangible personal property owned by a third party or (ii) is a lessor of, or makes available for use by any third party, any tangible personal property owned by a Seller, in either such case which lease requires aggregate annual payments in excess of $100,000;                               (m)         Any Contract with any manufacturer, supplier or customer with respect to discounts or allowances or extended payment terms, except for Sellers' standard discount terms;                                (n)         Any Contract that would restrict the Purchaser from conducting the Business;                                (o)         Any Contract giving any party the right to renegotiate prices or require a reduction in prices or the repayment of any amount previously paid and involving potential payments in excess of $50,000 in the case of any one Contract or $100,000 in the aggregate for all such Contracts; and                                (p)         Any other Contract which involves future payment or performance valued at $100,000 or more.                                 True and complete copies of all the Contracts required to be listed on Schedule 4.1.13 or any other Schedule hereto (including, without limitation, Schedules 1.1.1 and 4.1.14) have been furnished or made available to Purchaser. Except as set forth on Schedule 1.1.1 or 4.1.13, (i) Sellers and (to the knowledge of Sellers) the other parties thereto, have performed in all material respects all obligations required to be performed by them to date under the Contracts (including without limitation those listed on Schedule 1.1.1, Schedule 4.1.13 or on any other Schedule hereto) and are not (with or without the lapse of time or the giving of notice, or both) in breach or default in any respect thereunder, except for such failures to perform, breaches and defaults which, individually or in the aggregate, do not, and, insofar as reasonably can be foreseen, in the future will not, have a material adverse effect on the business, financial condition or results of operations of the Business, and (ii) all Contracts required to be listed on Schedule 4.1.13 or on any other Schedule hereto (including, without limitation, Schedule 1.1.1) are valid, in full force and effect and enforceable in accordance with their respective terms, except where the failure thereof does not individually or in the aggregate have a material adverse effect on the business, financial condition or results of operations of the Business.                                 4.1.14. Employee Contracts, Union Agreements and Benefit Plans.                                (a)         Except as set forth on Schedule 4.1.14(a), there are no material Employee Benefit Plans (as hereinafter defined) that cover current or former employees or independent contractors of the Division. Except as described on Schedule 4.1.14(a), the transactions contemplated by this Agreement will not result in any additional or accelerated payments to, or increase the vested interest of, any current or former officer, employee or director of the Division or their dependents under any Employee Benefit Plan. Except as set forth on Schedule 4.1.14(a), all of the Employee Benefit Plans that cover current or former employees of the Division are currently in effect. All Employee Benefit Plans that cover current or former employees of the Division and that are welfare plans providing or offering benefits to retirees or are retirement plans intended to be qualified under Section 401(a) of the Code are identified as such on Schedule 4.1.14(a). Sellers do not and Sellers' "ERISA Affiliates" (as hereinafter defined) do not maintain, contribute to, or participate in, or have within the past six months contributed to, or participated in a multiemployer plan within the meaning of "ERISA" (as hereinafter defined)  Section 4001(a)(3). No fact exists that could subject Purchaser to any liability after the Closing under Title IV of ERISA in connection with an Employee Benefit Plan. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "Employee Benefit Plans" means any plans, programs, agreements, arrangements, commitments, policies or understandings of any kind that provide compensation, remuneration or benefits of any kind or description whatsoever (whether current or deferred and whether paid in cash or in kind) in any way, including all employment, consulting or collective bargaining contracts, and deferred compensation, pension (as defined in Section 3(2) of ERISA), multiemployer (as defined in Section 3(37)(A) of ERISA), profit sharing, thrift, stock ownership, severance, stock appreciation rights, bonus, stock option, stock purchase or other nonqualified or compensation commitments, arrangements or plans, including all welfare plans (as defined in Section 3(1) of ERISA), of or pertaining to the present or former officers, directors, independent contractors or employees (including retirees), or their dependents, of Sellers and any ERISA Affiliate or any predecessors in interest thereto, that are currently in effect or as to which any Sellers, or any ERISA Affiliate, has any ongoing liability or obligation whatsoever. "ERISA Affiliate" means each trade or business (whether or not incorporated) that together with the Sellers is treated as a single employer pursuant to Sections 414(b),(c),(m) or (o) of the Code.                                (b)         Each Employee Benefit Plan intended to be qualified under Section 401(a) of the Code has, as currently in effect, been determined to be so qualified by the IRS and, to the knowledge of Sellers, has been maintained in compliance in all material respects with its terms and continues to satisfy the requirements for such qualification.                                (c)         To the knowledge of Sellers, no action, suit, proceeding, hearing or investigation with respect to the administration or investment of assets of any Employee Benefit Plan intended to be qualified under Section 401(a) of the Code that covers employees of the Division (other than routine claims for benefits) is pending or threatened, and no, to the knowledge of Sellers, audit or investigation by any domestic or foreign governmental or law enforcement agency is pending or has been proposed with respect to any Employee Benefit Plan that covers employees of the Division.                                 4.1.15. Labor Relations.                                (a)         Except as set forth on Schedule 4.1.15, (i) the employees of the Business have not been and are not represented by a labor organization which was either National Labor Relations Board ("NLRB") certified or voluntarily recognized; (ii)  no Seller has been and is not a signatory to a collective bargaining agreement with any labor organization that relates in any way to the Business; (iii) no representation election petition has been filed by employees of the Business or is pending with the NLRB and, to Sellers' knowledge, no union organizing campaign involving employees of the Business has occurred or is in progress; (iv) no NLRB unfair labor practice claims relating to the Business have been filed and/or are presently pending against any Seller or any labor organization representing the employees of the Business; (v) no grievance or arbitration demand, whether or not filed pursuant to a collective bargaining agreement, is pending against any Seller with respect to the employees of the Business; (vi) to Sellers' knowledge, no hand billing, picketing, work stoppage (sympathetic or otherwise), or other "concerted action" involving the employees of the Business has occurred or is in progress; (vii) no breach of contract and/or denial of fair representation claim relating to the Business is pending against any Seller and/or any labor organization representing the employees of the Business; (viii) no claim for unpaid wages or overtime or for child labor or record keeping violations is pending under the Fair Labor Standards Act, Davis-Bacon Act, Walsh-Healey Act or Service Contract Act or any other federal, state, local or foreign law, regulation or ordinance with respect to the Business; (ix) no discrimination and/or retaliation claim has been filed or is pending against any Seller under the 1866 or 1964 Civil Rights Acts, the Equal Pay Act, the Age Discrimination in Employment Act, as amended, the Americans with Disabilities Act, the Family and Medical Leave Act ("FMLA"), the Fair Labor Standards Act, ERISA or any other federal law or any comparable state fair employment practices act or foreign law regulating discrimination in the workplace with respect to the Business; (x) if any Seller is a federal or state contractor obligated to develop and maintain an affirmative action plan, no discrimination claim, show cause notice, conciliation proceeding, sanctions or debarment proceeding has been filed or is pending with Office of Federal Contract Compliance Programs or any other federal agency or any comparable state or foreign agency or court and no desk audit or on-site review is in progress with respect to the Business; (xi) no citation has been issued or threatened by the Occupational Safety and Health Administration ("OSHA") against any Seller with respect to the Business and no notice of contest or OSHA administrative enforcement proceeding involving any Seller has been filed since January 1, 1999, or is pending with respect to the Business; (xii) no workers' compensation or retaliation claim has been filed or is pending against any Seller with respect to the Business; (xiii) to Sellers' knowledge, no group of the Division's employees has any plans to terminate his or its employment; (xiv) no citation of the Sellers has occurred since January 1, 1999, and no enforcement proceeding has been initiated, threatened, or is pending under Federal or foreign immigration law; and (xv) except for the transactions contemplated by this Agreement, no Seller has taken any action that would constitute a "mass layoff" or "plant closing" within the meaning of the Worker Adjustment and Retraining Notification Act (the "WARN Act") or otherwise trigger notice requirements or liability under any local or state plant closing notice law. Each Seller is in compliance with respect to the Division in all material respects with all federal, state and local laws respecting employment and employment practices, terms and conditions of employment, wages and hours, and is not engaged in any unfair labor or unlawful employment practice.                                (b)         Sellers have made all filings required by the Occupational Safety and Health Act, Executive Order 11246 and other similar federal, state and local laws, regulations and orders, including all filings with the Equal Employment Opportunity Commission and any other filings relating to affirmative action or similar programs with respect to the Business. Sellers have previously delivered or made available to Purchaser all material reports and filings made or filed by them with respect to such matters.                                 4.1.16. Divisional Personnel. Schedule 4.1.16 sets forth the names, locations of service, salary or rate of pay and classification of all personnel employed with respect to the Business as of the date of this Agreement. Schedule 4.1.16 sets forth the date and amount of the last salary or rate of pay increase for each such person whose 1999 annual compensation exceeded $25,000. No Seller has received a claim from any Governmental Agency to the effect that such Seller has improperly classified as an independent contractor any person listed on Schedule 4.1.16, or any similarly situated person.                                 4.1.17. No Undisclosed Liabilities. No Seller and no Affiliate of Seller has any liability, obligation or commitment of any nature (absolute, accrued, contingent or otherwise) in respect of the Assets or the Business except (i) a liability which is fully reflected as a liability or reserved for in an account included on the Financial Statements at August 31, 2000, to the extent required by generally accepted accounting principles, (ii) a liability which has been incurred in the ordinary course of business consistent with past practice and without violation of this Agreement, since August 31, 2000, and (iii) a liability which is disclosed in a Schedule hereto. The terms "liability," "obligation" and "commitment" as used in this Section 4.1.17 shall have the meanings accorded to them by generally accepted accounting principles.                                 4.1.18. Environmental Protection.                                (a)         Definitions. For purposes of this Agreement, the following terms shall have the following meanings:                                "Environmental Laws" means federal, state and local statutes, ordinances, regulations and codes, and other applicable Laws relating to pollution, protection of the environment, public health and safety, or pharmacy practice as amended or reauthorized, including without limitation, the Comprehensive Environmental Response Compensation and Liability Act of 1980, as amended (42 U.S.C. S 9601 et seq.); the Resource Conservation and Recovery Act, as amended (42 U.S.C. S 6901 et seq.); the Toxic Substances Control Act, as amended (15 U.S.C. S 2601 et seq.); the Controlled Substances Act, as amended (21 U.S.C. S 801 et seq.); the Controlled Substances Import and Export Act (21 U.S.C. S 951 et seq.) and any applicable state pharmacy practice laws; and the Federal Food, Drug and Cosmetic Act (21 U.S.C. S 301 et seq.) and any equivalent state laws.                                "Hazardous Substances" means, without limitation, any explosive or radioactive material, asbestos, wastewater and sludges derived from wastewater, urea formaldehyde foam insulation, polychlorinated biphenyls, petroleum and petroleum based products, methane, hazardous waste, toxic or hazardous substances or related materials, or any controlled substances, as defined in the Environmental Laws.                                (b)         Except as set forth on Schedule 4.1.18(b):               (i)         Sellers are in compliance in all material respects with all applicable Environmental Laws with respect to the properties, assets (including the Assets) and operations comprising the Business.               (ii)         Sellers have obtained and adhered, in all material respects, to all permits and other approvals, necessary to conduct the Business as presently conducted and to store, dispose of and otherwise handle Hazardous Substances and, to Sellers' knowledge have reported, to the extent required by Environmental Laws, all past and present sites owned, leased or operated by them where Hazardous Substances have been treated, stored or disposed.               (iii)         Except in accordance with applicable Environmental Laws: (i) no Hazardous Substance has been released (as that term is defined in the applicable Environmental Laws) by Sellers at or on any of the property owned, leased or operated by Sellers in the Business during the period in which Sellers have owned, leased or operated such property, and (ii) to the knowledge of Sellers, no Hazardous Substance has ever been released at or on any of the property owned, leased or operated in the Business by Sellers.               (iv)         Sellers have not received any written notice, claim or request for information relating to any on-site or off-site locations to which any of them has transported Hazardous Substances or arranged for the transportation of Hazardous Substances, alleging that any of them is liable for any clean-up cost, remedial work, damage to natural resources or personal injury.               (v)         There is no claim for violation of any Environmental Law pending or, to the knowledge of Sellers, threatened against Sellers with respect to the Business.               (vi)         Sellers have made available to Purchaser accurate and complete copies of all documents in their possession or under their control pertaining to all of the matters described in paragraphs (i) through (v) of this Section 4.1.18(b), including all environmental audits or assessments prepared by and for Sellers or, to Sellers' knowledge, any governmental authority or any third party (including any financial institution).                                 4.1.19. Tax Matters.                                (a)         For purposes of this Agreement, "Taxes" shall mean all taxes (including any taxes attributable to any Seller ceasing to be a member of an affiliated group as defined in Section 1504(a) of the Code), assessments, charges, duties, fees, levies or other governmental charges (including interest, penalties or additions associated therewith), including federal, state, city, county, foreign or other income, franchise, capital stock, real property, personal property, tangible, withholding, FICA, unemployment compensation, disability, transfer, sales, use, excise, gross receipts and all other taxes of any kind for which Sellers may have any liability imposed by the United States or any state, county, city, country or foreign government or subdivision or agency thereof, whether disputed or not.                                (b)         Except as otherwise disclosed on Schedule 4.1.19(b), (i) all returns, including estimated returns and reports of every kind, with respect to income and franchise Taxes to the extent imposed on Sellers with respect to the Business, which are due to have been filed in accordance with any applicable law, have been duly filed or extensions have been duly granted therefor, (ii) all income and franchise Taxes, deposits or other payments for which Sellers may have any liability through the Effective Date with respect to the Business, have been paid in full or are accrued as liabilities for such Taxes on the books and records of Sellers (excluding any part of such accrual established to reflect timing differences between book and tax income); (iii) the amounts so paid on or before the Effective Date, together with any amounts accrued as liabilities for income and franchise Taxes (whether accrued as currently payable or deferred Taxes but excluding any part of any such accrual established to reflect timing differences between book and tax income) on the books of Sellers with respect to the Business will be adequate to satisfy all liabilities for such Taxes of Sellers through the Effective Date, including such Taxes accruable upon income earned through the Effective Date; (iv) there are not now any extensions of time in effect with respect to the dates on which any returns or reports of income and franchise Taxes with respect to the Business were or are due to be filed; (v) all deficiencies asserted as a result of any examination of any return or report of income and franchise Taxes with respect to the Business have been paid in full, accrued on the books of Sellers or finally settled, and no issue has been raised in any such examination which, by application of the same or similar principles, reasonably could be expected to result in a proposed deficiency for any other period not so examined; (vi) no claims have been asserted and, to the knowledge of Sellers, no proposals or deficiencies for any income or franchise Taxes with respect to the Business are being asserted, proposed or threatened, and no audit or investigation of any return or report of such Taxes is currently underway, pending or, to the knowledge of Sellers, threatened; (vii) to the knowledge of Sellers, no claims have been asserted and no proposals or deficiencies for any Taxes other than income or franchise Taxes with respect to the Business are being asserted, proposed or threatened, and no audit or investigation of any return or report of such Taxes is currently underway, pending or threatened; (viii) there are no outstanding waivers or agreements by Sellers for the extension of time for the assessment of income or franchise Taxes with respect to the Business or deficiency thereof; (ix) there are no Liens for income or franchise Taxes with respect to the Business upon the Assets, except such Liens for current such Taxes not yet due, nor are there any such Liens which, to the knowledge of Sellers, are pending or threatened; and (x) to the knowledge of Sellers, there are no Liens for Taxes other than income and franchise taxes with respect to the Business, except for current Liens for such Taxes not yet due, nor are there any such Liens which are pending or threatened.                                 4.1.20. Brokers' and Finders' Fees. Other than the engagement of Merrill Lynch & Co., no Seller nor anyone acting on behalf of any Seller, has done anything to cause or incur any liability to any party for any brokers' or finders' fees or the like in connection with this Agreement or any transaction contemplated hereby.                                 4.1.21. Licenses and Permits. Schedule 4.1.21 contains a true and complete list of all material notifications, licenses, permits (including, without limitation, environmental, construction, operation, pharmacy, and controlled substance permits), franchises, certificates, approvals, exemptions, classifications, registrations and other similar documents and authorizations, and applications therefor (collectively, the "Licenses") necessary to the conduct of the Business or the lack of which would individually or in the aggregate have a material adverse effect on the business, financial condition or results of operations of the Business. The Sellers own or possess all Licenses that are necessary to enable the Division to carry on the Business as presently conducted. All such Licenses are valid, binding, and in full force and effect. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby will not adversely affect any such License (subject to the receipt of any consent necessary). Sellers have taken all necessary action to maintain each such License, except where the failure to so act is not likely to have a material adverse effect. No loss or expiration of any such License is pending or reasonably foreseeable (other than expiration upon the end of any term) or, threatened.                                 4.1.22. Books and Records. All the books, records and accounts included in the Assets are in all material respects true and complete, are maintained in all material respects in accordance with all Laws applicable to the Business, and accurately present and reflect in all material respects the transactions of the Business and the dispositions of the assets of the Business.                                  4.1.23. [Intentionally omitted.]                                 4.1.24. Major Suppliers and Customers. Schedule 4.1.24 sets forth a list of each supplier of goods or services to, and each customer of, the Division to whom Sellers paid or billed in the aggregate more than $50,000 during the 12-month period ended August 31, 2000, together with, in each case, the amount paid or billed during such period. Except as set forth on Schedule 4.1.24, no Seller has suffered any change in its relationship with any of such suppliers or customers which could reasonably be expected to have a material adverse effect on the revenues projected for such customer during Sellers' fiscal year 2000 as set forth on Schedule 4.1.24. Except as set forth on Schedule 4.1.24, no Seller has knowledge that the consummation of the transactions contemplated hereunder will have any adverse effect on its business relationship with any such customer, which, if such adverse effect occurred, could reasonably be expected to result in the loss of $50,000 or more of revenues from such customer during the 12-month period following the Closing Date. Except as set forth on Schedule 4.1.24, none of the officers or directors of any Seller, nor, to any Sellers' knowledge, any Related Person (as hereinafter defined), has any material financial interest in any supplier or customer of the Division. "Related Person" means, with respect to any director or officer of any Seller, a lineal ancestor or descendant of such director or officer, the spouse of such director or officer and any entity, partnership or joint venture in which such director or officer, or any of the other persons referred to in this sentence, owns 10% or more of the equity interests.                                 4.1.25. Inventory. All Inventory reflected on the balance sheet of the Business as of August 31, 2000 was acquired and has been maintained in the ordinary course of business; is of good and merchantable quality; consists substantially of a quality, quantity and condition usable, or saleable within six months in the ordinary course of business; is valued at the lower of cost or market on a weighted average basis and otherwise in accordance with GAAP and consistent with past practices; and is not subject to any material write-down or write-off for which an appropriate reserve was not included in the balance sheet of the Business as of August 31, 2000. Except as described on Schedule 4.1.25 hereto, no Seller is under any liability or obligation with respect to the return of inventory in the possession of its customers. Except as listed and described on Schedule 4.1.25 hereto, no Seller has any obsolete or slow-moving inventory used in connection with the Business (i.e., inventory which, based upon the historical sales rate of such items could not reasonably be expected to be sold within six (6) months) or inventory which is not fit for the purpose for which it is intended to be used. Since August 31, 2000, no inventory item of any Seller used in connection with the Business has been sold or disposed of except in the ordinary course of business.                                 4.1.26. Pharmaceutical Regulation. Except as set forth on Schedule 4.1.26, with respect to the Division:                                (a)         The Sellers possess currently valid registrations, licenses and other permits from the DEA, relevant state boards of pharmacy, and any other relevant agencies to receive, store, and dispense pharmaceutical products, including pharmaceutical products regulated as controlled substances (collectively, the "Pharmaceutical Products"), at and from the Division's facilities.                                (b)         The Sellers have provided or made available to the Purchaser all Form FDA-483, Establishment Inspection Reports, or other regulatory agency forms, reports or correspondence received during the last five years describing inspectional observations by the Food and Drug Administration ("FDA"), DEA, relevant state boards of pharmacy, and any other agencies related to the Division's pharmacy activities.                                (c)         The Sellers have provided or made available to the Purchaser all responses to documents identified in paragraph (b) submitted to FDA, DEA, relevant state boards of pharmacy, or any other agencies related to the Division's pharmacy activities during the last five years.                                (d)         The Sellers have provided or made available to the Purchaser all warning letters, letters of admonition, other regulatory letters, notices of violation, notices of hearing or adverse findings received by such Company during the last five years identifying potential violations of, or deviations from laws or regulations administered by FDA, DEA, state boards of pharmacy, or any other agencies related to the Division's pharmacy activities.                                (e)         The Sellers have provided or made available to the Purchasers all responses to documents identified in paragraph (d) submitted to FDA, DEA, relevant state boards of pharmacy, or any other agencies related to the Division's pharmacy activities during the last five years.                                (f)         The Sellers perform internal regulatory compliance audits on a regular basis with respect to the Division and have implemented any corrective actions recommended by such reports, except to the extent that the failure to implement such corrective actions would not have a material adverse effect on the operations of the Business.                                (g)         The Sellers have had one or more regulatory audits by an outside auditor with respect to the Division during the last five years and have provided or made available to the Purchaser any written information regarding these audits.                               (h)         The Sellers are in compliance with FDA, DEA, relevant state board of pharmacy, and other agency regulations related to the Division's pharmacy activities, including, but not limited to, requirements for the receipt, security, inventory, and dispensing of pharmaceutical products and recordkeeping and reporting requirements.                               (i)         The Sellers have signed, up-to-date, written policies that reflect the actual FDA, DEA, and state regulatory compliance procedures with respect to the Division.                               (j)         The Sellers have no knowledge of any acts that furnish a reasonable basis for a warning letter or other regulatory letter, other adverse regulatory communication or action, or civil or criminal investigation or action.                 4.2.         Representations, Warranties And Certain Covenants of Purchaser. Purchaser represents and warrants to and covenants with Sellers as follows:                                 4.2.1. Corporate Organization. Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the State of Tennessee and has all requisite corporate power and authority and possesses all material Permits necessary to own, lease or otherwise hold its properties and assets and to carry on its business as presently being conducted. Purchaser has all requisite corporate power and authority (i) to purchase, own, hold or lease the Assets it is purchasing, (ii) to assume, pay and satisfy the Assumed Liabilities and (iii) to carry on the Business upon the consummation of the transactions contemplated hereby. Purchaser will, at or before the Closing, deliver to Sellers complete and correct copies of (i) Purchaser's Charter and all amendments thereto (certified by the Secretary or Assistant Secretary of Purchaser) and (ii) its By-Laws and all amendments thereto (certified by the Secretary or an Assistant Secretary of Purchaser).                                 4.2.2. Authorization And Effect Of Agreement. Purchaser has all requisite corporate power and authority to execute and deliver this Agreement and the Ancillary Documents to which it is or will be a party and to consummate the transactions contemplated hereby and thereby. The execution and delivery by Purchaser of this Agreement and the Ancillary Documents to which it is or will be a party and the consummation by Purchaser of the transactions contemplated hereby and thereby to be consummated by it have been duly authorized by all necessary corporate action on the part of Purchaser. This Agreement and the Ancillary Documents to which Purchaser is or will be a party have been or will be, as the case may be, duly executed and delivered by Purchaser and constitute valid and binding obligations of Purchaser, enforceable in accordance with their respective terms, except as enforceability may be limited by bankruptcy, insolvency or other similar Laws of general application affecting the enforcement of creditors' rights or by general principles of equity limiting the availability of equitable remedies (whether applied in a proceeding in equity or at law).                                 4.2.3. No Restrictions Against Purchase Of The Assets. Except as set forth in Schedule 4.2.3, the execution and delivery by Purchaser of this Agreement and the Ancillary Documents to which Purchaser is or will be a party do not, and the performance by Purchaser of the transactions contemplated hereby and thereby to be performed by it will not, conflict with, or result in any violation of, or constitute a default (with or without notice or lapse of time, or both) under, any provision of the Charter or By-Laws of Purchaser or any Contract, Permit or Law applicable to Purchaser or its assets, other than any such conflicts, violations or defaults which individually or in the aggregate do not have a material adverse effect on the business, financial condition or results of operations of Purchaser. Except as set forth in Schedule 4.2.3, no material consent, approval order or authorization of, or registration, declaration or filing with, any Governmental Agency is required to be obtained or made by or with respect to Purchaser in connection with the execution and delivery of this Agreement or the consummation by it or the transactions contemplated hereby and thereby to be consummated by it.                                 4.2.4. Brokers' and Finders' Fees. Neither Purchaser, nor anyone acting on behalf of Purchaser, has done anything to cause or incur any liability to any party for any brokers' or finders' fees or the like in connection with this Agreement or any transaction contemplated hereby. 5.         COVENANTS                 5.1.         Employees.                               (a)         Purchaser shall offer employment, commencing as of the Closing Date, on an at will basis, to all employees of the Business who are actively employed, or are on an approved leave of absence, on the Closing Date (the "Employees") at the same rate of base compensation and at a comparable job title with the Business as in effect immediately prior to the Closing Date. Each such Employee who accepts such offer of employment is hereinafter referred to as a "Hired Employee." All Hired Employees shall be eligible to participate in the employee benefit plans, programs and policies, and fringe benefits of Purchaser on the same basis (after application of paragraph (c) below) as such plans, programs, policies and benefits are offered to similarly situated employees of Purchaser.                               (b)         Sellers shall release all Employees as of the Closing Date to accept employment by Purchaser as provided under paragraph (a) above. Sellers shall pay such Employees all amounts due them with respect to earned and accrued salaries, wages and bonuses to the extent attributable to service with Sellers prior to the Closing Date. Sellers shall also pay each Employee his or her Accrued Paid Time Off, if any. "Accrued Paid Time Off" means for such purpose all accrued unused vacation, holiday, sick and personal time of an Employee as of the Closing Date, determined in accordance with Sellers' paid-time off policy.                               (c)         Purchaser shall credit all Hired Employees for all service with Sellers prior to the Closing Date for purposes of eligibility under all employee benefit plans, programs and policies, and fringe benefits of Purchaser and for purposes of vesting in the Purchaser's pension plan (as defined in Section 3(2) of ERISA), subject to the applicable pension plan break-in-services rules under the Code and ERISA. Purchaser shall pay Hired Employees all amounts due them with respect salaries, wages and bonuses (under any bonus plan adopted by Purchaser with respect to the Hired Employees) to the extent attributable to service with Purchaser on and after the Closing Date.                               (d)         Sellers shall be responsible for the payment of severance pay, if any, pursuant to any applicable employee related contract, agreement, plan or policy, attributable to the termination of any Employee.                             (e)         Sellers shall provide the Purchaser with all services and compensation information for periods prior to the Closing Date for employees of the Business who are hired by the Purchaser that is necessary or appropriate for Purchaser to cover such employees under Purchaser's employee benefit plans.                 5.2.         Transfer Taxes. Any real property transfer or gains taxes, recording fees or any other taxes payable as a result of the sale of the Assets or any other action contemplated by this Agreement will be paid by Purchaser. Purchaser and Sellers will cooperate in the preparation, execution and filing of all returns, questionnaires, applications, or other documents regarding any real property transfer or gains, sales, use, transfer, value added, stock transfer and stamp taxes, any transfer, recording, registration and other fees, and any similar taxes which become payable in connection with the transfer of the Assets that are required or permitted to be filed on or before the Closing. Except as provided above, (a) Purchaser will pay its own fees, costs and expenses incurred in connection with this Agreement and the transactions contemplated by this Agreement, including, the fees, costs and expenses of its financial advisors, accountants and counsel and (b) Sellers will pay the fees, costs and expenses of Sellers incurred in connection with this Agreement and the transactions contemplated by this Agreement, including, the fees, costs and expenses of Sellers' financial advisors, accountants and counsel.                 5.3.         Press Release. On the Closing Date, the Purchaser and the Seller shall be permitted to release a mutually agreed upon press release with respect to the consummation of the transactions contemplated by this Agreement.                 5.4.         Pharmacy Licenses. Sellers agree to use their commercially reasonable efforts to aid the Purchaser in obtaining all authorizations, consents, orders and approvals of Government Agencies after the Closing Date and to take all reasonable actions to avoid the entry of any order or decree by any Governmental Agency against the Purchaser with respect to such necessary government consents after the Closing Date. 6.         CLOSING DELIVERIES                 6.1.         Deliveries of Sellers. Sellers shall deliver all of the following documents at Closing:                                 6.1.1. Transfer Documents. Sellers shall have delivered to Purchaser the bills of sale, assignments, deeds and other instruments of transfer (the "Transfer Documents") in substantially the form set forth in Schedule 6.1.1, relating to the Assets, which (as to the Leased Real Property and the leases relating thereto) shall be in recordable form to the extent that recordation thereof is necessary or desirable, in Purchaser's judgment, to effect the Transfer of such Assets, Transferring to Purchaser good and marketable title to the Assets, in each case free of any Liens other than Permitted Liens.                                 6.1.2. Certificates. Sellers shall have delivered certified evidence of corporate actions taken in connection with the execution, delivery and performance by Sellers of this Agreement and the Ancillary Documents to which Sellers are a party and an incumbency certificate of each Seller.                                 6.1.3. Consents Under Key Agreements. Sellers shall have delivered all consents, approvals, novations, authorizations, exemptions or waivers from parties to the Contracts listed on Schedule 6.1.3 (collectively, the "Key A greements") to the extent required for the consummation of the transactions contemplated hereunder without any violation or breach thereof or default, termination or acceleration occurring thereunder.                                 6.1.4. Power of Attorney. The Sellers shall have delivered to the Purchaser a power of attorney substantially in the form attached hereto as Schedule 6.1.4.                               6.1.5. Termination Statements. Sellers shall have delivered to Purchaser UCC-3 Termination Statements, or other appropriate instruments of termination, in form and substance satisfactory to Purchaser, with respect to each UCC financing statement or other lien or encumbrance referred to on Schedule 6.1.5.                                6.1.6. Employment Agreements. Messrs. Trey Hartman, Grant Bryson and Larry Brown shall have entered into employment agreements in favor of Purchaser in substantially the forms set forth in Schedules 6.1.6(a), (b) and (c).                                 6.1.7. Non-Competition Agreements. The Sellers and the Affiliates of Sellers named therein shall have entered into noncompetition agreements in favor of Purchaser in substantially the form set forth in Schedule 6.1.7.                                 6.1.8. Accounts Receivable Collection Agreement. The Purchaser and Sellers shall have entered into the agreement with respect to the collection by Purchaser of Sellers' accounts receivable and payment by Purchaser, on behalf of Sellers, of their accounts payable (the "Accounts Receivable and Payable Management Agreement") substantially in the form set forth in Schedule 6.1.8.                                 6.1.9. Transition Services Agreement. The Purchaser and Sellers shall have entered into an agreement with respect to the provision of certain transition services by Sellers to Purchaser (the "Transition Services Agreement") substantially in the form set forth in Schedule 6.1.9.                                 6.1.10. BBC Guaranty. Sellers shall deliver to Purchaser a guaranty from BBC, the parent corporation of the Sellers guaranteeing all obligations of the Sellers pursuant to this Agreement (the "BBC Guaranty"), substantially in the form set forth on Schedule 6.1.10.                 6.2.         Deliveries of Purchaser. Purchaser shall deliver all of the following documents at Closing:                                6.2.1. Instruments Of Assumption. There shall have been delivered to Sellers by Purchaser the instruments of assumption (the "Assumption Instruments"), in substantially the form set forth in Schedule 6.2.1.                                 6.2.2. Purchase Price. Purchaser shall have delivered to Sellers the Purchase Price, in the manner specified in Section 2.3 and all other payments required by Section 2.                                 6.2.3. Certificates. Sellers shall have received certified evidence of corporate actions taken in connection with the execution, delivery and performance by Purchaser of this Agreement and the Ancillary Documents to which Purchaser is or will be a party and an incumbency certificate of Purchaser.                                 6.2.4. Prime Vendor Contract. The Purchaser and the Sellers shall enter into a prime vendor contract substantially in the form set forth in Schedule 6.2.4.                                 6.2.5. ASG Guaranty. Purchaser shall deliver to Seller a guaranty from ASG, the parent corporation of the Purchaser, guaranteeing all obligations of the Purchaser pursuant to this Agreement (the "ASG Guaranty"), substantially in the form set forth on Schedule 6.2.5. 7.         THE CLOSING                 7.1.         The Closing. The consummation of the purchase and sale of the Assets and the assumption of the Assumed Liabilities contemplated hereby (the "Closing") will take place on September 20, 2000, or such other date (but not later than September 29, 2000) and time as the parties may mutually agree (the "Closing Date"). The Closing shall be effective as of 12:01 a.m. Nashville time on the Closing Date. The Closing will take place at the offices of King & Spalding, 1185 Avenue of the Americas, New York, New York 10036-4003. 8.         SURVIVAL AND INDEMNIFICATION                 8.1         Survival.                                 8.1.1. Survival of Representations And Warranties. Each of the representations and warranties contained herein or in any Ancillary Document (except as otherwise specifically provided in such Ancillary Document) will survive and remain in full force and effect until March 31, 2002, except for (i) representations and warranties made in Sections 4.1.14 [Employee Contracts, Union Agreements and Benefit Plans]; 4.1.15 [Labor Relations]; 4.1.18 [Environmental Protection]; and 4.1.19 [Tax Matters]; which shall remain in effect for the applicable statute of limitations period and (ii) the Excluded Representations (as hereinafter defined), which shall survive the Closing and remain in effect indefinitely. The term "Excluded Representations" shall mean and include the representations and warranties of Sellers made in Sections 4.1.1 [Corporate Organization]; 4.1.2 [Authorization and Effect of Agreement]; 4.1.3 [No Restrictions Against Sale of the Assets]; and 4.1.21 [Brokers' and Finders' Fees].                                 8.1.2. Survival of Covenants. Unless a specified period is set forth in this Agreement (in which event such specified period will control), all covenants contained in this Agreement will survive the Closing and remain in effect indefinitely.                 8.2         Limitations On Indemnification; Right of Offset.                                 8.2.1. With Respect To Certain Representations And Warranties. No Indemnitee (as hereinafter defined) will be entitled to make a claim against an Indemnifying Party (as hereinafter defined) pursuant to Section 8.3.1 or 8.3.2 unless and until the aggregate amount of claims which may be asserted for Indemnifiable Losses (as hereinafter defined) pursuant to such Sections exceeds $100,000, and in the event the Indemnifiable Losses exceed $100,000, Purchaser shall be entitled to indemnification from Sellers of all Indemnifiable Losses; provided, however, that the foregoing limitation shall not apply to (i) claims made with respect to the Excluded Representations; (ii) claims by Purchaser related to Sellers' breach of its covenant set forth in the third sentence of Section 3.1; (iii) claims by Sellers related to Purchaser's breach of its covenant set forth in Section 3.2; or (iv) claims asserted pursuant to clauses (iii), (iv) or (vi) of Section 8.3.1.                                 8.2.2. With Respect To Sellers' Obligations. Notwithstanding any other provision of this Agreement, the indemnification obligations of Sellers under Section 8.3.1(i), other than indemnification obligations arising by reason of Sellers' breach of its covenant set forth in the third sentence of Section 3.1, shall not exceed the Purchase Price in the aggregate; provided, however, that such limitation on Sellers' liability shall not apply to Indemnifiable Losses (as hereinafter defined)  resulting from Sellers' fraud or willful breach.                 8.3         Indemnification.                                 8.3.1. Indemnification By Sellers. Subject to Sections 8.1, 8.2 and 8.4, Sellers will, jointly and severally, indemnify, defend and hold harmless Purchaser, its Affiliates and their respective directors, officers, employees, agents and representatives from and against any and all claims, demands or suits (by any person or entity, including without limitation any Governmental Agency), losses, liabilities, actual or punitive damages, fines, penalties, obligations, payments, costs and expenses, paid or incurred, whether or not relating to, resulting from or arising out of any Third Party Claim (as hereinafter defined), including without limitation the costs and expenses of any and all investigations, actions, suits, proceedings, demands, assessments, judgments, remediation, settlements and compromises relating thereto and reasonable fees and expenses of attorneys and other experts in connection therewith (individually and collectively, "Indemnifiable Losses") relating to, resulting from or arising out of any of the following: (i) the inaccuracy as of the Closing of any of the representations or warranties of Sellers contained in this Agreement or any Ancillary Document; (ii) any breach by Sellers of any covenant of Sellers contained in this Agreement or in any Ancillary Document; (iii) any liability associated with a violation of the WARN Act which occurs as a result of the transactions contemplated by this Agreement; (iv) any liability or obligation associated with any investigation by any governmental agency of any of the Division's facilities or operations that is pending on the Closing Date; (v) any liability other than an Assumed Liability, including, without limitation, Sellers' failure or alleged failure to pay or satisfy any liability for which it is responsible hereunder other than an Assumed Liability; and (vi) any liability, cost or expense incurred by Purchaser with respect to any Lien imposed on the Assets with respect to Taxes of Sellers or any prior owner of the Business of any kind or for any period.                                 8.3.2. Indemnification By Purchaser. Subject to Sections 8.1, 8.2 and 8.4, Purchaser will indemnify, defend and hold harmless Sellers, each of Sellers' Affiliates and their respective directors, officers, employees, agents and representatives from and against any and all Indemnifiable Losses relating to, resulting from or arising out of any of the following: (i) the inaccuracy as of the Closing of any of the representations or warranties of Purchaser contained in this Agreement or any Ancillary Document; (ii) any breach by Purchaser of any covenant of Purchaser contained in this Agreement or in any Ancillary Document; (iii) any Assumed Liability, including, without limitation, Purchaser's failure or alleged failure to pay or satisfy any Assumed Liability; and (iv) any liability or obligation relating to the Business incurred after the Closing.                                 8.3.3. Cumulative Rights. The rights of Purchaser under each of the clauses of Section 8.3.1 and the rights of Sellers under each of the clauses of Section 8.3.2 are not mutually exclusive.                                 8.3.4. Indemnity Payment; Indemnitee; Indemnifying Party. For purposes of this Agreement, (i) "Indemnity Payment" means any amount of Indemnifiable Losses required to be paid pursuant to this Section 8.3, (ii) "Indemnitee" means any person or entity entitled to indemnification under this Agreement, and (iii) "Indemnifying Party" means any person or entity that may be required to provide indemnification under this Agreement.                 8.4         Defense of Claims.                                 8.4.1. Third Party Claims.                               (a)         If any Indemnitee receives notice of the assertion of any claim or of the commencement of any action or proceeding by any entity that is not a party to this Agreement or an Affiliate of such a party (a "Third Party Claim") against such Indemnitee, against which an Indemnifying Party is obligated to provide indemnification under this Agreement, the Indemnitee will give such Indemnifying Party reasonably prompt written notice thereof, but in any event in sufficient time to permit the Indemnifying Party to defend against the Third Party Claim. Such notice will describe the Third Party Claim in reasonable detail, and will indicate the estimated amount, if reasonably practicable, of the Indemnifiable Loss that has been or may be sustained by the Indemnitee. The Indemnifying Party will have the right to participate in or, by giving written notice to the Indemnitee no later than 30 calendar days after receipt of the above-described notice of such Third Party Claim, to elect to assume the defense of any Third Party Claim at such Indemnifying Party's own expense and by such Indemnifying Party's own counsel (reasonably satisfactory to the Indemnitee), and the Indemnitee will cooperate in good faith in such defense. If the Indemnifying Party elects to assume the defense, the Indemnitee will have the right to participate in the defense of any Third Party Claim assisted by counsel of its own choosing and at its expense, provided that, if the named parties to any such proceeding (including any impleaded parties) include both the Indemnifying Party and the Indemnitee and the Indemnifying Party proposes that the same counsel represent both the Indemnitee and the Indemnifying Party, the Indemnitee shall have the right to retain its own counsel at the cost and expense of the Indemnifying Party, if representation of both parties by the same counsel would be inappropriate due to actual or potential conflicts of interest between them that are material. If the Indemnitee has not received written notice within such 30 calendar day period that the Indemnifying Party has elected to assume the defense of such Third Party Claim, the Indemnitee may, at its option, elect to settle or assume such defense, assisted by counsel of its own choosing, and the Indemnifying Party will be liable for all costs, expenses, settlement amounts or other Indemnifiable Losses paid or incurred in connection therewith.                               (b)         If, within the 30 calendar days set forth above, an Indemnitee receives written notice from an Indemnifying Party that such Indemnifying Party has elected to assume the defense of any Third Party Claim as provided in Section 8.4.1(a), the Indemnifying Party will not be liable for any legal expenses subsequently incurred by the Indemnitee in connection with the defense thereof (except as provided in paragraph (a) above); provided, however, that if the Indemnifying Party fails to take reasonable steps necessary to defend diligently such Third Party Claim within 30 calendar days after receiving written notice from the Indemnitee that the Indemnitee believes the Indemnifying Party has failed to take such steps, the Indemnitee may, at its option, elect to settle or assume its own defense, assisted by counsel of its own choosing, and the Indemnifying Party will be liable for all costs, expenses, settlement amounts or other Indemnifiable Losses paid or incurred in connection therewith.                               (c)         Without the prior written consent of the Indemnitee, the Indemnifying Party will not enter into any settlement of any Third Party Claim or cease to defend against such claim, if pursuant to or as a result of such settlement or cessation, injunctive or other equitable relief would be imposed against the Indemnitee. Without the prior written consent of the Indemnitee, which will not be unreasonably withheld, the Indemnifying Party will not enter into any settlement of any Third Party Claim or cease to defend against such claim, if such settlement or cessation would lead to liability or create any financial or other obligation on the part of the Indemnitee for which the Indemnitee is not entitled to indemnification hereunder or is not in fact indemnified therefor. The Indemnifying Party shall not consent to the entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by the claimant or plaintiff to each Indemnitee of a release from all liability in respect of such claim. The Indemnifying Party shall not be entitled to control, and the Indemnitee shall be entitled to have sole control over, the defense or settlement of any claim to the extent that claim seeks an order, injunction or other equitable relief against the Indemnitee which, if successful, could materially interfere with the business, operations, assets, condition (financial or otherwise) or prospects of the Indemnitee (and the cost of such defense shall constitute an amount for which the Indemnitee is entitled to indemnification hereunder). Except under the circumstances described above in this paragraph (c), the Indemnifying Party shall have the right to control the defense and settlement of any claims the defense of which it has assumed in accordance with this Section 8.4.1.                                 8.4.2. Direct Claims. Any claim by an Indemnitee for indemnification other than indemnification against a Third Party Claim (a "Direct Claim") will be asserted by giving the Indemnifying Party reasonably prompt written notice thereof, and the Indemnifying Party will have a period of 30 calendar days within which to respond in writing to such Direct Claim. If the Indemnifying Party does not so respond within such 30 calendar day period, the Indemnifying Party will be deemed to have rejected such claim, in which event the Indemnitee will be free to pursue such remedies as may be available to the Indemnitee under this Article VIII.                                 8.4.3. Failure to Give Timely Notice. A failure to give timely notice as provided in this Section 8.4 will not affect the rights or obligations of any party hereunder except and only to the extent that, as a result of such failure, any party which was entitled to receive such notice was deprived of its right to recover any payment under its applicable insurance coverage or was otherwise directly and materially prejudiced as a result of such failure.                                 8.4.4. Subrogation. If the amount of any Indemnifiable Loss, at any time subsequent to the making of an Indemnity Payment, is reduced by recovery, settlement or otherwise under or pursuant to any insurance coverage, or pursuant to any claim, recovery, settlement or payment by or against any other entity, the amount of such reduction, less any costs, expenses or premiums incurred in connection therewith, will promptly be repaid by the Indemnitee to the Indemnifying Party. The Indemnifying Party will, to the extent of any Indemnity made by it, be subrogated to all rights of the Indemnitee against any third party that is not an Affiliate of the Indemnitee in respect of the Indemnifiable Loss to which the Indemnity Payment relates. Without limiting the generality or effect of any other provision hereof, each such Indemnitee and Indemnifying Party will duly execute upon request all instruments reasonably necessary to evidence and perfect the above-described subrogation rights.                                 8.4.5. Payment. With regard to Third Party Claims for which indemnification is payable hereunder, such indemnification shall be paid by the Indemnifying Party promptly upon (i) the entry of a judgment against the Indemnitee and the expiration of any applicable appeal period or (ii) the entry of an unappealable judgment or final appellate decision against the Indemnitee. Notwithstanding the foregoing, provided that there is no dispute as to whether Indemnitee is entitled to indemnification hereunder, expenses of the Indemnitee for which the Indemnifying Party is responsible shall be reimbursed on a current basis by the Indemnifying Party.                                 8.4.6. Limitation on the Scope of Indemnification. Notwithstanding anything to the contrary set forth in this Section 8, no Indemnitee shall be entitled to indemnification with respect to punitive damages, except in the case of fraud or willful misconduct of the Indemnifying Party. 9.         OTHER POST-CLOSING COVENANTS                 9.1         General Post-Closing Matters.                                9.1.1. Post-Closing Notifications. Purchaser and Sellers will, and will cause their respective Affiliates to, comply with any applicable post-Closing notification or other requirements of any Law of any Governmental Agency having jurisdiction over the Business.                                 9.1.2. Access.                               (a)         On the Closing Date or as soon thereafter as practicable, but in no event later than 15 calendar days after the Closing Date, Sellers will deliver or cause to be delivered to Purchaser all original agreements, documents, books, records and files in the possession of Sellers and their Affiliates relating to the Business or the Assets (collectively, "Records"), or any other asset or property included in the Assets, to the extent not then located on the Leased Real Property, subject to the following exception: Purchaser recognizes that certain Records may contain only incidental information relating to the Business or may primarily relate to Sellers or the businesses of Sellers other than the Business or may be required by Law to be retained by Sellers and that Sellers and their Affiliates may retain such Records and instead deliver copies of the Records required to be retained by Law and appropriately excised copies of the other Records.                               (b)         After the Closing, upon reasonable notice given in accordance with this Agreement, Purchaser and Sellers will give, or cause to be given, to the representatives, employees, counsel and accountants of the other access, during normal business hours, to Records relating to periods prior to the Closing, and will permit such persons to examine and copy such Records to the extent reasonably requested by the other party in connection with the preparation of Tax and financial reporting matters (including without limitation any return or report relating to state or local real property transfer or gains taxes), audits, legal proceedings, governmental investigations and other business purposes; provided, however, that nothing herein will obligate any party to take actions that would unreasonably disrupt the normal course of its business, violate the terms of any Contract to which it is a party or to which it has released any of its proprietary, confidential or classified information. Purchaser will use reasonable efforts to ensure that such information and assistance can be provided to Sellers in the event that Purchaser disposes of any portion of the Business.                                 9.1.3. Guarantees, Etc. Schedule 9.1.3 sets forth a list of guarantees, letters of credits and other agreements guaranteeing or securing liabilities and obligations relating to the Business under which Sellers or any of their Affiliates have any liability and which constitute Assumed Liabilities (collectively, the "Sellers' Guarantees"). Purchaser will cooperate with Sellers (each Party acting at its own expense) to obtain and have issued replacements for each of the Sellers' Guarantees and to obtain any amendments, novations, releases, waivers, consents or approvals necessary to release Sellers and each of their Affiliates from all liability thereunder, in each case as promptly as practicable.                                 9.1.4. Rights of Endorsement. After the Closing Date, Purchaser shall have the right and authority to endorse, without recourse, the name of Sellers on any check or any other evidence of indebtedness received by Purchaser on account of any Assets transferred by Sellers pursuant hereto, and Sellers shall deliver to Purchaser at the Closing letters of instruction sufficient to permit Purchaser to deposit such checks or other evidence of indebtedness in bank accounts in the name of Purchaser. In addition, any payment received by Sellers or any of its Affiliates in respect of the Assets shall be remitted to Purchaser within 15 days of receipt by Sellers and any payment received by Purchaser in respect of Excluded Assets shall be remitted to Sellers within 15 days of receipt by Purchaser.                 9.2         Nonassignable Contracts.                                 9.2.1. Nonassignability. Without limiting the generality or effect of any provision of Articles 6, 8 or 9, to the extent that any Contract or lease with respect to Leased Real Property to be Transferred pursuant to the terms of Section 1.1.4 is not capable of being Transferred without the consent, approval, novation or waiver (collectively, the "Consents") of a third person or entity (including without limitation a Governmental Agency), or if such Transfer or attempted Transfer would constitute a breach thereof or a violation of any Law, nothing in this Agreement will constitute a Transfer or an attempted Transfer thereof.                                 9.2.2. Sellers To Use Reasonable Efforts. Notwithstanding anything contained in this Agreement to the contrary, but without limiting the generality or effect of Articles 6, 8 or 9, Sellers will not be obligated to Transfer to Purchaser any of its rights and obligations in and to any of the Contracts or leases referred to in Section 9.2.1 without first having obtained all of the Consents necessary for such Transfers.                                 9.2.3. If Waivers Or Consents Cannot Be Obtained. To the extent that the Consents referred to in Section 9.2.2 are not obtained by Sellers, Sellers will, during the one-year period commencing with the Closing Date or such longer period as Purchaser may desire (but, as to any particular Contract or lease, not longer than the term thereof), (a) use reasonable efforts, with costs and expenses of Sellers related thereto (other than the obligations of Sellers under the Contract required to be paid by Purchaser pursuant to Section 9.2.4) to be borne by Sellers, to provide to Purchaser the benefits (and the burdens) of any Contract or lease to the extent relating to the Business, (b) cooperate in any reasonable and lawful arrangement designed to provide such benefits (and burdens) to Purchaser, without incurring any obligation to any other person or entity other than to provide such benefits to Purchaser, and (c) enforce, at the request of Purchaser, for the account of Purchaser, any rights of Sellers arising from any such Contract or lease (including without limitation the right to elect to terminate in accordance with the terms thereof upon the advice of Purchaser). Purchaser agrees to cooperate with Sellers in connection with the foregoing. At the end of such one-year period (or such longer period as Purchaser may desire), Sellers will have no further obligations hereunder with respect to any such Contract or lease and the failure to obtain any necessary Consent with respect thereto will not be a breach of this Agreement; provided that nothing contained in this Section 9.2 shall affect the liability of Sellers, if any, pursuant to this Agreement if it has failed to disclose the need for such Consent or to use its reasonable efforts in accordance with the provisions hereof to obtain such Consent.                                 9.2.4. Obligation of Purchaser To Perform. Provided (and for so long as) Sellers obtain the benefits of such Contract or lease for Purchaser, Purchaser will perform the obligations of Sellers under or in connection with any Contract or lease referred to in Section 9.2 (to the extent permitted thereunder) for the benefit of the other party or parties thereto.                                 9.1.5. Certain Fees and Expenses. Notwithstanding anything to the contrary set forth in this Agreement, Sellers shall reimburse Purchaser for one-half of any amount required to be paid by Purchaser to the lessor of the Hanover, Maryland facility as a condition to the lessor's consent to the assignment of the lease of such facility to the Purchaser. 10.         MISCELLANEOUS PROVISIONS                10.1         Notices. All notices and other communications required or permitted hereunder will be in writing and, unless otherwise provided in this Agreement, will be deemed to have been duly given when delivered in person or when sent by facsimile (confirmed in writing by mail simultaneously dispatched) if sent on a business day and otherwise on the next business day or one business day after having been dispatched by a nationally recognized overnight courier service to the appropriate party at the address specified below or three business days after having been deposited in the United States mail, if sent by certified or registered mail, return receipt requested, postage prepaid: (a) If to Purchaser, to:   America Service Group Inc.   105 Westpark Drive   Suite 300   Brentwood, Tennessee 37027   Facsimile No.: 615-376-1309   Attention: Jean Byassee     General Counsel       with a copy to:       King & Spalding   191 Peachtree Street   Atlanta, Georgia 30303-1763   Facsimile No.: 404-572-5100   Attention: Philip A. Theodore, Esq.       (b) If to Sellers to:   Stadtlanders Pharmacy   Bergen Brunswig Corporation   600 Penn Center Boulevard   Pittsburgh, Pennsylvania 15235-5810   Attention: Steve Collis   Facsimile No.: 412-825-8419       with a copy to:       Lowenstein Sandler PC   65 Livingston Avenue   Roseland, New Jersey 07068   Facsimile No.: 973-597-2399   Attention: Laura R. Kuntz, Esq.   or to such other address or addresses as any party may from time to time designate as to itself by like notice.                10.2         Expenses. Except as otherwise expressly provided herein, whether or not a Closing shall occur, the parties shall each bear its own expenses incurred in connection with the consummation of the transactions contemplated by this Agreement and the Ancillary Documents or incident to the Transfer of the Assets and the assumption of the Assumed Liabilities contemplated by this Agreement, including without limitation all expenses required in connection with the delivery of the Transfer Documents provided for in Section 6.1.2 and the Assumption Instruments provided for in Section 6.2.2, and all expenses required to comply with the procedures required by Section 9.1.                10.3         Successors And Assigns. This Agreement will be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, but will not be assignable or delegable by any party without the prior written consent of the other parties, except that Purchaser may assign all of its rights hereunder to any Affiliate of Purchaser that is a direct or indirect wholly owned subsidiary of ASG, Purchaser's parent corporation; provided, however, that such assignment shall not relieve Purchaser of any of its obligations or liabilities hereunder or ASG of any of its obligations or liabilities under its guaranty of Purchaser's obligations hereunder. Notwithstanding anything herein to the contrary, in the event that Purchaser Transfers the Business, Purchaser may assign to the transferee all or any rights which Purchaser may have with respect to Sellers' covenants which are contained herein or in any Ancillary Document and are to be performed by Sellers after the Closing; provided, however, that such assignment shall not relieve Purchaser of any of its obligations or liabilities hereunder or ASG of any of its obligations or liabilities under its guaranty of Purchaser's obligations hereunder; and provided, further, however, that such transferee shall agree in writing to assume Purchaser's obligations hereunder and under any such Ancillary Document.                10.4         Waiver. Purchaser and Sellers, by written notice to the other, may (a) extend the time for performance of any of the obligations or other actions of the other under this Agreement, (b) waive any inaccuracies in the representations or warranties of the other contained in this Agreement or in any Ancillary Documents, (c) waive compliance with any of the conditions or covenants of the other contained in this Agreement, or (d) waive or modify performance of any of the obligations of the other under this Agreement; provided, however, that no such party may, without the prior written consent of such other party, make or grant such extension of time, waiver of inaccuracies or compliance or waiver or modification of performance with respect to its own obligations, representations, warranties, conditions or covenants hereunder and provided, further, however, that the Closing shall be deemed to constitute the waiver by the Purchaser and Sellers of the conditions to their respective obligations to consummate the transactions contemplated by this Agreement, which waiver shall be without prejudice to the right of Purchaser or Sellers to assert a claim against the other for any Indemnifiable Loss. Except as provided in the immediately preceding sentence, no action taken pursuant to this Agreement will be deemed to constitute a waiver of compliance with any representations, warranties, covenants or agreements contained in this Agreement. No waiver of any breach will operate or be construed as a waiver of any subsequent breach, whether of a similar or dissimilar nature. No delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof.                10.5         Entire Agreement. This Agreement (together with the Schedules and Exhibits hereto) supersedes any other agreement, whether written or oral, that may have been made or entered into by Purchaser or Sellers (or by any director, officer or representative thereof) relating to the matters contemplated hereby, other than the Confidentiality Agreement (which will survive the execution, delivery and/or termination of this Agreement unless and until the Closing occurs). This Agreement (together with the Confidentiality Agreement, dated July 17, 2000, by and between BBC and ASG, and the Exhibits and Schedules hereto) constitute the entire agreement by and among such parties and their Affiliates except as expressly set forth herein.                10.6         Amendments, Supplements, Etc. This Agreement may be amended or supplemented at any time by additional written agreements, as may mutually be determined by the parties hereto.                10.7         Rights Of The Parties. Except as expressly provided in Sections 8.3, 11.3 and 11.9, nothing expressed or implied in this Agreement is intended or will be construed to confer upon or give any person or entity other than the parties hereto and their respective Affiliates any rights or remedies under or by reason of this Agreement or any transaction contemplated hereby.                10.2         Further Assurances.                               (a)         After the Closing, Sellers will from time to time, at Purchaser's request and without further cost to Purchaser, execute and deliver to Purchaser such other instruments of conveyance and transfer and take such other action as Purchaser may reasonably request so as more effectively to transfer the Assets to Purchaser free of Liens other than Permitted Liens. In the event that Sellers fail to execute any such document or take any such action, Sellers hereby appoint Purchaser as their lawful attorney-in-fact for purposes of executing such documents and taking such actions. This appointment is irrevocable and coupled with an interest.                               (b)         After the Closing, Purchaser will from time to time, at Sellers' request and without further cost to Sellers, execute and deliver to Sellers such other instruments of assumption and take such other action as Sellers may reasonably request so as more effectively to assume the Assumed Liabilities.                10.9         Bulk Sales. Purchaser waives compliance by Sellers with the provisions of the so-called bulk sales Law of any jurisdiction, if applicable. Without limiting the generality of Section 8.3.1 but subject to Article 8, Sellers will, jointly and severally, indemnify and hold harmless Purchaser and its Affiliates, directors, officers, employees, agents and representatives from and against any Indemnifiable Losses relating to, resulting from or arising out of any non-compliance by Sellers with any applicable bulk sales Law.                10.10         Transfer. Purchaser and Sellers will cooperate and take such action as may be reasonably requested by the other in order to effect an orderly transfer of the Assets and the Business with a minimum of disruption to the operations and employees of the Business and of the other businesses of Sellers.                10.11         Governing Law. The validity, performance and enforcement of this Agreement and all Ancillary Documents, unless expressly provided to the contrary, shall be governed by the Laws of the State of Tennessee, without giving effect to the principles of conflicts of law thereof, except that with respect to matters regarding the transfer of right, title to and interest in any Contract or Permit, the Laws governing such Contract or Permit shall govern, without giving effect to the principles of conflicts of law thereof.                10.12         Execution in 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 agreement.                10.13         Titles And Headings. Titles and headings to sections herein are inserted for convenience of reference only, and are not intended to be a part of or to affect the meaning or interpretation of this Agreement.                10.14         Certain Interpretive Matters And Definitions.                               (a)         Unless the context otherwise requires, (i) all references to Sections, Articles, Exhibits or Schedules are to the Sections, Articles, Exhibits or Schedules of or to this Agreement, (ii) each accounting term not otherwise defined in this Agreement has the meaning assigned to it in accordance with GAAP, (iii) "or" is disjunctive and (iv) words in the singular include the plural and vice versa.                               (b)         No provision of this Agreement will be interpreted in favor of, or against, any of the parties hereto by reason of the extent to which any such party or its counsel participated in the drafting thereof.                               (c)         As used in this Agreement, (i) the term "Subsidiary" has the meaning given to that term in Rule 1-02 of Regulation S-X under the Securities Act of 1933, as amended (the "Securities Act"); (ii) the term "Affiliate" has the meaning given to the term in Rule 405 under the Securities Act, and will include without limitation any Subsidiary; (iii) the term "Governmental Agency" means the United States or any state, local or foreign government, or any subdivision, agency or authority of any thereof; and (iv) the term "Laws" means all federal, state and local laws, codes, and ordinances and all rules and regulations promulgated by any Governmental Agency thereunder.                               (d)         Notwithstanding anything to the contrary contained herein, for purposes of this Agreement, the term "knowledge of Sellers" or variations thereof shall mean the actual knowledge of Trey Hartman, Grant Bryson, Larry Brown, Steve Collis, Kim Harbaugh and Kelli Ellis.                10.15         Cross-References. If a document or matter is disclosed in any Exhibit or Schedule to this Agreement in connection with a representation or warranty made herein, it shall be deemed to be disclosed with respect to the same matter addressed elsewhere in this Agreement but only if the reference provides fair disclosure of the matter in question.                10.16         Severability. If any provision of this Agreement or the application of any such provision to any person or circumstance shall be held invalid, illegal or unenforceable in any respect by a court of competent jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision hereof.                10.17         Arbitration. Any controversy or claim arising out of or relating to this Agreement or any Ancillary Document (other than a dispute that is subject to Section 2.2 of this Agreement which shall be resolved in accordance with Section 2.2)  shall be settled by arbitration in accordance with the following provisions:                               (a)         Disputes Covered. The agreement of the parties to arbitrate covers all disputes of every kind relating to or arising out of this Agreement, any Ancillary Document or any of the transactions contemplated by this Agreement. Disputes include actions for breach of contract with respect to this Agreement or the Ancillary Document, as well as any claim based on tort or any other causes or action relating to the transactions contemplated by this Agreement such as claims based on an allegation of fraud or misrepresentation and claims based on a federal or state statute. In addition, the arbitrators selected according to procedures set forth below shall determine the arbitrability of any matter brought to them, and their decision shall be final and binding on the parties.                                (b)         Forum. The forum for the arbitration shall be Washington, D.C.                               (c)         Law. The governing law for the arbitration shall be the law of the State of Tennessee, without reference to its conflicts of laws provisions.                               (d)         Selection. There shall be three arbitrators, unl ess the parties are able to agree on a single arbitrator. In the absence of such agreement within ten days after the initiation of an arbitration proceeding, the Representative shall select one arbitrator and the Purchaser shall select one arbitrator, and those two arbitrators shall then select within ten days a third arbitrator. If those two arbitrators are unable to select a third arbitrator within such ten day period, a third arbitrator shall be appointed by the commercial panel of the American Arbitration Association. The decision in writing of at least two of the three arbitrators shall be final and binding upon the parties.                               (e)         Administration. The arbitration shall be administered by the American Arbitration Association.                               (f)         Rules. The rules of arbitration shall be the Commercial Arbitration Rules of the American Arbitration Association, as modified by any other instructions that the parties may agree upon at the time, except that each party shall have the right to conduct discovery in any manner and to the extent authorized by the Federal Rules of Civil Procedure as interpreted by the federal courts. In the event of any conflict between those rules and the provisions of this Section, the provisions of this Section shall prevail.                               (g)         Substantive Law. The arbitrators shall be bound by and shall strictly enforce the terms of this Agreement and may not limit, expand or otherwise modify its terms. The arbitrators shall make a good faith effort to apply substantive applicable law, but an arbitration decision shall not be subject to review. The arbitrators shall be bound to honor claims of privilege or work product doctrine recognized at law, but the arbitrators shall have the discretion to determine whether any such claim of privilege or work product doctrine applies.                               (h)         Decision. The arbitrators' decision shall provide a reasoned basis for the resolution of each dispute and for any award. The arbitrators shall not have power to award punitive damages, except in the case of fraud or willful misconduct.                               (i)         Expenses. Each party shall bear its own fees and expenses with respect to the arbitration and any proceeding related thereto and the parties shall share equally the fees and expenses of the American Arbitration Association and the arbitrators.                               (j)         Remedies; Award. The arbitrators shall have power and authority to award any remedy or judgment that could be awarded by a court of law in the State of Tennessee. The award rendered by arbitration shall be final and binding upon the parties, and judgment upon the award may be entered in any court of competent jurisdiction in the United States.       * * * --------------------------------------------------------------------------------                     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. PURCHASER: SELLERS: SECURE PHARMACY PLUS, INC. STADTLANDER OPERATING   COMPANY, L.L.C.                 By: /s/ Trey Hartman By: /s/ Milan A. Sawdei -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Name: Trey Hartman Name: Milan A. Sawdei Title: President Title: Executive Vice President,       Chief Legal Officer and Secretary           STADTLANDER LICENSING   COMPANY, L.L.C.             By: /s/ Milan A. Sawdei   --------------------------------------------------------------------------------     Name: Milan A. Sawdei     Title: Executive Vice President,       Chief Legal Officer and Secretary           STADTLANDER DRUG OF   CALIFORNIA, L.P.             By: /s/ Milan A. Sawdei   --------------------------------------------------------------------------------     Name: Milan A. Sawdei     Title: Executive Vice President,       Chief Legal Officer and Secretary           STADTLANDER DRUG OF   HAWAII, L.P.             By: /s/ Milan A. Sawdei   --------------------------------------------------------------------------------     Name: Milan A. Sawdei     Title: Executive Vice President,       Chief Legal Officer and Secretary                

QuickLinks -- Click here to rapidly navigate through this document EXHIBIT 10.37 AMENDMENT NO. 1 TO INTERCONNECTION AGREEMENT BY AND BETWEEN SOUTHWESTERN BELL TELEPHONE COMPANY AND BIRCH TELECOM OF OKLAHOMA, INC.     The Interconnection Agreement ("the Agreement") by and between Southwestern Bell Telephone Company ("TELCO") and Birch Telecom of Oklahoma, Inc. ("CLEC") is hereby amended as follows:     (1) Addition of Appendix Oklahoma Alternative Regulation Transition Plan     (2) Table of Contents modified to add additional Appendix     (3) This Amendment shall not modify or extend the Effective Date or Term of the underlying Agreement, but rather, contains a termination date specific to the Appendix Oklahoma Alternative Regulation Transition Plan adopted into the Interconnection Agreement which may or may not be coterminous with the underlying Agreement.     (4) EXCEPT AS MODIFIED HEREIN, ALL OTHER TERMS AND CONDITIONS OF THE UNDERLYING 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.     (5) This Amendment shall be filed with and is subject to approval by the Oklahoma Corporations Commission and shall become effective upon approval of the Commission.     IN WITNESS WHEREOF, this Amendment to the Agreement was exchanged in triplicate on this 15th day of June, 2000, by TELCO, signing by and through its duly authorized representative, and CLEC, signing by and through its duly authorized representative. BIRCH TELECOM OF OKLAHOMA, INC.   SOUTHWESTERN BELL TELEPHONE COMPANY               By: SBC Telecommunications, Inc.,       Its authorized agent   By:   /s/ RINA HARTLINE    --------------------------------------------------------------------------------       By:   /s/ WILLENA D. SLOCUM    -------------------------------------------------------------------------------- Title: Director State Regulation --------------------------------------------------------------------------------   Title: President—Industry Markets -------------------------------------------------------------------------------- Name: Rina Hartline -------------------------------------------------------------------------------- (Print or Type)   Name: Willena D. Slocum -------------------------------------------------------------------------------- (Print or Type) -------------------------------------------------------------------------------- QUICKLINKS EXHIBIT 10.37 AMENDMENT NO. 1 TO INTERCONNECTION AGREEMENT BY AND BETWEEN SOUTHWESTERN BELL TELEPHONE COMPANY AND BIRCH TELECOM OF OKLAHOMA, INC.

QuickLinks -- Click here to rapidly navigate through this document EXHIBIT 10.21 NORTHWEST PIPE NQ RETIREMENT SAVINGS PLAN     The Northwest Pipe NQ Retirement Savings Plan (hereinafter referred to as the "Plan") is hereby established as of July 1, 1999 for the exclusive benefit of the Participants on the following terms. ARTICLE 1 DEFINITIONS     The following words and phrases used in the Plan have the meanings set forth below, unless a different meaning is specifically provided for.     1.1 "Administrative Committee" means the committee appointed and acting pursuant to Article 8.     1.2 "Base Salary" means as to each Participant, the amount of compensation established by the Company as his annual rate of cash compensation excluding bonuses and other forms of compensation.     1.3 "Beneficiary" means the person or persons designated from time to time by the Participant to receive benefits from the Plan upon the death of the Participant. The designation may be changed by the Participant from time to time by filing a new designation with the Administrative Committee in such form as it may prescribe.     If there is no effective designation at the date of the Participant's death, then the Beneficiary is to be the spouse of the Participant, if then living. If there is no effective designation at the date of death of the Participant and if the spouse is not then living, the Beneficiary is to be the Participant's children, in equal shares; or if there be none surviving, the Participant's parents; or if there be none surviving, the Participant's brothers and sisters, in equal shares; or if there be none surviving, the estate of the Participant.     1.4 "Change of Control" means the purchase or other acquisition by any person, entity or group of persons, within the meaning of §13(d) or §14(d) of the Securities Exchange Act of 1934 ("Act"), or any comparable successor provisions, of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Act) of 50% or more of either the outstanding shares of common stock or the combined voting power of the Company's then outstanding voting securities entitled to vote generally, or the approval by the stockholders of the Company of a reorganization, merger, or consolidation, in each case, with respect to which persons who were stockholders of the Company immediately prior to the reorganization, merger or consolidation do not, immediately thereafter, own more than 50% of the combined voting power entitled to vote generally in the election of directors of the reorganized, merged or consolidated Company's then outstanding securities, or a liquidation or dissolution of the Company or of the sale of all or substantially all of the Company's assets.     1.5 "Company" means Northwest Pipe Company and any successor to all or a major portion of its assets or business which by appropriate action adopts the Plan. Company is a corporation with principal offices in the state of Oregon.     1.6 "Compensation" means as to each Participant, all amounts paid or accrued during the Plan Year for services rendered to the Company, including overtime, bonuses, commissions and elective deferrals to a cash or deferred profit sharing plan. Nonqualified deferred compensation which is paid or becomes taxable to a Participant while still employed by the Company is excluded from this definition of Compensation.     1.7 "Deferral Account" means the account maintained for each Participant which reflects the deferrals made by the Participant pursuant to Section 3.1 and the increases or decreases in the value of the Trust Fund allocable thereto, as provided in Article 4 of the Plan. 1 - NQ PLAN DOCUMENT --------------------------------------------------------------------------------     1.8 "Directors" means the Board of Directors of the Company.     1.9 "Disability" means a physical or mental condition of a Participant resulting from bodily injury, disease or mental disorder which qualifies him for benefits under the long term disability insurance provided by the Company.     1.10 "Early Retirement" means for any Participant the termination of Employee status on or after Early Retirement Age and before Normal Retirement and not working (as an employee or consultant, etc.) in any industry in which the Company is doing business at the time of the Participant's retirement.     1.11 "Early Retirement Age" means a completion of a period of service of at least ten years and attaining age 55.     1.12 "Employee" means an individual who is employed by the Company to render personal services and whose earnings constitute wages under §3121(a) of the Internal Revenue Code; but excludes independent contractors.     1.13 "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time.     1.14 "Forfeitures" mean the portion of the Participant's Matching and/or Target Account which a Participant loses under Sections 6.2, 6.3 and/or 6.4.     1.15 "Internal Revenue Code" or "Code" mean the Internal Revenue Code of 1986, as amended or replaced from time to time.     1.16 "Matching Account" means the account maintained for each Participant which reflects the Participant's share of Company matching contributions made pursuant to Section 3.2 and increases or decreases in the value of the Trust Fund allocable thereto, as provided in Article 4.     1.17 "Normal Retirement" means for any Participant the termination of Employee status on or after Normal Retirement Age and not working (as an employee or consultant, etc. for at least 5 years or age 68 if sooner) in any industry in which the Company is doing business at the time of the Participant's retirement.     1.18 "Normal Retirement Age" means attaining age 65.     1.19 "Participant" means an Employee who becomes a Participant in the Plan pursuant to Article 2 either as an Officer-Participant or a non-officer Participant.     1.20 "Period of Participation" is measured from entry into this Plan to severance from service. For vesting purposes, the Period of Participation is to be rounded down to the nearest integer; and periods of severance are to be disregarded.     1.21 "Plan Year" means the 12 consecutive month period which ends on June 30.     1.22 "Target Account" means the account maintained for each Officer-Participant which reflects the Officer-Participant's share of Company contributions made pursuant to Section 3.3 and increases or decreases in the value of the Trust Fund allocable thereto, as provided in Article 4.     1.23 "Trustee" means the trustee or trustees under the Trust Agreement referred to in Article 5, or any duly appointed successor.     1.24 "Trust Fund" means all moneys, securities, and assets held by the Trustee pursuant to the terms of the Plan and the Trust Agreement.     1.25 "Valuation Date" means the last day of each Plan Year and any other date on which the Administrative Committee decides to value the Trust Fund. 2 - NQ PLAN DOCUMENT -------------------------------------------------------------------------------- ARTICLE 2 ELIGIBILITY     2.1 PRECONDITION OF ELIGIBILITY     A.  Officers     The initial Officer-Participants are the president and vice-presidents of the Company.     B.  Non-officers     Non-officer Employees who are invited by the Board are eligible to participate. Only those who elect to defer some of their compensation pursuant to Section 3.1 actually become Participants.     2.2 EFFECTIVE DATE     A.  Officer     An employee becomes an Officer-Participant effective as of the first day of the Plan Year after promotion to officer.     B.  Non-officer     An employee becomes a non-officer Participant effective as of the first day of the Plan Year after he is invited to participate. ARTICLE 3 CONTRIBUTIONS AND BENEFITS     3.1 DEFERRALS     For any Plan Year, each Participant may elect to defer some of his Compensation and have such deferred amount allocated to his Deferral Account in accordance with Article 4, subject to the following rules:     A.  The Administrative Committee (1) shall determine a range of deferral percentages from which Participants may elect, (2) may prescribe the form on which elections are made, and (3) shall set the conditions related to frequency and advance notice for starting, stopping and changing elections.     B.  Notwithstanding Subsection 3.1A, a Participant's election to defer some of his Compensation must precede the date on which he is entitled to payment.     C.  Deferrals by Participants must be paid over to the Trustee for investment no later than 7 days after the pay date in which they would have been paid to the Participant. Late contributions will accrue interest to the Trust at 8% per year until paid.     3.2 MATCHING CONTRIBUTIONS     A.  For any Plan Year, the Company may make a discretionary matching contribution. Matching contributions are to be based on deferrals made pursuant to Section 3.1.     B.  Matching contributions are to be allocated to each Participant's Matching Account in accordance with Article 4.     C.  Funding Dates     The Company shall pay its matching contributions for each Plan Year to the Trustee on any date or dates which the Company may select subject to the consent of the Trustee. Each year's funding is to be completed by 21/2 months after the end of the Plan Year. Late contributions will accrue interest to the Trust at 8% per year until paid. 3 - NQ PLAN DOCUMENT --------------------------------------------------------------------------------     3.3 TARGET BENEFITS     A.  The Target Benefit     The benefit which is targeted for each Participant is 1% of projected Base Salary in the year before attaining Normal Retirement Age per year of employment (up to 35 years) with the Company. For example, if an Officer-Participant begins employment with the Company at age 25, his target benefit will be 35% of his projected final Base Salary. An Officer-Participant who begins employment with the Company at age 50 will have a target benefit of 15% of his final Base Salary.     B.  To Fund the Target Benefit     The Company is to contribute an amount that is estimated to be necessary to fund each Participant's target benefit. Each year's contribution is to be a level percent of the Base Salary in effect at the end of the Plan Year. The contributions are to be calculated based on the following assumptions: (1)   Rate of annual compensation increase:   3.0 % (2)   Pre-retirement interest rate:   8.0 % (3)   Post-employment interest rate:   8.0 % (4)   Mortality Table:   UP '84       C.  Funding Date     The Company shall pay its target contributions for each Plan Year to the Trustee on any date or dates which the Company may select subject to the consent of the Trustee. Each year's funding is to be completed by 21/2 months after the end of the Plan Year. Late contributions will accrue interest to the Trust at 8% per year until paid.     D.  Annual Funding Flexibility     At any time prior to making the contribution initially determined, the Directors may reduce the amount so determined if, after detailed financial statements have been prepared, they determine that for reasons of cash flow or other important business or financial considerations, it is prudent to do so.     E.  Allocation of Target Contributions     Target contributions are to be allocated to each Participant's Target Account in accordance with Article 4. ARTICLE 4 ALLOCATIONS TO PARTICIPANTS' ACCOUNTS     4.1 ESTABLISHMENT OF ACCOUNTS     The Administrative Committee shall establish and maintain a Target Account in the name of each Participant to which Company contributions (made pursuant to Section 3.3) are to be credited and to which adjustments are to be made in accordance with this Article 4. The Administrative Committee shall also establish and maintain, as necessary, a Deferral and Matching Account in the name of each Participant.     Notwithstanding the establishment of these accounts, the Participants are unsecured general creditors of the Company with respect to any rights derived by them from the existence of this Plan.     4.2 ALLOCATION OF MATCHING CONTRIBUTION     A.  Type 1 Match: Contemporaneously Funded Matching Contributions 4 - NQ PLAN DOCUMENT --------------------------------------------------------------------------------     The Company's contemporaneously funded matching contributions, if any, for the Plan Year are to be allocated as of the Valuation Date by the Administrative Committee to all Participants who elected to and did defer some of their Compensation pursuant to Section 3.1.     B.  Type 2 Match: Accrued Matching Contributions     The Company's accrued matching contributions, if any, for the Plan Year are to be allocated as of the Valuation Date by the Administrative Committee to all Participants who elected to and did defer some of their Compensation pursuant to Section 3.1.     C.  Allocation of all Company matching contributions is dependent on employment with the Company on the Valuation Date except for those Participants whose employment terminates due to death, Disability, Early Retirement or Normal Retirement.     4.3 ALLOCATION OF TARGET CONTRIBUTIONS     The Company's contribution to fund each Officer-Participant's target benefit is to be allocated by the Administrative Committee to the Target Account of each Officer-Participant who is still an officer and who is still in the employ of the Company on the Valuation Date.     Officer-Participants who were in the employ of the Company during the Plan Year, but who are not still in the employ of the Company on the Valuation Date due to (1) death, (2) Disability, (3) Early Retirement or (4) Normal Retirement are to be allocated their target contribution.     4.4 TRUST VALUATION AND ADJUSTMENT OF ACCOUNTS     A.  The Trustee shall determine the fair market value of the Trust Fund as of each Valuation Date. To reflect Trust Fund gain or loss ascertained through such valuation, the accounts maintained for all Participants are to be adjusted by the Administrative Committee as of each Valuation Date to reflect the increases or decreases of the fair market value of the Trust Fund, dividends, interest, other income or profit received, losses, expenses, contributions, benefit distributions and all other transactions involving the Trust Fund, since the preceding Valuation Date.     B.  The adjustment to the account of each Participant is to be made by debiting or crediting each such account with a portion of the net increase or decrease in value of all such accounts of all Participants.     The adjustment to each Participant's account is to be the result of multiplying the net increase or decrease in value of all such accounts of all Participants times a fraction the denominator of which is the sum of all numerators and the numerator is: (1) for each non-terminated or fully vested Participant's account, the balance of each such Participant's account immediately prior to the then current Valuation Date plus an appropriate portion of the current Plan Year's deferrals and Company contributions or (2) for the account of each Participant who terminated before becoming fully vested, the balance of each such Participant's account immediately prior to the then current Valuation Date less the unvested part thereof plus an appropriate portion of the current Plan Year's deferrals and the vested part of the Company contributions, if any. ARTICLE 5 INVESTMENT AND MANAGEMENT OF THE TRUST FUND     5.1 APPOINTMENT OF TRUSTEE     The Directors shall select and appoint a trustee or trustees (the "Trustee"), and the Company shall enter into a Trust Agreement with such Trustee to provide for the holding, investment and administration of the funds of the Plan and Trust. The Trust Fund is to be administered by the Trustee in accordance with the terms and provisions of the Trust Agreement. 5 - NQ PLAN DOCUMENT --------------------------------------------------------------------------------     5.2 BENEFICIAL OWNERSHIP OF TRUST FUND     Beneficial ownership of any and all assets of the Trust Fund (whether cash, bonds, stocks, mutual fund shares or other investments) is to remain in the Company. Participants have no property interest in any specific assets of the Company or the Trust.     5.3 TRUST AGREEMENT CONTROLS     If the provisions of the Plan and the Trust Agreement are inconsistent or otherwise in conflict regarding the rights, duties or obligations of the Trustee, the provisions of the Trust Agreement are to control. ARTICLE 6 RIGHT TO BENEFITS     6.1 DEFERRAL ACCOUNT     A.  Fully Vested     A Participant's interest in his Deferral Account is at all times fully vested and nonforfeitable. The Deferral Account will be distributable in accordance with (i) Sections 7.1, 7.2 and 7.3 upon the Participant's death, Disability, Early Retirement, attaining age 60 after termination of employment or Normal Retirement; (ii) Subsection 6.1B if so elected; (iii) Subsection 6.1C upon incurring a financial emergency; (iv) Subsection 6.1D if a haircut is requested; or (v) Section 6.6 upon constructive receipt.     All distributions are subject to any limitations established by the Administrative Committee and uniformly applied in a nondiscriminatory manner.     B.  Pre-entry Election     Before an Employee is first eligible to elect deferral of any of his compensation pursuant to Section 3.1, he may irrevocably specify when the benefits in his Deferral Account will become payable.     C.  Financial Emergency Hardship     (1) Upon the application of any Participant, the Administrative Committee, in accordance with a uniform nondiscriminatory policy, may, in its discretion, permit such Participant to withdraw that portion of his Deferral Account which is necessary to meet an unforeseen emergency that is caused by an event beyond the control of the Participant and did (or would) result in severe financial hardship to the Participant.     (2) Withdrawal may not be made to the extent that the hardship is or may be relieved (i) through reimbursement or compensation by insurance, (ii) by liquidation of the Participant's assets, to the extent the liquidation of such assets would not itself cause severe financial hardship and/or (iii) by cessation of deferrals pursuant to Section 3.1 as of the beginning of the next Plan Year.     D.  Haircut     (1) Notwithstanding anything to the contrary in this Plan other than Subsection 6.1D(2), a Participant may, at any time, elect that a specified amount of his benefits from the Deferral Account is to become payable.     (2) 10% of the amount specified pursuant to Subsection 6.1D(1) is to be forfeited at the same time as payment to the Participant is made. 6 - NQ PLAN DOCUMENT --------------------------------------------------------------------------------     6.2 MATCHING ACCOUNT     A.  Distribution     The vested Matching Account will be distributable in accordance with Sections 7.1, 7.2 and 7.3 upon the Participant's death, Disability, Early Retirement, attaining age 60 after termination of employment, Normal Retirement or constructive receipt as provided in Section 6.6.     B.  Full Vesting     A Participant's interest in his Matching Account is fully vested and nonforfeitable on the date such Participant ceases to be an Employee if such termination of employment is caused by reason of (1) death or (2) Disability. It will also become fully vested and nonforfeitable upon the demotion of officer after a Change of Control or the exercise by the Board pursuant to Subsection 3.3D to totally forgo funding of the Target contributions for 3 consecutive years.     C.  Vesting Schedule for Terminees     Up to 80% of the Matching Account balance will vest based on years of participation in this plan as follows: Years of Participation --------------------------------------------------------------------------------   Vested Percent --------------------------------------------------------------------------------   1   20 % 2   40 % 3   60 % 4   80 %     From 80% to 100% vesting is based on age during the 4 years preceding normal retirement age as follows: Years of Age --------------------------------------------------------------------------------   Vested Percent --------------------------------------------------------------------------------   62   85 % 63   90 % 64   95 % 65   100 %     Attainment of age 62 before 4 years of participation accelerates vesting to 85%, attainment of age 63 accelerates vesting to 90%, etc.     6.3 TARGET ACCOUNT     A.  Distribution     The vested Target Account will be distributable in accordance with Sections 7.1, 7.2 and 7.3 upon the Participant's death, Disability, Early Retirement, attaining age 60 after termination of employment, Normal Retirement or constructive receipt as provided in Section 6.6.     B.  Full Vesting     A Participant's interest in his Targets Account is fully vested and nonforfeitable on the date such Participant ceases to be an Employee if such termination of employment is caused by reason of (1) death or (2) Disability. It will also become fully vested and nonforfeitable upon the demotion of officer after a Change of Control or the exercise by the Board pursuant to Subsection 3.3D to totally forgo funding of the Target contributions for 3 consecutive years.     C.  Vesting Schedule for Terminees 7 - NQ PLAN DOCUMENT --------------------------------------------------------------------------------     Up to 80% of the Target Account balance will vest based on years of participation in this plan as follows: Years of Participation --------------------------------------------------------------------------------   Vested Percent --------------------------------------------------------------------------------   1   20 % 2   40 % 3   60 % 4   80 %     From 80% to 100% vesting is based on age during the 4 years preceding normal retirement age as follows: Years of Age --------------------------------------------------------------------------------   Vested Percent --------------------------------------------------------------------------------   62   85 % 63   90 % 64   95 % 65   100 %     Attainment of age 62 before 4 years of participation accelerates vesting to 85%, attainment of age 63 accelerates vesting to 90%, etc.     D.  Use of Forfeitures     The portion of the Target and Matching Accounts which is not, at the time the Participant terminates his status as an Employee, vested in accordance with the schedules set forth in Subsections 6.2C and 6.3C, is to be forfeited, held in a suspense account to which no investment gains or losses are to be allocated and used in the next Plan Year to reduce Company contributions to the Plan.     6.4. BAD-BOY FORFEITURES     Notwithstanding Subsections 6.2C and 6.3C, a Participant who is terminated for proven or admitted gross misconduct or dishonesty or who competes sooner than the earlier of 5 years after termination of employment or attaining age 68 forfeits his Target and Matching Accounts.     6.5 POST-TERMINATION DEATH     If a Participant entitled to benefits dies after termination of his status as an Employee but prior to complete distribution of his benefits, the fully vested undistributed portion of his accounts is to be paid to his Beneficiary in accordance with Article 7.     6.6 CONSTRUCTIVE RECEIPT     If, due to a change in law, a Participant's benefits become subject to income taxes prior to actual receipt, notwithstanding anything to the contrary in this Plan, an amount equal to the increase in income taxes caused thereby is to become distributable. ARTICLE 7 DISTRIBUTION OF BENEFITS     7.1 TIME OF DISTRIBUTION     A.  The benefits to which a Participant is entitled in accordance with Article 6 are to begin no later than 60 days after the end of the Plan Year in which the Participant becomes entitled to payment of his benefits. 8 - NQ PLAN DOCUMENT --------------------------------------------------------------------------------     B.  The Administrative Committee may delay the distribution of benefits for administrative reasons up to 60 days after the latest of (1) the date the amount is known or (2) the date an application for benefits is received.     7.2 NORMAL FORM OF BENEFIT DISTRIBUTION     A.  Unless, at the Participant's request, an optional form of benefit distribution is permitted by the Directors, a Participant's account balances are to be paid in annual installments over the life expectancy of the Participant.     B.  The life expectancy of the Participant is to be rounded to the nearest integer, fixed and is to be based on Table V of Treasury Regulation §1.72-9. Each annual installment is to be based on the number of remaining years of original life expectancy and the re-valued account balance to the credit of the Participant.     C.  The source of each installment payment is to be considered to come from the Participant's accounts in the following order until exhausted: (i) Deferral, (ii) Matching and (iii) Target.     7.3 OPTIONAL FORMS OF BENEFIT DISTRIBUTION     A.  Method of Distribution     A distribution of benefits payable to a Participant may be made in any alternate form which the Directors select, such as:     (1) One lump sum payment; or     (2) Semi-annual, quarterly or monthly installments of substantially equal designated amounts or of a designated percentage of the value of the account of the Participant over a period of years certain as determined by the Administrative Committee; provided, that such period does not extend beyond the life expectancy of such Participant.     B.  Acceleration of Installments     If the amounts credited to the accounts of a Participant are paid to the Participant in installments, the Directors may at any time during the period of such payments determine that the unpaid balance of such accounts is to be distributed in a lump sum.     If a Participant dies before the entire amounts credited to his accounts are paid, the amounts remaining are to be paid to Participant's Beneficiary in such method as the Directors may determine.     7.4 DEATH OF BENEFICIARY     If, after the death of the Participant, a Beneficiary is receiving benefits and dies before complete distribution of benefits, the balance is to be paid in a lump sum to the Beneficiary's estate.     7.5 INCOME TAX WITHHOLDING     The Company may withhold from any payments any income tax or other amounts as required by law.     7.6 FICA TAXES     The Participant's share of the FICA taxes remains the obligation of the Participant. As any FICA tax liability of the Participant becomes payable, the Participant may elect to have it withheld from his regular compensation or to directly reimburse the Company within 45 days after notice to Participant of the amount due. Thereafter, should the Company remain unreimbursed, notwithstanding anything contained herein to the contrary, it may satisfy its claim for reimbursement from assets of the Trust Fund. 9 - NQ PLAN DOCUMENT -------------------------------------------------------------------------------- ARTICLE 8 ADMINISTRATION OF THE PLAN     8.1 ALLOCATION OF AUTHORITY     The authority to control and manage the operation and administration of the Plan is to be allocated among the Directors, the Administrative Committee appointed pursuant to Section 8.2, and the Trustee appointed pursuant to Article 5. The Directors have the exclusive authority and responsibility to select the Trustee. The Trustee has the authority and responsibility to manage and control the assets of the Trust Fund in accordance with the provisions of the Trust Agreement. The Administrative Committee has the exclusive authority and responsibility for all matters in connection with the operation and administration of the Plan not specifically allocated to the Directors or the Trustee, and is the "named fiduciary" and "administrator" of the Plan within the meaning of ERISA. The Administrative Committee's powers and duties include, but are not limited to the following:     A.  Responsibility for the compilation and maintenance of all records necessary in connection with the Plan;     B.  Authorizing the payment of all benefits as they become payable under the Plan, which payments are to be made by the Trustee upon the written instructions of the Administrative Committee;     C.  Deciding questions relating to the eligibility of Employees to become Participants, the determination of Vesting, the right to benefits and the availability of any elections permitted by the Plan;     D.  Authority to engage such legal, accounting, and other professional and clerical services as may be required by ERISA or as it may deem proper;     E.  Authority to interpret this instrument and to make and publish such uniform and nondiscriminatory rules for administration of the Plan as are not inconsistent with the provisions of this instrument.     8.2 COMPOSITION OF ADMINISTRATIVE COMMITTEE     The Administrative Committee shall hold office at the pleasure of the Directors of the Company. Any member may resign by filing a written notice of his resignation with the president, and the vacancy is to be promptly filled by the Directors. The Directors are to certify the names and signatures of the members of the Administrative Committee to the Trustee in writing. The Administrative Committee is to act by agreement of a majority of its members, either by vote at a meeting or in writing without a meeting.     8.3 DELEGATION OF AUTHORITY     The Administrative Committee, from time to time, may allocate to any other person any of its rights, powers, and duties with respect to the operation and administration of the Plan. Any such allocation is to be terminable upon such notice as the Administrative Committee in its sole discretion deems reasonable and prudent under the circumstances.     8.4 COMPENSATION AND EXPENSES OF ADMINISTRATIVE COMMITTEE     The members of the Administrative Committee are to receive no compensation from the Trust Fund for services in administering the Plan, but are entitled to reimbursement from the Company for all expenses incurred in the administration of the Plan.     8.5 FIDUCIARY DUTIES 10 - NQ PLAN DOCUMENT --------------------------------------------------------------------------------     Each of the Directors, each member of the Administrative Committee, the Trustee and any other person to whom any fiduciary responsibility with respect to the Plan is allocated is a fiduciary of the Plan. Each fiduciary shall discharge his duties and responsibilities with respect to the Plan solely in the interest of the Participants, and     A.  For the exclusive purpose of providing benefits to Participants and defraying reasonable expenses of administering the Plan;     B.  With the care, skill, prudence and diligence under the circumstances then prevailing that a prudent man 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;     C.  To the extent the authority and responsibility is allocated to them, by diversifying the investments of the Trust Fund so as to minimize the risk of large losses, unless under the circumstances it is clearly prudent not to do so; and     D.  In accordance with the Plan and the Trust Agreement, to the extent such provisions are consistent with ERISA.     8.6 ALLOCATION OF FIDUCIARY RESPONSIBILITY     Each fiduciary under the Plan shall be solely responsible for his own acts or omissions. No fiduciary has any liability for a breach of fiduciary responsibility of another fiduciary with respect to the Plan unless he participates knowingly in such breach, knowingly undertakes to conceal such breach, fails to take reasonable remedial action to remedy such breach, or (through his negligence in performing those specific fiduciary responsibilities which give rise to his status as a fiduciary) has enabled another fiduciary to commit a breach of the latter's fiduciary responsibilities.     8.7 INDEMNIFICATION OF FIDUCIARIES     The Company shall indemnify and hold harmless the Directors, the members of the Administrative Committee, and any other person to whom any fiduciary duty with respect to the Plan is allocated pursuant to Section 8.3 from and against any and all liabilities, claims, demands, costs and expenses, including attorneys' fees, arising out of an alleged breach in the performance of their fiduciary duties under the Plan and under ERISA, other than such liabilities, claims, demands, costs, and expenses as may result from the gross negligence or willful misconduct of such persons. The Company has the right, but not the obligation, to conduct the defense of such persons in any proceeding to which this section applies. The Company may satisfy its obligations under this section in whole or in part through the purchase of a policy or policies of insurance. ARTICLE 9 AMENDMENTS TO THE PLAN     As the provisions of the Plan apply to future participants, the Company reserves the right to amend the provisions of the Plan to any extent and in any manner deemed appropriate to its Directors. Only with the consent of each Participant for himself may the Company amend, either prospectively or retroactively, the provisions of the Plan.     No amendment is to operate to:     A.  cause any part of the Trust Fund to revert to or be recoverable by the Company or to be used for, or diverted to, purposes other than the exclusive benefit of Participants or the Company's creditors upon insolvency or bankruptcy of the Company;     B.  reduce the then accrued benefits or the amounts then held for the benefit of any Participant; or 11 - NQ PLAN DOCUMENT --------------------------------------------------------------------------------     C.  change the duties, responsibilities or liabilities of the Trustee without his written consent. ARTICLE 10 MISCELLANEOUS     10.1  RECEIPT AND RELEASE FOR PAYMENTS       Any payment to a Participant or his Beneficiary, in accordance with the terms of this Plan and the Trust Agreement, is to the extent thereof in full satisfaction of all claims such person may have against the Trustee, the Administrative Committee and the Company, any of whom may require, as a condition precedent to such payment, the execution of a receipt and release in such form as is determined by the Trustee and the Administrative Committee.     10.2  CONSTRUCTION AND SEVERABILITY       This instrument creating the Plan shall be construed, administered, and governed in all respects in accordance with ERISA and other pertinent federal laws, and the laws of Oregon to the extent not preempted by ERISA. If any provision of this Plan are held by a court of competent jurisdiction to be invalid or unenforceable, the remaining provisions of the Plan are to continue to be fully effective.     10.3  HEADINGS, NUMBER AND GENDER       The headings and subheadings of this instrument are inserted for convenience of reference only and are not to be considered in the construction of this Plan. Wherever appropriate, words used in the singular may include the plural, plural may be read as the singular, and the masculine may include the feminine.     10.4  ALIENATION       No person entitled to any benefits under this Plan has any right to alienate, hypothecate or encumber his interest in any benefits under this Plan, and such benefits are not in any way to be subject to the claim of his creditors or be liable to attachment, execution or other process of law.     10.5  REVERSION TO COMPANY       All assets held in the Trust Fund are to be held for the benefit of the Participants, and are not to revert to or inure to the benefit of the Company, except under one of the following circumstances:     A.  insolvency or bankruptcy of the Company;     B.  contribution was made by the Company by mistake;     C.  forfeiture of benefits; or     D.  allocation to an unallocated suspense account.     10.6  APPLICATION FOR BENEFITS       A.  All applications for benefits under the Plan are to be submitted to the Administrative Committee; or its designated agent for submission to it.     B.  If the application is approved, the applicant will be notified in writing of such approval.     C.  Within 45 days of receipt of an incomplete application, the Administrative Committee shall notify the applicant, in writing, of that which is needed to complete the application; and that the applicant has 180 days from such notice to provide it.     Within 45 days of the earlier of (1) receipt of a completed application or (2) 180 days after notice to the applicant that it was incomplete, the Administrative Committee shall notify the applicant of its decision. 12 - NQ PLAN DOCUMENT --------------------------------------------------------------------------------     D.  If the application is wholly or partially denied, the Administrative Committee shall notify the person requesting the benefit, in writing, of such denial, including in such notification the following information: (1)the specific reason or reasons for such denial; (2)specific references to pertinent Plan provisions upon which the denial is based; (3)a description of any additional material or information which may be needed to clarify or perfect the request, and an explanation of why such information is required; and (4)an explanation of the Plan's review procedures with respect to the denial of benefits.     Such notification of approval or denial is to be given within 45 days of receipt of the application unless special circumstances require an extension of time which in no event is to exceed an additional 90 days. If such an extension is required, the applicant is to be notified in writing within the initial 45 day period of the special circumstances requiring the extension and the expected date of decision. If a timely notification of approval or denial is not received by an applicant, the application will be deemed to have been denied as of the end of the time period specified for such notification, including any obtained extensions of time, and such applicant may proceed to the appeal stage described in Section 10.7.     10.7  APPEAL OF BENEFIT DENIAL       Any applicant, or the legal representative of any applicant, whose request has been denied may appeal for reconsideration to the Directors by making a written request therefor within 180 days of receipt of the notification of denial. Such applicant or his legal representative may examine documents pertinent to the review and may submit to the Directors written issues and comments.     The Directors shall act upon each such appeal for reconsideration within 60 days after its receipt unless special circumstances require an extension of time, in which case a decision will be rendered as soon as possible, but not later than 120 days after receipt of the applicant's appeal. In the event the Directors deny an appeal in whole or in part, the Directors shall give written notice of its decision to the applicant within the specified period of time for rendering a decision setting forth the specific reasons for such denial and specific references to the pertinent Plan provisions on which the Directors' decision was based.     This Plan has been executed by the president of the Company on this 6th day of June, 2000.     NORTHWEST PIPE COMPANY           By           -------------------------------------------------------------------------------- Brian Dunham, President 13 - NQ PLAN DOCUMENT -------------------------------------------------------------------------------- QUICKLINKS NORTHWEST PIPE NQ RETIREMENT SAVINGS PLAN ARTICLE 1 DEFINITIONS ARTICLE 2 ELIGIBILITY ARTICLE 3 CONTRIBUTIONS AND BENEFITS ARTICLE 4 ALLOCATIONS TO PARTICIPANTS' ACCOUNTS ARTICLE 5 INVESTMENT AND MANAGEMENT OF THE TRUST FUND ARTICLE 6 RIGHT TO BENEFITS ARTICLE 7 DISTRIBUTION OF BENEFITS ARTICLE 8 ADMINISTRATION OF THE PLAN ARTICLE 9 AMENDMENTS TO THE PLAN ARTICLE 10 MISCELLANEOUS

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 2 - 2211 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 I0600 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 2211 Bridgepointe Parkway in the location labeled as Building 2 on Exhibit "A" attached hereto ("Premises"); and WHEREAS Landlord and Tenant are concurrently entering to a lease for Building 3 (the "Building 3 Lease"), the parties desire to eliminate the option to lease Building 3 contained in the Lease; and WHEREAS Landlord and Tenant wish to modify the security deposit provisions to provide for individual letters of credit for this Lease, the Building 1 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 a ended 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. 2. Section 4.B.ii is modified by adding "for Building 1" after "Commencement Date" in the only sentence of this section. 3. Section 4.D is replaced in its entirety by the following: Security Deposit (i) Amount: Tenant has deposited 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. 4. 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." 5. 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)." 6. 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." 7. Section 19 regarding Tenant's option to lease Building 3 is deleted and no longer applicable due to Tenant's concurrent execution of the Building 3 Lease. 8. All defined terms shall have the same meanings as in the Lease, except as otherwise stated this Amendment. 9. 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 2211 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 se 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 May 22, 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 --------------------------------------------------------------------------------

NOTE: PORTIONS OF THIS EXHIBIT HAVE BEEN DELETED PURSUANT TO A CONFIDENTIAL TREATMENT REQUEST. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DELETED INFORMATION IS SIGNIFIED BY “[XXXXX]”. Exhibit 10.23.1 AMENDMENT TO MASTER AGREEMENT AND SCHEDULE This is an Amendment (the “Amendment”), with an effective date of June 1, 2000, to that Master Agreement between Netzee, Inc. (“Netzee”) and The Bankers Bank (the “Bankers Bank”) with an effective date of March 1, 2000 (the “Original Agreement”; and, as amended by this Amendment, the “Amended Agreement”), pertaining to an Internet/Intranet based banking product referred to as the “Link,” Link Product” or “System” in the Original Agreement which is designed to provide Correspondent Banking Institutions which are Bankers Bank’s customers – sometimes referred to as “Participating Banks,” with means to communicate electronically with Bankers Bank and perform certain electronic banking transactions. Capitalized terms used and not defined herein shall have the meaning given in the Original Agreement. A License/Services Schedule with an Effective Date of March 1, 2000 was also entered into by the parties as an Addendum to the Master Agreement (the “Original Addendum”; and, as amended by this Amendment, the “Amended Addendum”). As more specifically provided in this Agreement, the parties have agreed that prior to the occurrence of a Trigger Event (as defined below) Banker’ Bank will be allowed, alone or in collaboration with The Independent BankersBank (the “Host Partner”), to host, maintain and customize the Link for the benefit of its or their respective Participating Banks (“Authorized Participating Banks”), using equipment and resources independently provided or procured, and allowed additional rights after the occurrence of a Trigger Event, all as more particularly set forth below, and accordingly the parties desire to amend the terms of the Original Agreement and the Original Addendum as follows: (1)   Promptly following execution of this Amendment, Bankers Bank will pay Netzee the sum of $[XXXXX]. Of this amount, $[XXXXX] is to cover services previously rendered and work product previously delivered by Netzee to Bankers Bank in the months of March, April and May 2000; and the remainder, $[XXXXX] (the “Transition Fee”), is in consideration of the rights and licenses granted in Paragraph (2) below and the services to be provided by Netzee pursuant to Paragraph (3) below. Such payment is non-cancelable and non-refundable.   (2)   For the purposes of this Amendment, the “Escrowed Software” shall mean the software commonly known as the Link that has the features set forth below and as such features have been subsequently added to or enhanced by or on behalf of Netzee on or before June 30, 2000: -------------------------------------------------------------------------------- ACCOUNT DELIVERY FUNDS TRANSFER         Bank to Bank Transfer         Internal Transfer         Local Clearing         Recurring Wire Table INTERNATIONAL WIRE         Exchange Rates         Foreign Drafts         Recurring Table ACH         ACH Received         ACH Origination         ACH Return/Notice of Change         Recurring Table         EFTPS         ENR INVESTMENTS         Increase/Decrease Fed Funds         Investments Research Requests         Corporate Sweep Messages         Securities Purchased and Sold         Stock Order or Sale         Pledge & Repo/Resell Maintenance         Treasury Fund Factor         Messages                 Fed Fund Rates                 T-Bill Rates                 Wallstreet Report                 Investment Broadcast Reports                 Bond Portfolio Reports                 Transaction Advices                 Safekeeping Income Report FILE DELIVERY         MICR Delivery         Open Case         Case Inquiry         Cash Letter Worksheet         Reports                 Check Adjustment Advice                 Cash Letter Availability 2 --------------------------------------------------------------------------------                 Over Night Fed Fund Report FRB SERVICES         Coin/Currency Order & Shipment         Coin/Currency Order & Shipment Notification         Large Dollar Return Item         Recurring Savings Bond Table         Series EE and I         T T & L Report         FR2900 Import NOTIFICATIONS         FR2900 Confirmation         FED ACH Advice         Fed Funds Sold & Purchased         Weekly Fed Fund Re-Cap         Incoming & Outgoing Wire Advices         Internal Transfer Advice         Miscellaneous Entry Advice         Savings Bond Order Advice         T T & L Advice STATEMENT DELIVERY         Account Analysis         FRB Statement         Daily and Weekly Account Statements         FRB Charges EVENT NOTIFICATION DETAILED ADMINISTRATION CONTROLS To the extent consistent with the foregoing and existing and available for Netzee to provide Bankers Bank, the Escrowed Software shall include, without limitation, copies of the Host Software; the Client Software; any existing technical manuals associated with the Escrowed Software; existing maintenance tools (such as test programs and program specifications); tools and documentation used in the administration of the Escrowed Software, existing menu and support programs and subroutine libraries in source and object code form; existing compilation procedures in human and machine readable form; existing execution procedures in human and machine readable form; existing end user documentation; and existing system flow charts, programmers’ notes, program flow charts, file layouts, report layouts, and screen layouts. Unless otherwise expressly qualified, Escrowed Software shall include such software in its source code and object code forms. Netzee hereby grants to Bankers Bank the following nonexclusive, royalty free rights and licenses: 3 --------------------------------------------------------------------------------   (a)   to load, store, use, operate, and make copies of the Escrowed Software (including any Modifications, as hereinafter defined) for Bankers Bank’s internal operations and, to the extent so authorized by Bankers Bank, the operations of Authorized Participating Banks (the “Users”);     (b)   to market, distribute, and sublicense to Users the Client Software and any other portions of the Escrowed Software (including any Modifications) necessary or reasonably appropriate to the use of the Escrowed Software (including any Modifications) and its functionality by Authorized Participating Banks;     (c)   to provide support and maintenance services for the Escrowed Software (including any Modifications) to Users;     (d)   to grant licenses to use the source code and other portions of the Escrowed Software (including any Modifications) to Users in accordance with source code escrow agreements, which licenses are contingent on the occurrence of Bankers Bank’s insolvency, bankruptcy, contract default, failure to maintain or modify the Escrowed Software, or similar circumstances;     (e)   to compile, assemble, and otherwise transform source code portions of the Escrowed Software (including any Modifications) into object code;     (f)   to alter, revise, modify, enhance, update and create other modifications to the Escrowed Software (collectively, “Modifications”), provided Netzee shall have no responsibility with regard to the production, implementation, use or performance of such Modifications; and     (g)   to make and allow Users to make back up and archival copies of the Escrowed Software (including Modifications).   The term of the licenses granted under this Amendment is perpetual, unless earlier terminated as a result of a default under the Amended Agreement. Except as provided in Paragraph 1 above, Netzee acknowledges and agrees that no fees or royalties are currently or will in the future be payable under the Amended Agreement, unless Bankers Bank requests and Netzee agrees to provide additional services. The Users may utilize the services of independent service providers, contractors or facility managers and, in connection with such services, provide them access to the Escrowed Software to maintain and/or modify, or access and/or operate on the User’s behalf, any hardware of the Users or their suppliers, other software owned or licensed by any User, and/or the Escrowed Software, provided that use of the Escrowed Software is solely by or for the Users. As a condition of each independent service provider’s access to the Escrowed Software, the independent service provider shall execute a confidentiality agreement with the applicable User in which the independent service provider agrees to use the Escrowed Software, and information obtained from the applicable User concerning the Escrowed Software, only to perform services for the applicable User, and agrees not to disclose any information concerning the Escrowed Software to any third party. 4 -------------------------------------------------------------------------------- Netzee will provide to Bankers Bank a copy in acceptable form of the Escrowed Software. Netzee will also provide to Bankers Bank, to the extent such information is available or can be reasonably obtained, a list of the third party systems, equipment, and software programs required for use and/or support of the Escrowed Software. Bankers Bank shall be the exclusive owner of all right, title, and interest (including, without limitation, all copyright, patent, trade secret and other intellectual property rights) in and to all Modifications to the Escrowed Software created by or on behalf of Bankers Bank (provided that, in such regard, the ownership pertains to newly added or changed material or content, as opposed to pre-existing material or content, the ownership of which is retained by Netzee, and provided further that, if Netzee participates in creation of such Modifications, Netzee retains its rights to those portions of such Modifications that Netzee creates unless otherwise so agreed in the context of the particular transaction). Both parties agree to perform, during or after term of this Amended Agreement, such further deliveries or execute such further instruments as may be necessary or desirable to transfer, perfect and defend each party’s respective ownership rights in the Escrowed Software and any Modifications thereto as contemplated by the Amended Agreement, as requested by either party.   Until the occurrence of a “Trigger Event” (defined below), use of the Escrowed Software by the Users shall be limited to the internal business requirements of such Users. Until the occurrence of a Trigger Event (but not thereafter), Bankers Bank agrees not to license, or provide services using, the Escrowed Software to any correspondent bank that is or becomes a licensee of Netzee or of other business organizations licensed or engaged by Netzee with respect to the same or similar software or services.   Upon the occurrence of a Trigger Event Bankers Bank is further granted the nonexclusive, royalty free rights and licenses to market, distribute, and sublicense, either directly or through resellers, value added resellers, distributors, original equipment manufacturers, and similar entities and/or provide services regarding the Escrowed Software (including any Modifications) to bankers banks in addition to the Host Partner, and to banks which are customers of such other bankers banks, whereupon such further bankers banks and such other banks shall be deemed additional “Users” for purposes of this Agreement.   For the purposes of this Amendment, a “Trigger Event” means one or more of the following occurrences:     (a)   Netzee files for relief under the federal Bankruptcy Code, or any action is filed against Netzee under such Code and such action is not cured within 30 days;     (b)   Netzee enters into a general assignment for the benefit of creditors;     (c)   Netzee otherwise substantially ceases doing business, without any successor organization undertaking such business; or     (d)   A Trigger Event shall be deemed to have occurred on and at all times after June 30, 2005. 5 -------------------------------------------------------------------------------- The rights and licenses granted in this Paragraph (2) are irrespective of the fact that the conditions for release set forth in Section 7 of the Original Agreement has not been met, and, to the extent expressly set forth herein, will supersede the provisions of Section 7 of the Original Agreement, as well as any other agreement providing for the license, reversion or release of the Software to Banker’s Bank.   The Bankers Bank will deliver to Netzee within fifteen (15) days after the end of each calendar quarter (ending March 31, June 30, October 31, and December 31) a certificate of an officer of Bankers Bank indicating the name and number of Participating Users of Bankers Bank, except that the names (but not the numbers) do not have to be provided in the event Netzee at any time incurs a change of control of Netzee sufficient that the new controlling entity or entities are able to change a majority of the Board of Directors of Netzee, whether by virtue of a merger or consolidation with, a sale of all or substantially all of its assets to, or otherwise. (3) Netzee shall provide the following transition support to one or both Bankers Bank and Host Partner, as they direct:        (a) Assistance with delivery of the Software and information described in Paragraph (2) above.     (b) Knowledge transfer with regard to status of development of features and options currently included or planned for the Escrowed Software.     (c) Reasonable cooperation of technical personnel of Netzee, as available.     (d) Periodic consultation and support with regard to core business processes included in the Escrowed Software, to the extent known and available from Netzee as part of its normal business.       The parties will confer monthly with regard to scheduling and circumstances of support to be provided to Bankers Bank and the Host Partner. The foregoing support will be provided jointly to Bankers Bank and the Host Partner. The Transition Fee shall be considered earned in equal monthly amounts between June 1, 2000 and February 28, 2001.         (4) Except as provided in Paragraphs (3) above and (5) below, Netzee will have no responsibility to provide Services of any nature to Bankers Bank or Participating Users. In no event will Netzee have any continuing obligation to Bankers Bank or Participating Users after February 28, 2001. Bankers Bank and the applicable Participating Users shall hereafter have sole responsibility for creation, testing, implementation and support of the System, and Bankers Bank will hold Netzee harmless from any obligation or liability arising from such operation and activity. The Maintenance Agreement, scheduled to commence March 1, 2001, is terminated. 6 -------------------------------------------------------------------------------- (5) Netzee warrants to Bankers Bank as follows:       (a) Netzee owns or has acquired rights to all proprietary interests in the Escrowed Software necessary to grant the rights set forth in this Amendment. This subparagraph (a) shall not supercede any warranty or indemnification of either party previously entered with respect to the ownership or right to license the Escrowed Software or any part thereof.     (b) The Escrowed Software is not subject to any lien, security interest, or similar instrument or conveyance that could have the effect of terminating Bankers Bank’s license rights hereunder without Bankers Bank’s written consent.   (6) Except as provided in this Amendment, the Original Agreements shall remain in effect.   The Bankers Bank   By: /s/ Kevin Tweddle                  Kevin Tweddle   Netzee, Inc.   By: /s/ Richard S. Eiswirth            Richard S. Eiswirth 7

EXHIBIT 10.3c TERMINATION PROTECTION AGREEMENT   AGREEMENT effective June 19, 2000 between Harcourt General, Inc. and Peter Farwell (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 19, 2000 (the "Effective Date") and shall remain in effect until June 18, 2002 (the "Term"); provided, however, that commencing with June 19, 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 4.55% 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 19th day of June, 2000. HARCOURT GENERAL, INC. /s/ Richard A. Smith             By: Richard A. Smith Title: Chairman of the Board /s/ Peter Farwell                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) 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 10.2 364-DAY CREDIT AGREEMENT   Dated as of May 23, 2000   among   AUTOZONE, INC., as Borrower,     THE SEVERAL LENDERS FROM TIME TO TIME PARTY HERETO   AND   BANK OF AMERICA, N.A., as Administrative Agent and THE CHASE MANHATTAN BANK, as Syndication Agent _____________________________________________________________________________ BANC OF AMERICA SECURITIES, LLC and CHASE SECURITIES, INC., as Lead Arrangers and Book Managers and BANK ONE, NA and FLEET NATIONAL BANK as Co-Documentation Agents -------------------------------------------------------------------------------- TABLE OF CONTENTS SECTION 1 DEFINITIONS 1.1     Definitions. 1.2     Incorporated Definitions. 1.3     Computation of Time Periods. 1.4     Accounting Terms. SECTION 2 CREDIT FACILITY 2.1     Revolving Loans. 2.2     Competitive Loan Subfacility. 2.3     [intentionally left blank] SECTION 3 OTHER PROVISIONS RELATING TO CREDIT FACILITY 3.1     Default Rate. 3.2     Extension and Conversion. 3.3     Prepayments. 3.4     Termination, Reduction and Increase of Committed Amount. 3.5     Fees. 3.6     Capital Adequacy. 3.7     Inability To Determine Interest Rate. 3.8     Illegality. 3.9     Yield Protection. 3.10     Withholding Tax Exemption. 3.11     Indemnity. 3.12     Pro Rata Treatment. 3.13     Sharing of Payments. 3.14     Payments, Computations, Etc. 3.15     Evidence of Debt. 3.16     Replacement of Lenders. SECTION 4 CONDITIONS 4.1     Closing Conditions. 4.2     Conditions to all Extensions of Credit. SECTION 5 REPRESENTATIONS AND WARRANTIES 5.1     Organization; Existence; Compliance with Law. 5.2     Power; Authorization; Enforceable Obligations. 5.3     No Legal Bar. 5.4     Governmental Regulations. 5.5     Purpose of Loans. 5.6     Incorporated Representations and Warranties. SECTION 6 COVENANTS 6.1     Use of Proceeds. 6.2     Incorporated Covenants. SECTION 7     [intentionally left blank] SECTION 8 EVENTS OF DEFAULT 8.1     Events of Default. 8.2     Acceleration; Remedies. SECTION 9 AGENCY PROVISIONS 9.1     Appointment. 9.2     Delegation of Duties. 9.3     Exculpatory Provisions. 9.4     Reliance on Communications. 9.5     Notice of Default. 9.6     Non-Reliance on Administrative Agent and Other Lenders. 9.7     Indemnification. 9.8     Administrative Agent in its Individual Capacity. 9.9     Successor Administrative Agent. 9.10     Syndication Agent. SECTION 10 MISCELLANEOUS 10.1     Notices. 10.2     Right of Set-Off. 10.3     Benefit of Agreement. 10.4     No Waiver; Remedies Cumulative. 10.5     Payment of Expenses, etc. 10.6     Amendments, Waivers and Consents. 10.7     Counterparts. 10.8     Headings. 10.9     Survival. 10.10     Governing Law; Submission to Jurisdiction; Venue. 10.11     Severability. 10.12     Entirety. 10.13     Binding Effect; Termination. 10.14     Confidentiality. 10.15     Source of Funds. 10.16     Conflict. SCHEDULES Schedule 1.1 Applicable Percentage Schedule 2.1(a) Lenders Schedule 2.1(b)(i) Form of Notice of Borrowing Schedule 2.1(e) Form of Revolving Note Schedule 2.2(f) Form of Competitive Note Schedule 3.2 Form of Notice of Extension/Conversion Schedule 3.4(b) Form of New Commitment Agreement Schedule 4.1(e) Form of Legal Opinion Schedule 6.2 Form of Officer's Compliance Certificate Schedule 10.3(b) Form of Assignment and Acceptance -------------------------------------------------------------------------------- 364-DAY CREDIT AGREEMENT THIS 364-DAY CREDIT AGREEMENT dated as of May 23, 2000 (the "Credit Agreement"), is by and among AUTOZONE, INC., a Nevada corporation (the "Borrower"), the several lenders identified on the signature pages hereto and such other lenders as may from time to time become a party hereto (the "Lenders"), BANK OF AMERICA, N.A., as administrative agent for the Lenders (in such capacity, the "Administrative Agent") and THE CHASE MANHATTAN BANK, as syndication agent (in such capacity, the "Syndication Agent"). W I T N E S S E T H WHEREAS, the Borrower has requested that the Lenders provide a $650,000,000 credit facility (as such credit facility may be increased or decreased pursuant to the terms hereof) for the purposes hereinafter set forth; WHEREAS, the Lenders have agreed to make the requested credit facility available to the Borrower on the terms and conditions hereinafter set forth; NOW, THEREFORE, IN CONSIDERATION of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:     SECTION 1 DEFINITIONS 1.1 Definitions. As used in this Credit Agreement, the following terms shall have the meanings specified below unless the context otherwise requires: "Agency Services Address" means Bank of America, N.A., Agency Administrative Services, 1850 Gateway Boulevard, 5th Floor, Concord, California 94520-3281, Attention: Jennifer Reeves, or such other address as may be identified by written notice from the Administrative Agent to the Borrower. "Administrative Agent" shall have the meaning assigned to such term in the heading hereof, together with any successors or assigns. "Applicable Percentage" means, for purposes of calculating the applicable interest rate for any day for any Revolving Loan, the applicable rate of the Facility Fee for any day for purposes of Section 3.5(a) or the applicable rate of the Utilization Fee for any day for purposes of Section 3.5(c), the appropriate applicable percentage set forth on Schedule 1.1 The Applicable Percentages shall be determined and adjusted on the following dates (each a "Calculation Date"): (i) where the Borrower has a senior unsecured (non-credit enhanced) long term debt rating from S&P and/or Moody's, five (5) Business Days after receipt of notice by the Administrative Agent of a change in any such debt rating, based on such debt rating(s); and (ii) where the Borrower previously had a senior unsecured (non-credit enhanced) long term debt rating from S&P and/or Moody's, but either or both of S&P and Moody's withdraws its rating such that the Borrower's senior unsecured (non-credit enhanced) long term debt no longer is rated by either S&P or Moody's, five (5) Business Days after receipt by the Administrative Agent of notice of the withdrawal of the last to exist of such previous debt ratings, based on Pricing Level V until the earlier of (A) such time as S&P and/or Moody's provides another rating for such debt of the Borrower or (B) the Required Lenders have agreed to an alternative pricing grid or other method for determining Pricing Levels pursuant to an effective amendment to this Credit Agreement. The Applicable Percentage shall be effective from a Calculation Date until the next such Calculation Date. The Administrative Agent shall determine the appropriate Applicable Percentages promptly upon receipt of the notices and information necessary to make such determination and shall promptly notify the Borrower and the Lenders of any change thereof. Such determinations by the Administrative Agent shall be conclusive absent manifest error. The Applicable Percentage from the Closing Date shall be based on Pricing Level II, subject to adjustment as provided herein. "Approving Lenders" has the meaning set forth in Section 3.4(d). "Bank of America" means Bank of America, N.A. and its successors. "Base Rate Loan" means any Loan bearing interest at a rate determined by reference to the Base Rate. "Borrower" means the Person identified as such in the heading hereof, together with any permitted successors and assigns "Calculation Date" has the meaning set forth in the definition of Applicable Percentage. "Closing Date" means the date hereof. "Committed Amount" shall have the meaning assigned to such term in Section 2.1(a). "Commitment" means, with respect to each Lender, the commitment of such Lender in an aggregate principal amount at any time outstanding not to exceed the amount set forth opposite such Lender's name on Schedule 2.1(a) (as such amount may be reduced or increased from time to time in accordance with the provisions of this Credit Agreement), to make Loans in accordance with the provisions of Section 2.1(a). "Commitment Percentage" means, for any Lender, the percentage which such Lender's Commitment then constitutes of the aggregate Committed Amount. "Competitive Bid" means an offer by a Lender to make a Competitive Loan pursuant to the terms of Section 2.2. "Competitive Bid Rate" means, as to any Competitive Bid made by a Lender in accordance with the provisions of Section 2.2, the fixed rate of interest offered by the Lender making the Competitive Bid. "Competitive Loan" means a loan made by a Lender in its discretion pursuant to the provisions of Section 2.2. "Competitive Note" means a promissory note of the Borrower in favor of a Lender delivered pursuant to Section 2.2(f) and evidencing the Competitive Loans, if any, of such Lender, as such promissory note may be amended, modified, restated or replaced from time to time. "Credit Documents" means a collective reference to this Credit Agreement, the Notes, and all other related agreements and documents issued or delivered hereunder or thereunder or pursuant hereto or thereto. "Default" means any event, act or condition which with notice or lapse of time, or both, would constitute an Event of Default. "Designating Lender" has the meaning set forth in Section 10.3(e). "Disapproving Lenders" has the meaning set forth in Section 3.4(d). "Dollars" and "$" means dollars in lawful currency of the United States of America. "Eurodollar Loan" means any Loan bearing interest at a rate determined by reference to the Eurodollar Rate. "Event of Default" means such term as defined in Section 8.1. "Existing Credit Agreements" means collectively, (i) that certain Credit Agreement, dated as of December 20, 1996, as amended by Amendment No. 1 to Credit Agreement dated as of February 10, 1998, Amendment No. 2 to Credit Agreement dated as of November 13, 1998 and Amendment No. 3 to Credit Agreement dated as of March 28, 2000, by and among the Borrower, the lenders party thereto and Bank of America, formerly known as NationsBank, N.A., as Agent and (ii) that certain Credit Agreement dated as of November 13, 1998, as amended by Amendment No. 1 to Credit Agreement dated as of July 16, 1999 and Amendment No. 2 to Credit Agreement dated as of March 28, 2000 by and among the Borrower, the lenders party thereto and Bank of America, formerly known as NationsBank, N.A. as Agent. "Facilities" means a collective reference to (i) the revolving loan facility established pursuant to Section 2.1 and (ii) the Five-Year Revolver. "Facility Fee" shall have the meaning assigned to such term in Section 3.5(a). "Facility Fee Calculation Period" shall have the meaning assigned to such term in Section 3.5(a). "Fees" means all fees payable pursuant to Section 3.5. "Financial Officer" means, with respect to the Borrower, the Treasurer, the Chief Accounting Officer, the General Counsel, the Chief Financial Officer or the Vice President-Finance of the Borrower; provided that the Borrower may designate additional persons or delete persons so authorized by written notice to the Administrative Agent from at least two existing Financial Officers of the Borrower. "Five-Year Revolver" means the revolving loan facility established pursuant to the Five-Year Credit Agreement. "Five-Year Credit Agreement" means that certain Five-Year Credit Agreement dated as of the date hereof among the Borrower, the lenders party thereto, Bank of America, as administrative agent and The Chase Manhattan Bank, as syndication agent. "Interest Payment Date" means (i) as to any Base Rate Loan, the last day of each March, June, September and December, the date of repayment of principal of such Loan and the Termination Date and (ii) as to any Eurodollar Loan, the last day of each Interest Period for such Loan, the date of repayment of principal of such Loan and on the Termination Date, and in addition where the applicable Interest Period is more than 3 months, then also on the date 3 months from the beginning of the Interest Period, and each 3 months thereafter. If an Interest Payment Date falls on a date which is not a Business Day, such Interest Payment Date shall be deemed to be the next succeeding Business Day, except that in the case of Eurodollar Loans where the next succeeding Business Day falls in the next succeeding calendar month, then on the next preceding Business Day. "Interest Period" means (i) as to any Eurodollar Loan, a period of one, two, three or six month's duration, as the Borrower may elect, commencing in each case, on the date of the borrowing (including conversions, extensions and renewals) and (ii) as to any Competitive Loan, a period commencing in each case on the date of the borrowing and ending on the date specified in the applicable Competitive Bid whereby the offer to make such Competitive Loan was extended (such ending date in any event to be no less than one week and not more than 180 days from the date of the borrowing; provided, however, (A) if any Interest Period would end on a day which is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day (except that in the case of Eurodollar Loans where the next succeeding Business Day falls in the next succeeding calendar month, then on the next preceding Business Day), (B) no Interest Period shall extend beyond the Termination Date, and (C) in the case of Eurodollar Loans, where an Interest Period begins on a day for which there is no numerically corresponding day in the calendar month in which the Interest Period is to end, such Interest Period shall end on the last day of such calendar month. "Lenders" means each of the Persons identified as a "Lender" on the signature pages hereto, and each Person which may become a Lender by way of assignment in accordance with the terms hereof, together with their successors and permitted assigns. "Lending Installation" means, with respect to a Lender or the Administrative Agent, any office, branch, subsidiary or affiliate of such Lender or the Administrative Agent. "Loan" or "Loans" means the Revolving Loans and/or the Competitive Loans, individually or collectively, as appropriate. "Master Account" means such account as may be identified by written notice from at least two Financial Officers of the Borrower to the Administrative Agent. "Moody's" means Moody's Investors Service, Inc., or any successor or assignee of the business of such company in the business of rating securities. "Note" means any Revolving Note or any Competitive Note, as the context may require. "Notice of Borrowing" means a written notice of borrowing in substantially the form of Schedule 2.1(b)(i), as required by Section 2.1(b)(i). "Notice of Extension/Conversion" means the written notice of extension or conversion in substantially the form of Schedule 3.2, as required by Section 3.2. "Participation Interest" means, the extension of credit by a Lender by way of a purchase of a participation or in any Loans as provided in Section 3.13. "Pricing Level" means the applicable pricing level for the Applicable Percentage shown in Schedule 1.1. "Register" shall have the meaning given such term in Section 10.3(c). "Required Lenders" means, at any time, Lenders which are then in compliance with their obligations hereunder (as determined by the Administrative Agent) and holding in the aggregate at least 51% of (i) the Commitment Percentages or (ii) if the Commitments have been terminated, the outstanding Loans and Participation Interests. "Revolving Loans" shall have the meaning assigned to such term in Section 2.1(a). "Revolving Note" means a promissory note of the Borrower in favor of a Lender delivered pursuant to Section 2.1(e) and evidencing the Revolving Loans of such Lender, as such promissory note may be amended, modified, restated or replaced from time to time. "S&P" means Standard & Poor's Ratings Group, a division of McGraw Hill, Inc., or any successor or assignee of the business of such division in the business of rating securities. "SPV" has the meaning set forth in Section 10.3(e). "Syndication Agent" shall have the meaning assigned to such term in the heading hereof together with any successors and assigns. "Termination Date" means May 22, 2001, as such date may be extended pursuant to Section 3.4. "Utilization Fee" shall have the meaning set forth in Section 3.5(c). "Utilization Fee Period" shall have the meaning assigned to such term in Section 3.5(c). 1.2 Incorporated Definitions. All capitalized terms not otherwise defined herein shall have the respective meanings assigned to such terms in the Five-Year Credit Agreement, as in effect as of the date hereof (the "Incorporated Definitions"). The incorporation by reference to the Five-Year Credit Agreement of the Incorporated Definitions pursuant to this Section 1.2 shall survive the termination of the Five-Year Credit Agreement. For purposes of the incorporation of the Incorporated Definitions pursuant to this Section 1.2, all references in the Incorporated Definitions to the "Administrative Agent" shall be deemed to refer to the Administrative Agent hereunder, all references in the Incorporated Definitions to a "Lender" or the "Lenders" shall be deemed to refer to one or more of the Lenders hereunder, all references in the Incorporated Definitions to the "Required Lenders" shall be deemed to refer to the Required Lenders hereunder, all references in the Incorporated Definitions to the "Credit Agreement," or any similar references, shall be deemed to refer to this Credit Agreement, all references in the Incorporated Definitions to a "Note" or the "Notes" shall be deemed to refer to one or more of the Notes issued pursuant to Section 2.1(e) hereof and all references in the Incorporated Definitions to a "Credit Document" or the "Credit Documents," or any similar references, shall be deemed to refer to one or more of the Credit Documents as defined in Section 1.1 hereof. 1.3 Computation of Time Periods. For purposes of computation of periods of time hereunder, the word "from" means "from and including" and the words "to" and "until" each mean "to but excluding." 1.4 Accounting Terms. Except as otherwise expressly provided herein, all accounting terms used herein shall be interpreted, and all financial statements and certificates and reports as to financial matters required to be delivered to the Lenders hereunder shall be prepared, in accordance with GAAP applied on a consistent basis. All calculations made for the purposes of determining compliance with this Credit Agreement shall (except as otherwise expressly provided herein) be made by application of GAAP applied on a basis consistent with the most recent annual or quarterly financial statements delivered pursuant to Section 6.1 of the Incorporated Covenants; provided, however, if (a) the Borrower shall object to determining such compliance on such basis at the time of delivery of such financial statements due to any change in GAAP or the rules promulgated with respect thereto or (b) the Administrative Agent or the Required Lenders shall so object in writing within 30 days after delivery of such financial statements, then such calculations shall be made on a basis consistent with the most recent financial statements delivered by the Borrower to the Lenders as to which no such objection shall have been made.     SECTION 2 CREDIT FACILITY 2.1 Revolving Loans. (a) Commitment. Subject to the terms and conditions hereof and in reliance upon the representations and warranties set forth herein, each Lender severally agrees to make available to the Borrower revolving credit loans requested by the Borrower in Dollars ("Revolving Loans") up to such Lender's Commitment from time to time from the Closing Date until the Termination Date, or such earlier date as the Commitments shall have been terminated as provided herein for the purposes hereinafter set forth; provided, however, that the sum of the aggregate principal amount of outstanding Revolving Loans shall not exceed SIX HUNDRED FIFTY MILLION DOLLARS ($650,000,000.00) (as such aggregate maximum amount may be reduced or increased from time to time as provided in Sections 3.3 and 3.4, the "Committed Amount"); provided, further, (i) with regard to each Lender individually, such Lender's outstanding Revolving Loans shall not exceed such Lender's Commitment, and (ii) with regard to the Lenders collectively, the aggregate principal amount of outstanding Revolving Loans plus the aggregate principal amount of outstanding Competitive Loans shall not exceed the Committed Amount. Revolving Loans may consist of Base Rate Loans or Eurodollar Loans, or a combination thereof, as the Borrower may request, and may be repaid and reborrowed in accordance with the provisions hereof; provided, however, that no more than 25 Eurodollar Loans shall be outstanding hereunder at any time. For purposes hereof, Eurodollar Loans with different Interest Periods shall be considered as separate Eurodollar Loans, even if they begin on the same date, although borrowings, extensions and conversions may, in accordance with the provisions hereof, be combined at the end of existing Interest Periods to constitute a new Eurodollar Loan with a single Interest Period. Revolving Loans hereunder may be repaid and reborrowed in accordance with the provisions hereof. (b) Revolving Loan Borrowings. (i) Notice of Borrowing. The Borrower shall request a Revolving Loan borrowing by written notice (or telephone notice promptly confirmed in writing) to the Administrative Agent not later than 11:30 A.M. (Charlotte, North Carolina time) on the Business Day of the requested borrowing in the case of Base Rate Loans, and not later than 2:00 P.M. (Charlotte, North Carolina time) on the third Business Day prior to the date of the requested borrowing in the case of Eurodollar Loans. Each such request for borrowing shall be irrevocable, executed by a Financial Officer of the Borrower and shall specify (A) that a Revolving Loan is requested, (B) the date of the requested borrowing (which shall be a Business Day), (C) the aggregate principal amount to be borrowed, and (D) whether the borrowing shall be comprised of Base Rate Loans, Eurodollar Loans or a combination thereof, and if Eurodollar Loans are requested, the Interest Period(s) therefor. If the Borrower shall fail to specify in any such Notice of Borrowing (I) an applicable Interest Period in the case of a Eurodollar Loan, then such notice shall be deemed to be a request for an Interest Period of one month, or (II) the type of Revolving Loan requested, then such notice shall be deemed to be a request for a Base Rate Loan hereunder. The Administrative Agent shall give notice to each affected Lender promptly upon receipt of each Notice of Borrowing pursuant to this Section 2.1(b)(i), the contents thereof and each such Lender's share of any borrowing to be made pursuant thereto. (ii) Minimum Amounts. Each Eurodollar Loan or Base Rate Loan that is a Revolving Loan shall be in a minimum aggregate principal amount of $5,000,000 and integral multiples of $1,000,000 in excess thereof (or the remaining amount of the Committed Amount, if less). (iii) Advances. Each Lender will make its Commitment Percentage of each Revolving Loan borrowing available to the Administrative Agent for the account of the Borrower as specified in Section 3.14(a), or in such other manner as the Administrative Agent may specify in writing, by 1:00 P.M. (Charlotte, North Carolina time) on the date specified in the applicable Notice of Borrowing in Dollars and in funds immediately available to the Administrative Agent. Such borrowing will then be made available to the Borrower by the Administrative Agent by crediting the Master Account with the aggregate of the amounts made available to the Administrative Agent by the Lenders and in like funds as received by the Administrative Agent.     (c) Repayment. The principal amount of all Revolving Loans shall be due and payable in full on the Termination Date, subject to the provisions of Sections 3.4(d) and (e). (d) Interest. Subject to the provisions of Section 3.1, (i) Base Rate Loans. During such periods as Revolving Loans shall be comprised in whole or in part of Base Rate Loans, such Base Rate Loans shall bear interest at a per annum rate equal to the Base Rate plus the Applicable Percentage; and (ii) Eurodollar Loans. During such periods as Revolving Loans shall be comprised in whole or in part of Eurodollar Loans, such Eurodollar Loans shall bear interest at a per annum rate equal to the Eurodollar Rate plus the Applicable Percentage.     Interest on Revolving Loans shall be payable in arrears on each applicable Interest Payment Date (or at such other times as may be specified herein). (e) Notes. The Revolving Loans made by each Lender shall be evidenced by a duly executed promissory note of the Borrower to such Lender in an original principal amount equal to such Lender's Commitment and in substantially the form of Schedule 2.1(e).   2.2 Competitive Loan Subfacility. (a) Competitive Loans. Subject to the terms and conditions and relying upon the representations and warranties herein set forth, the Borrower may, from time to time from the Closing Date until the Termination Date, request and each Lender may, in its sole discretion, agree to make, Competitive Loans in Dollars to the Borrower; provided, however, that (i) the aggregate principal amount of outstanding Competitive Loans shall not at any time exceed the Committed Amount, and (ii) the sum of the aggregate principal amount of outstanding Revolving Loans plus the aggregate principal amount of outstanding Competitive Loans shall not at any time exceed the Committed Amount. Each Competitive Loan shall be not less than $10,000,000 in the aggregate and integral multiples of $1,000,000 in excess thereof (or the remaining portion of the Committed Amount, if less). (b) Competitive Bid Requests. The Borrower may solicit by making a written or telefax request to all of the Lenders for a Competitive Loan. To be effective, such request must be received by each of the Lenders by such time as determined by each such Lender in accordance with such Lender's customary practices (in any event not to be later than 2:00 P.M. (Charlotte, North Carolina time)) one Business Day prior to the date of the requested borrowing and must specify (i) that a Competitive Loan is requested, (ii) the amount of such Competitive Loan and (iii) the Interest Period for such Competitive Loan. (c) Competitive Bids. Upon receipt of a request by the Borrower for a Competitive Loan, each Lender may, in its sole discretion, submit a Competitive Bid containing an offer to make a Competitive Loan in an amount up to the amount specified in the related request for Competitive Loans. Such Competitive Bid shall be submitted to the Borrower by telephone notice (to be immediately confirmed by telecopy) by such time as determined by such Lender in accordance with such Lender's customary practices (in any event not to be later than 10:30 A.M. (Charlotte, North Carolina time)) on the date of the requested Competitive Loan. Competitive Bids so made shall be irrevocable. Each Competitive Bid shall specify (i) the date of the proposed Competitive Loan, (ii) the maximum and minimum principal amounts of the Competitive Loan for which such offer is being made (which may be for all or a part of (but not more than) the amount requested by the Borrower), (iii) the applicable Competitive Bid Rate, and (iv) the applicable Interest Period. (d) Acceptance of Competitive Bids. The Borrower may, before such time as determined by the applicable Lender in accordance with such Lender's customary practices (in any event until 1:00 P.M. (Charlotte, North Carolina time)) on the date of the requested Competitive Loan, accept any Competitive Bid by giving the applicable Lender and the Administrative Agent telephone notice (immediately confirmed in writing) of (i) the Lender or Lenders whose Competitive Bid(s) is/are accepted, (ii) the principal amount of the Competitive Bid(s) so accepted and (iii) the Interest Period of the Competitive Bid(s) so accepted. The Borrower may accept any Competitive Bid in whole or in part; provided, however, that (a) the principal amount of each Competitive Loan may not exceed the maximum amount offered in the Competitive Bid and may not be less than the minimum amount offered in the Competitive Bid, (b) the principal amount of each Competitive Loan may not exceed the total amount requested pursuant to subsection (a) above, (c) the Borrower shall not accept a Competitive Bid made at a particular Competitive Bid Rate if it has decided to reject a Competitive Bid made at a lower Competitive Bid Rate and (d) if the Borrower shall accept a Competitive Bid or Bids made at a particular Competitive Bid Rate but the amount of such Competitive Bid or Bids shall cause the total amount of Competitive Bids to be accepted by the Borrower to exceed the total amount requested pursuant to subsection (a) above, then the Borrower shall accept a portion of such Competitive Bid or Bids in an amount equal to the total amount requested pursuant to subsection (a) above less the amount of other Competitive Bids accepted with respect to such request, which acceptance, in the case of multiple Competitive Bids at the same Competitive Bid Rate, shall be made pro rata in accordance with each such Competitive Bid at such Competitive Bid Rate. Competitive Bids so accepted by the Borrower shall be irrevocable. (e) Funding of Competitive Loans. Upon acceptance by the Borrower pursuant to subsection (d) above of all or a portion of any Lender's Competitive Bid, such Lender shall, before such time as determined by such Lender in accordance with such Lender's customary practices, on the date of the requested Competitive Loan, make such Competitive Loan available by crediting the Master Account with the amount of such Competitive Loan. (f) Competitive Notes. The Competitive Loans of each Lender shall be evidenced by a single Competitive Note duly executed on behalf of the Borrower, dated the date hereof, in substantially the form of Schedule 2.2(f), payable to the order of such Lender. (g) Repayment of Competitive Loans. The Borrower shall repay to each Lender which has made a Competitive Loan on the last day of the Interest Period for such Competitive Loan the then unpaid principal amount of such Competitive Loan. Unless the Borrower shall repay the maturing Competitive Loan or give to notice to the Administrative Agent of its intent to otherwise repay such Loan not later than 11:30 A.M. (Charlotte, North Carolina time) on the last day of the Interest Period, the Borrower shall be deemed to have requested a Revolving Loan advance comprised of Base Rate Loans in the amount of the maturing Competitive Loan, the proceeds of which will be used to repay such Competitive Loan. (h) Interest on Competitive Loans. The Borrower shall pay interest to each Lender on the unpaid principal amount of each Competitive Loan from and including the date of such Competitive Loan to but excluding the stated maturity date thereof, at the applicable Competitive Bid Rate for such Competitive Loan (computed on the basis of the actual number of days elapsed over a year of 360 days). Interest on Competitive Loans shall be payable in arrears on each applicable Interest Payment Date (or at such other times as may be specified herein). (i) Limitation on Number of Competitive Loans. The Borrower shall not request a Competitive Loan if, assuming the maximum amount of Competitive Loans so requested is borrowed as of the date of such request, the sum of the aggregate principal amount of outstanding Revolving Loans plus the aggregate principal amount of outstanding Competitive Loans plus the aggregate principal amount of outstanding Swingline Loans would exceed the aggregate Committed Amount. (j) Change in Procedures for Requesting Competitive Loans. The Borrower and the Lenders hereby agree that, notwithstanding any other provision to the contrary contained in this Credit Agreement, upon mutual agreement of the Administrative Agent and the Borrower and written notice by the Administrative Agent to the Lenders, all further requests by the Borrower for Competitive Loans shall be made by the Borrower to the Lenders through the Administrative Agent in accordance with such procedures as shall be prescribed by the Administrative Agent and acceptable to the Borrower and each Lender. 2.3 [intentionally left blank]     SECTION 3 OTHER PROVISIONS RELATING TO CREDIT FACILITY 3.1 Default Rate. Upon the occurrence, and during the continuance, of an Event of Default, the principal of and, to the extent permitted by law, interest on the Loans and any other amounts owing hereunder or under the other Credit Documents shall bear interest, payable on demand, at a per annum rate 1% greater than the rate which would otherwise be applicable (or if no rate is applicable, whether in respect of interest, fees or other amounts, then 1% greater than the Base Rate). 3.2 Extension and Conversion. Subject to the terms of Section 4.2, the Borrower shall have the option, on any Business Day, to extend existing Loans into a subsequent permissible Interest Period or to convert Loans (other than Competitive Loans) into Loans of another interest rate type; provided, however, that (a) except as provided in Section 3.8, Eurodollar Loans may be converted into Base Rate Loans only on the last day of the Interest Period applicable thereto, (b) Eurodollar Loans may be extended, and Base Rate Loans may be converted into Eurodollar Loans, only if no Default or Event of Default is in existence on the date of extension or conversion, (c) Loans extended as, or converted into, Eurodollar Loans shall be subject to the terms of the definition of "Interest Period" set forth in Section 1.1 and shall be in such minimum amounts as provided in Section 2.1(b)(ii), (d) no more than 25 Eurodollar Loans shall be outstanding hereunder at any time (it being understood that, for purposes hereof, Eurodollar Loans with different Interest Periods shall be considered as separate Eurodollar Loans, even if they begin on the same date, although borrowings, extensions and conversions may, in accordance with the provisions hereof, be combined at the end of existing Interest Periods to constitute a new Eurodollar Loan with a single Interest Period) and (e) any request for extension or conversion of a Eurodollar Loan which shall fail to specify an Interest Period shall be deemed to be a request for an Interest Period of one month. Each such extension or conversion shall be effected by a Financial Officer of the Borrower giving a Notice of Extension/Conversion (or telephone notice promptly confirmed in writing) to the Administrative Agent prior to 11:30 A.M. (Charlotte, North Carolina time) on the Business Day of, in the case of the extension of a Base Rate Loan, and prior to 2:00 P.M. (Charlotte, North Carolina time) on the third Business Day prior to, in the case of the extension of a Eurodollar Loan as, or conversion of a Base Rate Loan into, a Eurodollar Loan, the date of the proposed extension or conversion, specifying the date of the proposed extension or conversion, the Loans to be so extended or converted, the types of Loans into which such Loans are to be converted and, if appropriate, the applicable Interest Periods with respect thereto. Each request for extension or conversion shall be irrevocable and shall constitute a representation and warranty by the Borrower of the matters specified in subsections (b), (c), (d) and (e) of Section 4.2. In the event the Borrower fails to request extension or conversion of any Eurodollar Loan in accordance with this Section, or any such conversion or extension is not permitted or required by this Section, then such Eurodollar Loan shall be automatically converted into a Base Rate Loan at the end of the Interest Period applicable thereto. The Administrative Agent shall give each Lender notice as promptly as practicable of any such proposed extension or conversion affecting any Loan. 3.3 Prepayments. (a) Voluntary Prepayments. The Borrower shall have the right to prepay Loans (other than Competitive Bid Loans, which may not be prepaid) in whole or in part from time to time, subject to Section 3.11, but otherwise without premium or penalty; provided, however, that (i) Eurodollar Loans may only be prepaid on three Business Days prior written notice to the Administrative Agent and specifying the applicable Loans to be prepaid; (ii) any prepayment of Eurodollar Loans will be subject to Section 3.11; and (iii) each such partial prepayment of Loans shall be in a minimum principal amount of $5,000,000 and multiples of $1,000,000 in excess thereof (or, if less, the full remaining amount of the Loan being prepaid). Subject to the foregoing terms, amounts prepaid under this Section 3.3(a) shall be applied as the Borrower may elect. (b) Mandatory Prepayments.   (i) Commitment Limitation. If at any time, the sum of the aggregate principal amount of outstanding Revolving Loans plus the aggregate principal amount of outstanding Competitive Loans plus the aggregate principal amount of outstanding Swingline Loans shall exceed the Committed Amount, the Borrower promises to prepay immediately the outstanding principal balance on the Revolving Loans and/or Competitive Loans in an amount sufficient to eliminate such excess. (ii) Debt and Equity Issuances. During any period in which the Borrower has a senior unsecured (non-credit enhanced) long term debt rating from S&P of below BBB- and a senior unsecured (non-credit enhanced) long term debt rating from Moody's of below Baa3, immediately upon receipt by the Borrower or any Subsidiary of proceeds from any Debt or Equity Issuance (as defined below) the Borrower shall prepay the principal amount of Revolving Loans outstanding under the Facilities in an aggregate amount equal to 50% of the net cash proceeds of such Debt or Equity Issuance. Such prepayment shall (A) be applied pro rata to the Facilities (to the extent of outstanding Revolving Loans under each Facility), (B) permanently reduce the Committed Amount (and the Commitments of the Lenders on a pro rata basis) on a Dollar for Dollar basis and (C) be accompanied by interest on the principal amount prepaid through the date of prepayment. For purposes hereof, "Debt or Equity Issuance" means the issuance by the Borrower or any of its Subsidiaries (to a Person other than the Borrower or any of its Subsidiaries) of (I) any Indebtedness for borrowed money in the form of publicly issued or privately placed bonds or other debt securities with a maturity of three years or greater or (II) any shares of capital stock or other equity securities.   (c) General. All prepayments made pursuant to this Section 3.3 shall (i) be subject to Section 3.11 and (ii) unless the Borrower shall specify otherwise, be applied first to Base Rate Loans, if any, and then to Eurodollar Loans in direct order of Interest Period maturities. Except as otherwise set forth in subclause (b) above, amounts prepaid on the Loans may be reborrowed in accordance with the provisions hereof. 3.4 Termination, Reduction and Increase of Committed Amount. (a) Voluntary Reductions. The Borrower may from time to time permanently reduce or terminate the Committed Amount in whole or in part (in minimum aggregate amounts of $5,000,000 or in integral multiples of $1,000,000 in excess thereof (or, if less, the full remaining amount of the then applicable Committed Amount)) upon five Business Days prior written notice to the Administrative Agent; provided, however, no such termination or reduction shall be made which would cause the aggregate principal amount of outstanding Loans to exceed the Committed Amount unless, concurrently with such termination or reduction, the Loans are repaid to the extent necessary to eliminate such excess. The Commitments of the Lenders shall automatically terminate on the Termination Date. The Administrative Agent shall promptly notify each affected Lender of receipt by the Administrative Agent of any notice from the Borrower pursuant to this Section 3.4(a). (b) Additional Commitments. The Borrower shall have the right no more than once a year to increase the Facilities up to an aggregate amount of $1,500,000,000 (with such increase to be applied pro rata to the Facilities) without the consent of the Lenders, subject however to the satisfaction of each of the following terms and conditions: (i) to the knowledge of the Administrative Agent, no Default or Event of Default shall exist and be continuing at the time of such increase; (ii) concurrently with the Borrower's request for such increase hereunder, the Borrower shall deliver to the Administrative Agent, an officer's certificate substantially in the form of Schedule 6.2 hereto certifying that no Default or Event of Default has occurred and is continuing and demonstrating compliance with each of the financial covenants set forth in Sections 6.10 and 6.11 both before and after giving effect to the increase requested hereunder; (iii) such increase shall be allocated in the following order: (A) first, to the existing Lenders consenting to an increase in the amount of their Commitments; provided that (1) on or before the tenth Business Day following notification of a requested increase in the Committed Amount, each Lender shall notify the Borrower of the desired increase, if any, in its Commitment and (2) if the aggregate increases in the Commitments requested by the existing Lenders shall exceed the requested increase in the Committed Amount, the Commitments of such Lenders shall be increased on a pro rata basis according to the existing Commitment Percentage of such Lenders; and (B) second, to any other commercial bank, financial institution or "accredited investor" (as defined in Regulation D of the Securities and Exchange Commission) reasonably acceptable to the Administrative Agent and the Borrower;   (iv) each Person providing a new Commitment shall execute a New Commitment Agreement substantially in the form of Schedule 3.4(b) hereto and, upon such execution and the satisfaction of the other terms and conditions of this Section 3.4(b), such Person shall thereupon become a party hereto and have the rights and obligations of a Lender under this Credit Agreement as more specifically provided in the New Commitment Agreement; and (v) the Administrative Agent shall promptly notify each Lender of (A) the new Committed Amount and (B) each Lender's Commitment Percentage, in each case after giving effect to the one-time increase in Commitment referred to in this Section 3.4(b).   On the date (which date shall be a Business Day) on which the increase in the Committed Amount occurs the Administrative Agent and the Lenders shall make adjustments among the Lenders with respect to the Revolving Loans outstanding hereunder and under the Five-Year Revolver and amounts of principal, interest, fees and other amounts paid or payable with respect thereto as shall be necessary in order to reallocate among the Lenders such outstanding amounts based on the new Commitment Percentages and to otherwise carry out fully the terms of this Section 3.4(b). The Borrower agrees that, in connection with any such increase in the Committed Amount, it will promptly (i) provide to each Lender providing a new or increased Commitment (upon surrender of the existing Revolving Note of such Lender in the case of an existing Lender) a Revolving Note in the amount of its new or increased (as applicable) Commitment substantially in the form of the Revolving Note attached hereto as Schedule 2.1(e) (but, in the case of a new Revolving Note given to an existing Lender that increases its Commitment, with notation thereon that it is given in substitution for and replacement of the original Revolving Note or any replacement notes thereof) and (ii) provide to each Lender (upon surrender of the existing Competitive Note of such Lender in the case of an existing Lender) a Competitive Note in the amount of the new Committed Amount substantially in the form of the Competitive Note attached hereto as Schedule 2.2(f) (but, in the case of a new Competitive Note given to an existing Lender, with notation thereon that it is given in substitution for and replacement of the original Competitive Note or any replacement notes thereof). Each of the parties hereto acknowledges and agrees that no Lender shall be obligated to increase its Commitment pursuant to the terms of this Section 3.4(b). (c) Termination Date. Subject to subclauses (d) and (e) below, the Commitments of the Lenders shall automatically terminate on the Termination Date. (d) Extension. The Borrower may, no earlier than 60 days and no later than 30 days prior to the Termination Date, by notice to the Administrative Agent, make written request of the Lenders to extend the Termination Date for an additional period of 364 days. The Administrative Agent will give prompt notice to each of the Lenders of its receipt of any such request for extension of the Termination Date. Each Lender shall make a determination not more than 30 days nor less than 25 days prior to the Termination Date as to whether or not it will agree to extend the Termination Date as requested; provided, however, that failure by any Lender to make a timely response to the Borrower's request for extension of the Termination Date shall be deemed to constitute a refusal by the Lender to extend the Termination Date. If, in response to a request for an extension of the Termination Date, one or more Lenders shall fail to agree to the requested extension (the "Disapproving Lenders"), then the Borrower may elect to either (A) continue the credit facility hereunder at the same level of Commitments by replacing each of the Disapproving Lenders in accordance with Section 3.16, or (B) provided that the requested extension is approved by Lenders holding at least 51% of the Commitments hereunder (including for purposes hereof any Replacement Lenders which may replace a Disapproving Lender, the "Approving Lenders"), extend and continue the credit facility at a lower aggregate amount equal to the Commitments held by the Approving Lenders. In any such case, (i) the Termination Date relating to the Commitments held by the Disapproving Lenders shall remain as then in effect with repayment of obligations held by such Disapproving Lenders being due on such date and termination of their respective Commitments on such date, and (ii) the Termination Date relating to the Commitments held by the Approving Lenders shall be extended by an additional period of 364 days. (e) Term Out Option. If (i) the Borrower shall have delivered to the Administrative Agent a written notice requesting an extension of the Termination Date at least three (3) Business Days prior to the Termination Date then in effect (which notice the Administrative Agent shall promptly transmit to each Lender) and (ii) no Default or Event of Default exists on the otherwise applicable Termination Date, then such otherwise applicable Termination Date shall be extended to the first anniversary of the Termination Date then in effect. No additional borrowings may be made during such extension period and any amounts repaid on Loans outstanding under such facility during such extension period may not be reborrowed. The otherwise Applicable Percentage on all Loans outstanding under this option shall be increased by an additional 12.5 bps.   3.5 Fees. (a) Facility Fee. In consideration of the Commitments of the Lenders hereunder, the Borrower agrees to pay to the Administrative Agent for the account of each Lender a fee (the "Facility Fee") on the Committed Amount computed at a per annum rate for each day during the applicable Facility Fee Calculation Period (hereinafter defined) equal to the Applicable Percentage in effect from time to time. The Facility Fee shall commence to accrue on the Closing Date and shall be due and payable in arrears on the last Business Day of each March, June, September and December (and any date that the Committed Amount is reduced or increased as provided in Section 3.4 and the Termination Date) for the immediately preceding quarter (or portion thereof) (each such quarter or portion thereof for which the Facility Fee is payable hereunder being herein referred to as a "Facility Fee Calculation Period"), beginning with the first of such dates to occur after the Closing Date. (b) Administrative Fees. The Borrower agrees to pay to the Administrative Agent, for its own account, the fees referred to in the Administrative Agent's Fee Letter (collectively, the "Administrative Agent's Fees"). (c) Utilization Fee. During such periods as the aggregate principal amount of all outstanding Loans is greater than or equal to 33% of the Committed Amount (each a "Utilization Fee Period"), the Borrower agrees to pay to the Administrative Agent for the account of each Lender a fee (the "Utilization Fee") on all Loans outstanding during each such Utilization Fee Period computed at a per annum rate for each day during such period equal to the Applicable Percentage for the Utilization Fee in effect from time to time. The Utilization Fee shall be due and payable in arrears on the last Business Day of each March, June, September and December for all Utilization Fee Periods occurring during the immediately preceding quarter (or portion thereof), beginning with the first of such dates to occur after the Closing Date.   3.6 Capital Adequacy. If any Lender determines the amount of capital required or expected to be maintained by such Lender, any Lending Installation of such Lender or any corporation controlling such Lender is increased as a result of a Change, then, within 15 days of demand by such Lender, the Borrower shall pay such Lender the amount necessary to compensate for any shortfall in the rate of return on the portion of such increased capital which such Lender determines is attributable to this Credit Agreement, its Loans or its obligation to make Loans hereunder (after taking into account such Lender's policies as to capital adequacy). "Change" means (i) any change after the Closing Date in the Risk-Based Capital Guidelines or (ii) any adoption of or change in any other law, governmental or quasi-governmental rule, regulation, policy, guideline, interpretation, or directive (whether or not having the force of law) after the Closing Date which affects the amount of capital required or expected to be maintained by any Lender or any Lending Installation or any corporation controlling any Lender. "Risk-Based Capital Guidelines" means (i) the risk-based capital guidelines in effect in the United States on the Closing Date, including transition rules, and (ii) the corresponding capital regulations promulgated by regulatory authorities outside the United States implementing the July 1988 report of the Basle Committee on Banking Regulation and Supervisory Practices Entitled "International Convergence of Capital Measurements and Capital Standards," including transition rules, and any amendments to such regulations adopted prior to the Closing Date. 3.7 Inability To Determine Interest Rate. If prior to the first day of any Interest Period, the Administrative Agent shall have reasonably determined that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the Eurodollar Rate for such Interest Period, the Administrative Agent shall give telecopy or telephonic notice thereof to the Borrower and the Lenders as soon as practicable thereafter. If such notice is given (a) any Eurodollar Loans requested to be made on the first day of such Interest Period shall be made as Base Rate Loans and (b) any Loans that were to have been converted on the first day of such Interest Period to or continued as Eurodollar Loans shall be converted to or continued as Base Rate Loans. Until such notice has been withdrawn by the Administrative Agent, no further Eurodollar Loans shall be made or continued as such, nor shall the Borrower have the right to convert Base Rate Loans to Eurodollar Loans. 3.8 Illegality. Notwithstanding any other provision herein, if the adoption of or any change in any Requirement of Law or in the interpretation or application thereof occurring after the Closing Date shall make it unlawful for any Lender to make or maintain Eurodollar Loans as contemplated by this Credit Agreement, (a) such Lender shall promptly give written notice of such circumstances to the Borrower and the Administrative Agent (which notice shall be withdrawn whenever such circumstances no longer exist), (b) the commitment of such Lender hereunder to make Eurodollar Loans, continue Eurodollar Loans as such and convert a Base Rate Loan to Eurodollar Loans shall forthwith be canceled and, until such time as it shall no longer be unlawful for such Lender to make or maintain Eurodollar Loans, such Lender shall then have a commitment only to make a Base Rate Loan when a Eurodollar Loan is requested and (c) such Lender's Loans then outstanding as Eurodollar Loans, if any, shall be converted automatically to Base Rate Loans on the respective last days of the then current Interest Periods with respect to such Loans or within such earlier period as required by law. If any such conversion of a Eurodollar Loan occurs on a day which is not the last day of the then current Interest Period with respect thereto, the Borrower shall pay to such Lender such amounts, if any, as may be required pursuant to Section 3.11. 3.9 Yield Protection. If any law or any governmental or quasi-governmental rule, regulation, policy, guideline or directive (whether or not having the force of law), or any interpretation thereof, or the compliance of any Lender therewith, (a) subjects any Lender or any applicable Lending Installation to any tax, duty, charge or withholding on or from payments due from the Borrower (excluding federal taxation of the overall net income of any Lender or applicable Lending Installation), or changes the basis of taxation of payments to any Lender in respect of its Loans or other amounts due it hereunder; (b) imposes or increases or deems applicable any reserve, assessment, insurance charge, special deposit or similar requirements against assets of, deposits with or for the account of, or credit extended by, any Lender or any applicable Lending Installation (other than reserves and assessments taken into account in determining the Base Rate); and the result of which is to increase the cost to any Lender of making, funding or maintaining loans or reduces any amount receivable by any Lender or any applicable Lending Installation in connection with loans, or requires any Lender or any applicable Lending Installation to make any payment calculated by reference to the amount of loans held or interest received by it, by an amount deemed material by such Lender; then, within 15 days of demand by such Lender, the Borrower shall pay such Lender that portion of such increased expense incurred or reduction in an amount received which such Lender determines is attributable to making, funding and maintaining its Loans and its Commitments. This covenant shall survive the termination of this Credit Agreement and the payment of the Loans and all other amounts payable hereunder. 3.10 Withholding Tax Exemption. Each Lender that is not incorporated under the laws of the United States of America or a state thereof shall:   > > > > (a)     (i) on or before the date of any payment by the Borrower under > > > > this Credit Agreement or Notes to such Lender, deliver to the Borrower > > > > and the Administrative Agent (A) two (2) duly completed copies of United > > > > States Internal Revenue Service Form 1001 or 4224, or successor > > > > applicable form, as the case may be, certifying that it is entitled to > > > > receive payments under this Credit Agreement and any Notes without > > > > deduction or withholding of any United States federal income taxes and > > > > (B) an Internal Revenue Service Form W-8 or W-9, or successor applicable > > > > form, as the case may be, certifying that it is entitled to an exemption > > > > from United States backup withholding tax;   (ii) deliver to the Borrower and the Administrative Agent two (2) 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; or     (b) in the case of any such Lender that is not a "bank" within the meaning of Section 881(c)(3)(A) of the Internal Revenue Code, (i) represent to the Borrower (for the benefit of the Borrower and the Administrative Agent) that it is not a bank within the meaning of Section 881(c)(3)(A) of the Internal Revenue Code, (ii) agree to furnish to the Borrower on or before the date of any payment by the Borrower, with a copy to the Administrative Agent two (2) accurate and complete original signed copies of Internal Revenue Service Form W-8, or successor applicable form certifying to such Lender's legal entitlement at the date of such certificate to an exemption from U.S. withholding tax under the provisions of Section 881(c) of the Internal Revenue Code with respect to payments to be made under this Credit Agreement and any Notes (and to deliver to the Borrower and the Administrative Agent two (2) further copies of such form on or before the date it expires or becomes obsolete and after the occurrence of any event requiring a change in the most recently provided form and, if necessary, obtain any extensions of time reasonably requested by the Borrower or the Administrative Agent for filing and completing such forms), and (iii) agree, to the extent legally entitled to do so, upon reasonable request by the Borrower, to provide to the Borrower (for the benefit of the Borrower and the Administrative Agent) such other forms as may be reasonably required in order to establish the legal entitlement of such Lender to an exemption from withholding with respect to payments under this Credit Agreement and any Notes; unless in any such case any change in treaty, law or regulation has occurred after the date such Person becomes a Lender hereunder 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 in either case. Each Person that shall become a Lender or a participant of a Lender pursuant to subsection 10.3 shall, upon the effectiveness of the related transfer, be required to provide all of the forms, certifications and statements required pursuant to this subsection, provided that in the case of a participant of a Lender the obligations of such participant of a Lender pursuant to this Section 3.10 shall be determined as if the participant of a Lender were a Lender except that such participant of a Lender shall furnish all such required forms, certifications and statements to the Lender from which the related participation shall have been purchased. 3.11 Indemnity. The Borrower promises to indemnify each Lender and to hold each Lender harmless from any loss or expense which such Lender may sustain or incur (other than through such Lender's gross negligence or willful misconduct) as a consequence of (a) default by the Borrower in making a borrowing of, conversion into or continuation of Eurodollar Loans after the Borrower has given a notice requesting the same in accordance with the provisions of this Credit Agreement, (b) default by the Borrower in making any prepayment of a Eurodollar Loan after the Borrower has given a notice thereof in accordance with the provisions of this Credit Agreement or (c) the making of a prepayment of Eurodollar Loans on a day which is not the last day of an Interest Period with respect thereto. With respect to Eurodollar Loans, such indemnification may include an amount equal to the excess, if any, of (i) the amount of interest which would have accrued on the amount so prepaid, or not so borrowed, converted or continued, for the period from the date of such prepayment or of such failure to borrow, convert or continue to the last day of the applicable 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 Eurodollar Loans provided for herein (excluding, however, the Applicable Percentage included therein, if any) over (ii) the amount of interest (as reasonably determined by such Lender) which would have accrued to such Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank Eurodollar market. The covenants of the Borrower set forth in this Section 3.11 shall survive the termination of this Credit Agreement and the payment of the Loans and all other amounts payable hereunder. 3.12 Pro Rata Treatment. Except to the extent otherwise provided herein: (a) Loans. Each Loan, each payment or prepayment of principal of any Loan, each payment of interest on the Loans, each payment of Facility Fees, each payment of Utilization Fees, each reduction of the Committed Amount and each conversion or extension of any Loan, shall be allocated pro rata among the Lenders in accordance with the respective principal amounts of their outstanding Loans and Participation Interests. With respect to Competitive Loans, if the Borrower fails to specify the particular Competitive Loan or Loans as to which any payment or other amount should be applied and it is not otherwise clear as to the particular Competitive Loan or Loans to which such payment or other amounts relate, or any such payment or other amount is to be applied to Competitive Loans without regard to any such direction by the Borrower, then each payment or prepayment of principal on Competitive Loans and each payment of interest or other amount on or in respect of Competitive Loans, shall be allocated pro rata among the relevant Lenders of Competitive Loans in accordance with the then outstanding amounts of their respective Competitive Loans. (b) Advances. Unless the Administrative Agent shall have been notified in writing by any Lender prior to a borrowing that such Lender will not make the amount that would constitute its ratable 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 such Lender within the time period specified therefor hereunder, such Lender shall pay to the Administrative Agent, on demand, such amount with interest thereon at a rate equal to the Federal Funds Rate for the period until such Lender makes such amount immediately available to the Administrative Agent. A certificate of the Administrative Agent submitted to any Lender with respect to any amounts owing under this subsection shall be conclusive in the absence of manifest error. 3.13 Sharing of Payments. The Lenders agree among themselves that, in the event that any Lender shall obtain payment in respect of any Loan or any other obligation owing to such Lender under this Credit Agreement through the exercise of a right of setoff, banker's lien or counterclaim, or pursuant to a secured claim under Section 506 of Title 11 of the United States Code or other security or interest arising from, or in lieu of, such secured claim, received by such Lender under any applicable bankruptcy, insolvency or other similar law or otherwise, or by any other means, in excess of its pro rata share of such payment as provided for in this Credit Agreement, such Lender shall promptly purchase from the other Lenders a participation in such Loans and other obligations in such amounts, and make such other adjustments from time to time, as shall be equitable to the end that all Lenders share such payment in accordance with their respective ratable shares as provided for in this Credit Agreement. The Lenders further agree among themselves that if payment to a Lender obtained by such Lender through the exercise of a right of setoff, banker's lien, counterclaim or other event as aforesaid shall be rescinded or must otherwise be restored, each Lender which shall have shared the benefit of such payment shall, by repurchase of a participation theretofore sold, return its share of that benefit (together with its share of any accrued interest payable with respect thereto) to each Lender whose payment shall have been rescinded or otherwise restored. The Borrower agrees that any Lender so purchasing such a participation may, to the fullest extent permitted by law, exercise all rights of payment, including setoff, banker's lien or counterclaim, with respect to such participation as fully as if such Lender were a holder of such Loan or other obligation in the amount of such participation. Except as otherwise expressly provided in this Credit Agreement, if any Lender or the Administrative Agent shall fail to remit to the Administrative Agent or any other Lender an amount payable by such Lender or the Administrative Agent to the Administrative Agent or such other Lender pursuant to this Credit Agreement on the date when such amount is due, such payments shall be made together with interest thereon for each date from the date such amount is due until the date such amount is paid to the Administrative Agent or such other Lender at a rate per annum equal to the Federal Funds Rate. If under any applicable bankruptcy, insolvency or other similar law, any Lender receives a secured claim in lieu of a setoff to which this Section 3.13 applies, such Lender shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the Lenders under this Section 3.13 to share in the benefits of any recovery on such secured claim. 3.14 Payments, Computations, Etc. (a) Except as otherwise specifically provided herein, all payments hereunder (other than payments in respect of Competitive Loans) shall be made to the Administrative Agent in dollars in immediately available funds, without offset, deduction, counterclaim or withholding of any kind, at the Administrative Agent's office specified in Schedule 2.1(a) not later than 4:00 P.M. (Charlotte, North Carolina time) on the date when due. Payments received after such time shall be deemed to have been received on the next succeeding Business Day. The Administrative Agent may (but shall not be obligated to) debit the amount of any such payment which is not made by such time to any ordinary deposit account of the Borrower maintained with the Administrative Agent (with notice to the Borrower). The Borrower shall, at the time it makes any payment under this Credit Agreement (other than payments in respect of Competitive Loans), specify to the Administrative Agent the Loans, Fees, interest or other amounts payable by the Borrower hereunder to which such payment is to be applied (and in the event that it fails so to specify, or if such application would be inconsistent with the terms hereof, the Administrative Agent shall distribute such payment to the Lenders in such manner as the Administrative Agent may determine to be appropriate in respect of obligations owing by the Borrower hereunder, subject to the terms of Section 3.12(a)). The Administrative Agent will distribute such payments to such Lenders, if any such payment is received prior to 12:00 Noon (Charlotte, North Carolina time) on a Business Day in like funds as received prior to the end of such Business Day and otherwise the Administrative Agent will distribute such payment to such Lenders on the next succeeding Business Day. All payments of principal and interest in respect of Competitive Loans shall be made in accordance with the terms of Section 2.2. Whenever any payment hereunder shall be stated to be due on a day which is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day (subject to accrual of interest and Fees for the period of such extension), except that in the case of Eurodollar Loans, if the extension would cause the payment to be made in the next following calendar month, then such payment shall instead be made on the next preceding Business Day. Except as expressly provided otherwise herein, all computations of interest and fees shall be made on the basis of actual number of days elapsed over a year of 360 days, except with respect to computation of interest on Base Rate Loans which (unless the Base Rate is determined by reference to the Federal Funds Rate) shall be calculated based on a year of 365 or 366 days, as appropriate. Interest shall accrue from and include the date of borrowing, but exclude the date of payment. (b) Allocation of Payments After Event of Default. Notwithstanding any other provisions of this Credit Agreement to the contrary, after the occurrence and during the continuance of an Event of Default, all amounts collected or received by the Administrative Agent or any Lender on account of the Loans, Fees or any other amounts outstanding under any of the Credit Documents shall be paid over or delivered as follows:   FIRST, to the payment of all reasonable out-of-pocket costs and expenses (including without limitation reasonable attorneys' fees) of the Administrative Agent in connection with enforcing the rights of the Lenders under the Credit Documents; SECOND, to payment of any fees owed to the Administrative Agent; THIRD, to the payment of all reasonable out-of-pocket costs and expenses (including without limitation, reasonable attorneys' fees) of each of the Lenders in connection with enforcing its rights under the Credit Documents or otherwise with respect to amounts owing to such Lender; FOURTH, to the payment of accrued fees and interest; FIFTH, to the payment of the outstanding principal amount of the Loans; SIXTH, to all other amounts and other obligations which shall have become due and payable under the Credit Documents or otherwise and not repaid pursuant to clauses "FIRST" through "FIFTH" above; and SEVENTH, to the payment of the surplus, if any, to whoever may be lawfully entitled to receive such surplus.   In carrying out the foregoing, (i) amounts received shall be applied in the numerical order provided until exhausted prior to application to the next succeeding category; and (ii) each of the Lenders shall receive an amount equal to its pro rata share (based on the proportion that the then outstanding Loans held by such Lender bears to the aggregate then outstanding Loans) of amounts available to be applied pursuant to clauses "THIRD", "FOURTH", "FIFTH" and "SIXTH" above. 3.15 Evidence of Debt. (a) Each Lender shall maintain an account or accounts evidencing each Loan made by such Lender to the Borrower from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time under this Credit Agreement. Each Lender will make reasonable efforts to maintain the accuracy of its account or accounts and to promptly update its account or accounts from time to time, as necessary. (b) The Administrative Agent shall maintain the Register pursuant to Section 10.3(c) hereof, and a subaccount for each Lender, in which Register and subaccounts (taken together) shall be recorded (i) the amount, type and Interest Period of each such Loan hereunder, (ii) the amount of any principal or interest due and payable or to become due and payable to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder from or for the account of the Borrower and each Lender's share thereof. The Administrative Agent will make reasonable efforts to maintain the accuracy of the subaccounts referred to in the preceding sentence and to promptly update such subaccounts from time to time, as necessary. (c) The entries made in the accounts, Register and subaccounts maintained pursuant to subsection (b) of this Section 3.15 (and, if consistent with the entries of the Administrative Agent, subsection (a)) shall be prima facie, but not conclusive, 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 any 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 the Loans made by such Lender in accordance with the terms hereof. 3.16 Replacement of Lenders. In the event any Lender delivers to the Borrower any notice in accordance with Sections 3.6, 3.8, 3.9 or 3.10, then the Borrower shall have the right, if no Default or Event of Default then exists, to replace such Lender (the "Replaced Lender") with one or more additional banks or financial institutions (collectively, the "Replacement Lender"), provided that (A) at the time of any replacement pursuant to this Section 3.16, the Replacement Lender shall enter into one or more assignment agreements substantially in the form of Schedule 10.3(b) pursuant to, and in accordance with the terms of, Section 10.3(b) (and with all fees payable pursuant to said Section 10.3(b) to be paid by the Replacement Lender) pursuant to which the Replacement Lender shall acquire all of the rights and obligations of the Replaced Lender hereunder and, in connection therewith, shall pay to the Replaced Lender in respect thereof an amount equal to the sum of (a) the principal of, and all accrued interest on, all outstanding Loans of the Replaced Lender, and (b) all accrued, but theretofore unpaid, fees owing to the Replaced Lender pursuant to Section 3.5(a), and (B) all obligations of the Borrower owing to the Replaced Lender (including all obligations, if any, owing pursuant to Section 3.6, 3.8 or 3.9, but excluding those obligations specifically described in clause (A) above in respect of which the assignment purchase price has been, or is concurrently being paid) shall be paid in full to such Replaced Lender concurrently with such replacement.     SECTION 4 CONDITIONS 4.1 Closing Conditions. The obligation of the Lenders to enter into this Credit Agreement and to make the initial Loans shall be subject to satisfaction of the following conditions (in form and substance acceptable to the Lenders): (a) The Administrative Agent shall have received original counterparts of this Credit Agreement executed by each of the parties hereto; (b) The Administrative Agent shall have received an appropriate original Revolving Note for each Lender, executed by the Borrower; (c) The Administrative Agent shall have received an appropriate original Competitive Note for each Lender, executed by the Borrower; (d) The Administrative Agent shall have received all documents it may reasonably request relating to the existence and good standing of the Borrower, the corporate or other necessary authority for and the validity of the Credit Documents, and any other matters relevant thereto, all in form and substance reasonably satisfactory to the Administrative Agent; (e) The Administrative Agent shall have received a legal opinion of Harry L. Goldsmith, Esq., general counsel for the Borrower, dated as of the Closing Date and substantially in the form of Schedule 4.1(e); (f) Since August 28, 1999 there shall not have occurred nor otherwise exist an event or condition which has a Material Adverse Effect; (g) The Administrative Agent shall have received, for its own account and for the accounts of the Lenders, all fees and expenses required by this Credit Agreement or any other Credit Document to be paid on or before the Closing Date; (h) Each of the Existing Credit Agreements shall have been terminated; and (i) The Administrative Agent shall have received such other documents, agreements or information which may be reasonably requested by the Administrative Agent. 4.2 Conditions to all Extensions of Credit. The obligations of each Lender to make, convert or extend any Loan (including the initial Loans) are subject to satisfaction of the following conditions in addition to satisfaction on the Closing Date of the conditions set forth in Section 4.1: (a) The Borrower shall have delivered, in the case of any Loan, an appropriate Notice of Borrowing or Notice of Extension/Conversion; (b) The representations and warranties set forth in Section 5 shall be, subject to the limitations set forth therein, true and correct in all material respects as of such date (except for those which expressly relate to an earlier date); (c) There shall not have been commenced against the Borrower an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or any case, proceeding or other action for the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of the Borrower or for any substantial part of its Property or for the winding up or liquidation of its affairs, and such involuntary case or other case, proceeding or other action shall remain undismissed, undischarged or unbonded; (d) No Default or Event of Default shall exist and be continuing either prior to or after giving effect thereto; and (e) Immediately after giving effect to the making of such Loan (and the application of the proceeds thereof), the sum of the aggregate principal amount of outstanding Loans shall not exceed the Committed Amount. The delivery of each Notice of Borrowing and each Notice of Extension/Conversion shall constitute a representation and warranty by the Borrower of the correctness of the matters specified in subsections (b), (c), (d) and (e) above.     SECTION 5 REPRESENTATIONS AND WARRANTIES The Borrower hereby represents to the Administrative Agent and each Lender that: 5.1 Organization; Existence; Compliance with Law. Each of the Borrower and its Subsidiaries (a) is duly organized, validly existing and is in good standing under the laws of the jurisdiction of its incorporation or organization, (b) has the corporate or other necessary 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, except to the extent that the failure to have such legal right would not be reasonably expected to have a Material Adverse Effect, (c) is duly qualified as a foreign entity and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification, other than in such jurisdictions where the failure to be so qualified and in good standing would not be reasonably expected to have a Material Adverse Effect, and (d) is in compliance with all material Requirements of Law, except to the extent that the failure to comply therewith would not, in the aggregate, be reasonably expected to have a Material Adverse Effect. 5.2 Power; Authorization; Enforceable Obligations. The Borrower has the corporate or other necessary power and authority, and the legal right, to make, deliver and perform the Credit Documents to which it is a party, and in the case of the Borrower, to borrow hereunder, and has taken all necessary corporate action to authorize the borrowings on the terms and conditions of this Credit Agreement and to authorize the execution, delivery and performance of the Credit Documents to which it is a party. No consent or authorization of, filing with, notice to or other similar act by or in respect of, any Governmental Authority or any other Person is required to be obtained or made by or on behalf of the Borrower in connection with the borrowings hereunder or with the execution, delivery, performance, validity or enforceability of the Credit Documents to which the Borrower is a party. This Credit Agreement has been, and each other Credit Document to which the Borrower is a party will be, duly executed and delivered on behalf of the Borrower. This Credit Agreement constitutes, and each other Credit Document to which the Borrower is a party when executed and delivered will constitute, a legal, valid and binding obligation of the Borrower enforceable against such party in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law). 5.3 No Legal Bar. The execution, delivery and performance of the Credit Documents by the Borrower, the borrowings hereunder and the use of the proceeds thereof (a) will not violate any Requirement of Law or contractual obligation of the Borrower or any of its Subsidiaries in any respect that would reasonably be expected to have a Material Adverse Effect, (b) will not result in, or require, the creation or imposition of any Lien on any of the properties or revenues of any of the Borrower or any of its Subsidiaries pursuant to any such Requirement of Law or contractual obligation, and (c) will not violate or conflict with any provision of the Borrower's articles of incorporation or by-laws. 5.4 Governmental Regulations. No part of the proceeds of the Loans will be used, directly or indirectly, for the purpose of purchasing or carrying any "margin stock" in violation of Regulation U. If requested by any Lender or the Administrative Agent, the Borrower will furnish to the Administrative Agent and each Lender a statement to the foregoing effect in conformity with the requirements of FR Form U-1 referred to in said Regulation U. No indebtedness being reduced or retired out of the proceeds of the Loans was or will be incurred for the purpose of purchasing or carrying any margin stock within the meaning of Regulation U or any "margin security" within the meaning of Regulation T. "Margin stock" within the meanings of Regulation U does not constitute more than 25% of the value of the consolidated assets of the Borrower and its Subsidiaries. None of the transactions contemplated by this Credit Agreement (including, without limitation, the direct or indirect use of the proceeds of the Loans) will violate or result in a violation of the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, or regulations issued pursuant thereto, or Regulation T, U or X. 5.5 Purpose of Loans. The proceeds of the Loans hereunder shall be used solely by the Borrower (a) to repurchase stock in the Borrower, (b) to finance acquisitions to the extent permitted under this Credit Agreement, (c) to refinance existing indebtedness to the Lenders and (d) for the working capital, commercial paper back up, capital expenditures and other lawful corporate purposes of the Borrower and its Subsidiaries. 5.6 Incorporated Representations and Warranties. The Borrower hereby agrees that the representations and warranties contained in Sections 5.1, 5.5, 5.6, 5.7, 5.8, 5.9, 5.10, 5.11(b) - (e), 5.12 and 5.14 of the Five-Year Credit Agreement, as in effect as of the date hereof (the "Incorporated Representations"), are hereby incorporated by reference and shall be as binding on the Borrower as if set forth fully herein. The incorporation by reference to the Five-Year Credit Agreement of the Incorporated Representations pursuant to this Section 5.6 shall survive the termination of the Five-Year Credit Agreement. For purposes of the incorporation of the Incorporated Representations pursuant to this Section 5.6, all references in the Incorporated Representations to the "Administrative Agent" shall be deemed to refer to the Administrative Agent hereunder, all references in the Incorporated Representations to a "Lender" or the "Lender" shall be deemed to refer to one or more of the Lenders hereunder, all references in the Incorporated Representations to the "Required Lenders" shall be deemed to refer to the Required Lenders hereunder, all references in the Incorporated Representations to the "Credit Agreement," or any similar references, shall be deemed to refer to this Credit Agreement, all references in the Incorporated Representations to a "Note" or the "Notes" shall be deemed to refer to one or more of the Notes issued pursuant to Section 2.1(e) hereof and all references in the Incorporated Representations to a "Credit Document" or the "Credit Documents," or any similar references, shall be deemed to refer to one or more of the Credit Documents as defined in Section 1.1 hereof.     SECTION 6 COVENANTS The Borrower hereby covenants and agrees that so long as this Credit Agreement is in effect or any amounts payable hereunder or under any other Credit Document shall remain outstanding, and until all of the Commitments hereunder shall have terminated: 6.1 Use of Proceeds. The Borrower will use the proceeds of the Loans solely for the purposes set forth in Section 5.5. 6.2 Incorporated Covenants. The Borrower hereby agrees that the affirmative and negative covenants contained in Sections 6.1 to 6.7 inclusive, Section 6.9, Section 6.10, Section 6.11 and Section 7 of the Five-Year Credit Agreement, as existing after giving effect to any subsequent amendment to the Five-Year Credit Agreement which the Required Lenders hereunder have approved in a writing referring to this Credit Agreement (the "Incorporated Covenants"), are hereby incorporated by reference and shall be as binding on the Borrower as if set forth fully herein, except that, for purposes hereof, Schedule 6.1(c) to the Five-Year Credit Agreement referred to in Section 6.1(c) of the Five-Year Credit Agreement shall be deemed to refer to Schedule 6.2 attached hereto. The incorporation by reference to the Five-Year Credit Agreement of the Incorporated Covenants pursuant to this Section 6.2 shall survive the termination of the Five-Year Credit Agreement. For purposes of the incorporation of the Incorporated Covenants pursuant to this Section 6.2, all references in the Incorporated Covenants to the "Administrative Agent" shall be deemed to refer to the Administrative Agent hereunder, all references in the Incorporated Covenants to a "Lender" or the "Lenders" shall be deemed to refer to one or more of the Lenders hereunder, all references in the Incorporated Covenants to the "Required Lenders" shall be deemed to refer to the Required Lenders hereunder, all references in the Incorporated Covenants to the "Credit Agreement," or any similar reference, shall be deemed to refer to this Credit Agreement, all references in the Incorporated Covenants to a "Note" or the "Notes" shall be deemed to refer to one or more of the Notes issued pursuant to Section 2.1(e) hereof and all references in the Incorporated Covenants to a "Credit Document" or the "Credit Documents," or any similar reference, shall be deemed to refer to one or more of the Credit Documents as defined in Section 1.1 hereof.     SECTION 7 [intentionally left blank]     SECTION 8 EVENTS OF DEFAULT 8.1 Events of Default. An Event of Default shall exist upon the occurrence of any of the following specified events (each an "Event of Default"): (a) Payment. The Borrower shall   (i) default in the payment when due of any principal of any of the Loans, or (ii) default, and such default shall continue for five (5) or more Business Days, in the payment when due of any interest on the Loans, or of any other amounts owing hereunder, under any of the other Credit Documents or in connection herewith or therewith; or   (b) Representations. Any representation, warranty or statement made or deemed to be made by the Borrower herein, in any of the other Credit Documents, or in any statement or certificate delivered or required to be delivered pursuant hereto or thereto shall prove untrue in any material respect on the date as of which it was deemed to have been made; or (c) Covenants. The Borrower shall   (i) default in the due performance or observance of any term, covenant or agreement contained in Sections 6.2, 6.10, 6.11 or 7.1 through 7.3, inclusive, and 7.5 of the Incorporated Covenants, or (ii) default in the due performance of any term, covenant or agreement contained in Section 6.1 of the Incorporated Covenants and such default shall continue unremedied for a period of at least 5 days after the earlier of a responsible officer of the Borrower becoming aware of such default or notice thereof by the Administrative Agent; or (iii) default in the due performance or observance by it of any term, covenant or agreement (other than those referred to in subsections (a), (b), (c)(i) or (c)(ii) of this Section 8.1) contained in this Credit Agreement and such default shall continue unremedied for a period of at least 30 days after the earlier of a responsible officer of the Borrower becoming aware of such default or notice thereof by the Administrative Agent; or   (d) Incorporated Events of Default. The occurrence of an "Event of Default" under and as defined in the Five-Year Credit Agreement, as in effect as of the date hereof, which "Events of Default" (the "Incorporated Events of Default"), are hereby incorporated herein by reference and shall be as binding on the Borrower as if set forth fully herein, such incorporation by reference to survive termination of the Five-Year Credit Agreement. For purposes of the incorporation of the Incorporated Events of Default pursuant to this Section 8.1(d), all references in the Incorporated Events of Default to the "Administrative Agent" shall be deemed to refer to the Administrative Agent hereunder, all references in the Incorporated Events of Default to a "Lender" or the "Lenders" shall be deemed to refer to one or more of the Lenders hereunder, all references in the Incorporated Events of Default to the "Required Lenders" shall be deemed to refer to the Required Lenders hereunder, all references in the Incorporated Events of Default to the "Credit Agreement," or any similar references, shall be deemed to refer to this Credit Agreement, all references in the Incorporated Events of Default to a "Note" or the "Notes" shall be deemed to refer to one or more of the Notes issued pursuant to Section 2.1(e) hereof and all references in the Incorporated Events of Default to a "Credit Document" or the "Credit Documents," or any similar references, shall be deemed to refer to one or more of the Credit Documents as defined in Section 1.1 hereof. 8.2 Acceleration; Remedies. Upon the occurrence of an Event of Default, and at any time thereafter unless and until such Event of Default has been waived by the Required Lenders or cured to the satisfaction of the Required Lenders (pursuant to the voting procedures in Section 10.6), the Administrative Agent shall, upon the request and direction of the Required Lenders, by written notice to the Borrower take any of the following actions: (a) Termination of Commitments. Declare the Commitments terminated whereupon the Commitments shall be immediately terminated. (b) Acceleration. Declare the unpaid principal of and any accrued interest in respect of all Loans and any and all other indebtedness or obligations of any and every kind owing by the Borrower to the Administrative Agent and/or any of the Lenders hereunder to be due whereupon the same shall be immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower. (c) Enforcement of Rights. Enforce any and all rights and interests created and existing under the Credit Documents and all rights of set-off. Notwithstanding the foregoing, if an Event of Default specified in Section 8.1(d) of the Incorporated Events of Default shall occur, then the Commitments shall automatically terminate and all Loans, all accrued interest in respect thereof, all accrued and unpaid Fees and all other indebtedness or obligations owing to the Administrative Agent and/or any of the Lenders hereunder automatically shall immediately become due and payable without the giving of any notice or other action by the Administrative Agent or the Lenders.     SECTION 9 AGENCY PROVISIONS 9.1 Appointment. Each Lender hereby designates and appoints Bank of America, N.A. as Administrative Agent (in such capacity as Administrative Agent hereunder, the "Administrative Agent") of such Lender to act as specified herein and the other Credit Documents, and each such Lender hereby authorizes the Administrative Agent as the agent for such Lender, to take such action on its behalf under the provisions of this Credit Agreement and the other Credit Documents and to exercise such powers and perform such duties as are expressly delegated by the terms hereof and of the other Credit Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere herein and in the other Credit Documents, the Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein and therein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Credit Agreement or any of the other Credit Documents, or shall otherwise exist against the Administrative Agent. The provisions of this Section are solely for the benefit of the Administrative Agent and the Lenders and the Borrower shall have no rights as a third party beneficiary of the provisions hereof. In performing its functions and duties under this Credit Agreement and the other Credit Documents, the Administrative Agent shall act solely as agent of the Lenders and does not assume and shall not be deemed to have assumed any obligation or relationship of agency or trust with or for the Borrower or any of its Affiliates. 9.2 Delegation of Duties. The Administrative Agent may execute any of its respective duties hereunder or under the other Credit Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties; provided that the use of any Administrative Agents or attorneys-in-fact shall not relieve the Administrative Agent of its duties hereunder. 9.3 Exculpatory Provisions. The Administrative Agent and its officers, directors, employees, agents, attorneys-in-fact or affiliates shall not be (a) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection herewith or in connection with any of the other Credit Documents (except for its or such Person's own gross negligence or willful misconduct), or (b) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by the Borrower contained herein or in any of the other Credit Documents or in any certificate, report, document, financial statement or other written or oral statement referred to or provided for in, or received by the Administrative Agent under or in connection herewith or in connection with the other Credit Documents, or enforceability or sufficiency therefor of any of the other Credit Documents, or for any failure of the Borrower to perform its obligations hereunder or thereunder. The Administrative Agent shall not be responsible to any Lender for the effectiveness, genuineness, validity, enforceability, collectibility or sufficiency of this Credit Agreement, or any of the other Credit Documents or for any representations, warranties, recitals or statements made herein or therein or made by the Borrower in any written or oral statement or in any financial or other statements, instruments, reports, certificates or any other documents in connection herewith or therewith furnished or made by the Administrative Agent to the Lenders or by or on behalf of the Borrower to the Administrative Agent or any Lender or be required to ascertain or inquire as to the performance or observance of any of the terms, conditions, provisions, covenants or agreements contained herein or therein or as to the use of the proceeds of the Loans or of the existence or possible existence of any Default or Event of Default or to inspect the properties, books or records of the Borrower or any of its Affiliates. 9.4 Reliance on Communications. The Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document or conversation reasonably believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Borrower, independent accountants and other experts selected by the Administrative Agent with reasonable care). The Administrative Agent may deem and treat the Lenders as the owner of their respective interests hereunder for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with the Administrative Agent in accordance with Section 10.3(b) hereof. The Administrative Agent shall be fully justified in failing or refusing to take any action under this Credit Agreement or under any of the other Credit Documents unless it shall first receive such advice or concurrence of the Required 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, hereunder or under any of the other Credit Documents in accordance with a request of the Required Lenders (or to the extent specifically provided in Section 10.6, all the Lenders) and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders (including their successors and assigns). 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 notice from a Lender or the Borrower referring to the Credit Document, 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 prompt 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. 9.6 Non-Reliance on Administrative Agent and Other Lenders. Each Lender expressly acknowledges that each of the Administrative Agent and its officers, directors, employees, agents, attorneys-in-fact or affiliates has not made any representations or warranties to it and that no act by the Administrative Agent or any affiliate thereof hereinafter taken, including any review of the affairs of the Borrower or any of its Affiliates, 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, assets, operations, property, financial and other conditions, prospects and creditworthiness of the Borrower or its Affiliates and made its own decision to make its Loans hereunder and enter into this Credit 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 Credit Agreement, and to make such investigation as it deems necessary to inform itself as to the business, assets, operations, property, financial and other conditions, prospects and creditworthiness of the Borrower and its 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 not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, assets, property, financial or other conditions, prospects or creditworthiness of the Borrower or any of its Affiliates which may come into the possession of the Administrative Agent or any of its officers, directors, employees, agents, attorneys-in-fact or affiliates. 9.7 Indemnification. The Lenders agree to indemnify the Administrative Agent in its capacity as such (to the extent not reimbursed by the Borrower and without limiting the obligation of the Borrower to do so), ratably according to their respective Commitments (or if the Commitments have expired or been terminated, in accordance with the respective principal amounts of outstanding Loans and Participation Interests of the Lenders), 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 final payment of all of the obligations of the Borrower hereunder and under the other Credit Documents) be imposed on, incurred by or asserted against the Administrative Agent in its capacity as such in any way relating to or arising out of this Credit Agreement or the other Credit Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by the Administrative Agent under or in connection with any of the foregoing; provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the gross negligence or willful misconduct of the Administrative Agent. If any indemnity furnished to the Administrative Agent for any purpose shall, in the opinion of the Administrative Agent, be insufficient or become impaired, the Administrative Agent may call for additional indemnity and cease, or not commence, to do the acts indemnified against until such additional indemnity is furnished. The agreements in this Section shall survive the repayment of the Loans and other obligations under the Credit Documents and the termination of the Commitments 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, its Subsidiaries or their respective Affiliates as though the Administrative Agent were not the Administrative Agent hereunder. With respect to the Loans made by and all obligations of the Borrower hereunder and under the other Credit Documents, the Administrative Agent shall have the same rights and powers under this Credit 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, at any time, resign upon 20 days written notice to the Lenders, and may be removed, upon show of cause, by the Required Lenders upon 30 days written notice to the Administrative Agent. Upon any such resignation or removal, the Required Lenders shall have the right to appoint a successor Administrative Agent; provided that, so long as no Default or Event of Default has occurred and is continuing, such successor Administrative Agent shall be reasonably acceptable to the Borrower. If no successor Administrative Agent shall have been so appointed by the Required Lenders, and shall have accepted such appointment, within 30 days after the notice of resignation or notice of removal, as appropriate, then the retiring Administrative Agent shall select a successor Administrative Agent provided such successor is a Lender hereunder or a commercial bank organized under the laws of the United States of America or of any State thereof and has a combined capital and surplus of at least $400,000,000. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations as Administrative Agent, as appropriate, under this Credit Agreement and the other Credit Documents and 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 Credit Agreement. 9.10 Syndication Agent. The Syndication Agent, in its capacity as such, shall have no rights, powers, duties or obligations under this Credit Agreement or any of the other Credit Documents.     SECTION 10 MISCELLANEOUS 10.1 Notices. Except as otherwise expressly provided herein, all notices and other communications shall have been duly given and shall be effective (i) when delivered, (ii) when transmitted and received (by confirmation of receipt) via telecopy (or other facsimile device) to the number set out below, (iii) the day following the day on which the same has been delivered prepaid to a reputable national overnight air courier service, or (iv) the third Business Day following the day on which the same is sent by certified or registered mail, postage prepaid, in each case to the respective parties at the address, in the case of the Borrower and the Administrative Agent, set forth below, and, in the case of the Lenders, set forth on Schedule 2.1(a), or at such other address as such party may specify by written notice to the other parties hereto: if to the Borrower:   AutoZone, Inc. 123 South Front Street Memphis, TN 38103 Attn: Chief Financial Officer Telephone: (901) 495-7181 Telecopy: (901) 495-8317   with a copy to the Treasurer and to the General Counsel for the Borrower at the same address;   if to the Administrative Agent: > > > Bank of America, N.A. > > > Agency Administrative Services > > > 1850 Gateway Boulevard, 5th Floor > > > Concord, CA 94520-3281 > > > Attn: Jennifer Reeves > > > Telephone: (925) 675-8384 > > > Telecopy: (925) 969-2902 > > > with a copy to: Bank of America, N.A. Retail Credit Products Bank of America Corporate Center 100 N. Tryon Street, 16th Floor Charlotte, North Carolina 28255 Attn: Timothy H. Spanos, Managing Director Telephone: (704) 386-4507 Telecopy: (704) 388-8268 10.2 Right of Set-Off. In addition to any rights now or hereafter granted under applicable law, and not by way of limitation of any such rights, upon the occurrence of an Event of Default, each Lender is authorized at any time and from time to time, without presentment, demand, protest or other notice of any kind (all of which rights being hereby expressly waived), to set-off and to appropriate and apply any and all deposits (general or special) and any other indebtedness at any time held or owing by such Lender (including, without limitation, branches, agencies or Affiliates of such Lender wherever located) to or for the credit or the account of the Borrower against obligations and liabilities of such Person to such Lender hereunder, under the Notes or the other Credit Documents, irrespective of whether such Lender shall have made any demand hereunder and although such obligations, liabilities or claims, or any of them, may be contingent or unmatured, and any such set-off shall be deemed to have been made immediately upon the occurrence of an Event of Default even though such charge is made or entered on the books of such Lender subsequent thereto. Any Person purchasing a participation in the Loans and Commitments hereunder pursuant to Section 3.13 or Section 10.3(d) may exercise all rights of set-off with respect to its participation interest as fully as if such Person were a Lender hereunder. 10.3 Benefit of Agreement. (a) Generally. This Credit Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective successors and assigns of the parties hereto; provided that the Borrower may not assign or transfer any of its interests without prior written consent of the Lenders; provided further that the rights of each Lender to transfer, assign or grant participations in its rights and/or obligations hereunder shall be limited as set forth in this Section 10.3, provided however that nothing herein shall prevent or prohibit any Lender from (i) pledging its Loans hereunder to a Federal Reserve Bank in support of borrowings made by such Lender from such Federal Reserve Bank, or (ii) granting assignments or selling participations in such Lender's Loans and/or Commitments hereunder to its parent company and/or to any Affiliate or Subsidiary of such Lender. (b) Assignments. Each Lender may assign all or a portion of its rights and obligations hereunder, pursuant to an assignment agreement substantially in the form of Schedule 10.3(b), to (i) any Lender or any Affiliate or Subsidiary of a Lender, or (ii) any other commercial bank, financial institution or "accredited investor" (as defined in Regulation D of the Securities and Exchange Commission) that is reasonably acceptable to the Administrative Agent and, so long as no Default or Event of Default has occurred and is continuing, is reasonably acceptable to the Borrower; provided that (i) any such assignment (other than any assignment to an existing Lender) shall be in a minimum aggregate amount of $5,000,000 (or, if less, the remaining amount of the Commitment being assigned by such Lender) of the Commitments and in integral multiples of $1,000,000 above such amount, (ii) so long as no Event of Default has occurred and is continuing, no Lender shall assign more than 50% of such Lender's original Commitment without the written consent of the Borrower and (iii) each such assignment shall be of a constant, not varying, percentage of all such Lender's rights and obligations under this Credit Agreement. Any assignment hereunder shall be effective upon delivery to the Administrative Agent of written notice of the assignment together with a transfer fee of $3,500 payable to the Administrative Agent for its own account from and after the later of (i) the effective date specified in the applicable assignment agreement and (ii) the date of recording of such assignment in the Register pursuant to the terms of subsection (c) below. The assigning Lender will give prompt notice to the Administrative Agent and the Borrower of any such assignment. Upon the effectiveness of any such assignment (and after notice to, and (to the extent required pursuant to the terms hereof), with the consent of, the Borrower as provided herein), the assignee shall become a "Lender" for all purposes of this Credit Agreement and the other Credit Documents and, to the extent of such assignment, the assigning Lender shall be relieved of its obligations hereunder to the extent of the Loans and Commitment components being assigned. Along such lines the Borrower agrees that upon notice of any such assignment and surrender of the appropriate Note or Notes, it will promptly provide to the assigning Lender and to the assignee separate promissory notes in the amount of their respective interests substantially in the form of the original Note (but with notation thereon that it is given in substitution for and replacement of the original Note or any replacement notes thereof). By executing and delivering an assignment agreement in accordance with this Section 10.3(b), the assigning Lender thereunder and the assignee thereunder shall be deemed to confirm to and agree with each other and the other parties hereto as follows: (i) such assigning Lender warrants that it is the legal and beneficial owner of the interest being assigned thereby free and clear of any adverse claim; (ii) except as set forth in clause (i) above, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Credit Agreement, any of the other Credit Documents or any other instrument or document furnished pursuant hereto or thereto, or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Credit Agreement, any of the other Credit Documents or any other instrument or document furnished pursuant hereto or thereto or the financial condition of the Borrower or any of its respective Affiliates or the performance or observance by the Borrower of any of its obligations under this Credit Agreement, any of the other Credit Documents or any other instrument or document furnished pursuant hereto or thereto; (iii) such assignee represents and warrants that it is legally authorized to enter into such assignment agreement; (iv) such assignee confirms that it has received a copy of this Credit Agreement, the other Credit Documents and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such assignment agreement; (v) such assignee will independently and without reliance upon the Administrative Agent, such assigning Lender or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Credit Agreement and the other Credit Documents; (vi) such assignee appoints and authorizes the Administrative Agent to take such action on its behalf and to exercise such powers under this Credit Agreement or any other Credit Document as are delegated to the Administrative Agent by the terms hereof or thereof, together with such powers as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all the obligations which by the terms of this Credit Agreement and the other Credit Documents are required to be performed by it as a Lender. If the assignee is not a United States person under Section 7701(a)(30) of the Code, it shall deliver to the Borrower and the Administrative Agent a valid certification as to exemption from deduction or withholding of taxes in accordance with Section 3.10. (c) Maintenance of Register. The Administrative Agent shall maintain at one of its offices in Charlotte, North Carolina (i) a copy of each New Commitment Agreement, (ii) a copy of each Lender assignment agreement delivered to it in accordance with the terms of subsection (b) above and (iii) a register for the recordation of the identity of the principal amount, type and Interest Period of each Loan outstanding hereunder, the names, addresses and the Commitments of the Lenders pursuant to the terms hereof from time to time (the "Register"). The Administrative Agent will make reasonable efforts to maintain the accuracy of the Register and to promptly update the Register from time to time, as necessary. The Register shall be prima facie, but not conclusive, evidence of the information contained therein and the Borrower, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Credit Agreement. The Register shall be available for inspection by the Borrower and each Lender, at any reasonable time and from time to time upon reasonable prior notice. (d) Participations. Each Lender may sell, transfer, grant or assign participations in all or any part of such Lender's interests and obligations hereunder; provided that (i) such selling Lender shall remain a "Lender" for all purposes under this Credit Agreement (such selling Lender's obligations under the Credit Documents remaining unchanged) and the participant shall not constitute a Lender hereunder, (ii) no such participant shall have, or be granted, rights to approve any amendment or waiver relating to this Credit Agreement or the other Credit Documents except to the extent any such amendment or waiver would (A) reduce the principal of or rate of interest on or Fees in respect of any Loans in which the participant is participating or (B) postpone the date fixed for any payment of principal (including extension of the Termination Date or the date of any mandatory prepayment), interest or Fees in which the participant is participating, and (iii) sub-participations by the participant (except to an affiliate, parent company or affiliate of a parent company of the participant) shall be prohibited. In the case of any such participation, the participant shall not have any rights under this Credit Agreement or the other Credit Documents (the participant's rights against the selling Lender in respect of such participation to be those set forth in the participation agreement with such Lender creating such participation) and all amounts payable by the Borrower hereunder shall be determined as if such Lender had not sold such participation, provided, however, that such participant shall be entitled to receive additional amounts under Sections 3.6, 3.9 and 3.11 on the same basis as if it were a Lender provided that it shall not be entitled to receive any more than the selling Lender would have received had it not sold the participation. (e) Designation. (i) Notwithstanding anything to the contrary contained herein, any Lender (a "Designating Lender") may grant to one or more special purpose funding vehicles (each, an "SPV"), identified as such in writing from time to time by the Designating Lender to the Administrative Agent and the Borrower, the option to provide to the Borrower all or any part of any Loan that such Designating Lender would otherwise be obligated to make to the Borrower pursuant to this Credit Agreement; provided that (I) nothing herein shall constitute a commitment by any SPV to make any Loan, (II) if an SPV elects not to exercise such option or otherwise fails to provide all or any part of such Loan, the Designating Lender shall be obligated to make such Loan pursuant to the terms hereof, (III) the Designating Lender shall remain liable for any indemnity or other payment obligation with respect to its Commitment hereunder and (IV) each such SPV would satisfy the requirements of Section 3.10 if such SPV was a Lender hereunder. The making of a Loan by an SPV hereunder shall utilize the Commitment of the Designating Lender to the same extent, and as if, such Loan were made by such Designating Lender. (ii) As to any Loans or portion thereof made by it, each SPV shall have all the rights that a Lender making such Loans or portion thereof would have had under this Credit Agreement; provided, however that each SPV shall have granted to its Designating Lender an irrevocable power of attorney, to deliver and receive all communications and notices under this Credit Agreement (and any related documents) and to exercise on such SPV's behalf, all of such SPV's voting rights under this Credit Agreement. No additional Note shall be required to evidence the Loans or portion thereof made by an SPV; and the related Designating Lender shall be deemed to hold its Note as agent for such SPV to the extent of the Loans or portion thereof funded by such SPV. In addition, any payments for the account of any SPV shall be paid to its Designating Lender as agent for such SPV. (iii) Each party hereto hereby agrees that no SPV shall be liable for any indemnity or payment under this Credit Agreement for which a Lender would otherwise be liable for so long as, and to the extent, the Designating 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 Credit Agreement) that, prior to the date that is one year and one day after the payment in full of all outstanding prior indebtedness of any SPV, it will not institute against, or join any other person in instituting against, such SPV any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or similar proceedings under the laws of the United States or any State thereof. (iv) In addition, notwithstanding anything to the contrary contained in this Section 10.3 or otherwise in this Credit Agreement, any SPV may (I) at any time and without paying any processing fee therefor, assign or participate all or a portion of its interest in any Loans to the Designating Lender (or to any other SPV of such Designating Lender) or to any financial institutions providing liquidity and/or credit support to or for the account of such SPV to support the funding or maintenance of Loans and (II) disclose on a confidential basis any non-public information relating to its Loans to any rating agency, commercial paper dealer or provider of any surety, guarantee or credit or liquidity enhancements to such SPV. This Section 10.3 may not be amended without the written consent of any Designating Lender affected thereby. 10.4 No Waiver; Remedies Cumulative. No failure or delay on the part of the Administrative Agent or any Lender in exercising any right, power or privilege hereunder or under any other Credit Document and no course of dealing between the Administrative Agent or any Lender and the Borrower shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or under any other Credit Document preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder or thereunder. The rights and remedies provided herein are cumulative and not exclusive of any rights or remedies which the Administrative Agent or any Lender would otherwise have. No notice to or demand on the Borrower in any case shall entitle the Borrower to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the Administrative Agent or the Lenders to any other or further action in any circumstances without notice or demand. 10.5 Payment of Expenses, etc. The Borrower agrees to: (a) pay all reasonable out-of-pocket costs and expenses (i) of the Administrative Agent in connection with the negotiation, preparation, execution and delivery and administration of this Credit Agreement and the other Credit Documents and the documents and instruments referred to therein (including, subject to agreed upon limitations, the reasonable fees and expenses of Moore & Van Allen, PLLC, special counsel to the Administrative Agent and non-duplicative allocated costs of internal counsel) and any amendment, waiver or consent relating hereto and thereto including, but not limited to, any such amendments, waivers or consents resulting from or related to any work-out, renegotiation or restructure relating to the performance by the Borrower under this Credit Agreement and (ii) of the Administrative Agent and the Lenders in connection with enforcement of the Credit Documents and the documents and instruments referred to therein (including, without limitation, in connection with any such enforcement, the reasonable fees and disbursements of counsel (including non-duplicative allocated costs of internal counsel) for the Administrative Agent and each of the Lenders); (b) pay and hold each of the Lenders harmless from and against any and all future stamp and other similar taxes with respect to the foregoing matters and save each of the Lenders harmless from and against any and all liabilities with respect to or resulting from any delay or omission (other than to the extent attributable to such Lender) to pay such taxes; and (c) indemnify each Lender, its officers, directors, employees, representatives, agents and Affiliates from and hold each of them harmless against any and all losses, liabilities, claims, damages or expenses incurred by any of them as a result of, or arising out of, or in any way related to, or by reason of (i) any investigation, litigation or other proceeding (whether or not any Lender is a party thereto, but excluding any investigation initiated by the Person seeking indemnification hereunder) related to the entering into and/or performance of any Credit Document or the use of proceeds of any Loans (including other extensions of credit) hereunder or the consummation of any other transactions contemplated in any Credit Document, including, without limitation, the reasonable fees and disbursements of counsel (including non-duplicative allocated costs of internal counsel) incurred in connection with any such investigation, litigation or other proceeding or (ii) the presence or Release of any Materials of Environmental Concern at, under or from any Property owned, operated or leased by the Borrower or any of its Subsidiaries, or the failure by the Borrower or any of its Subsidiaries to comply with any Environmental Law (but excluding, in the case of either of clause (i) or (ii) above, any such losses, liabilities, claims, damages or expenses to the extent (A) incurred by reason of gross negligence or willful misconduct on the part of the Person to be indemnified, (B) owing to the Borrower or (C) owing to another Person entitled to indemnification hereunder). 10.6 Amendments, Waivers and Consents. Neither this Credit Agreement nor any other Credit Document nor any of the terms hereof or thereof may be amended, changed, waived, discharged or terminated unless such amendment, change, waiver, discharge or termination is in writing entered into by, or approved in writing by, the Required Lenders and the Borrower, provided, however, that: (a) no such amendment, change, waiver, discharge or termination shall, without the consent of each Lender directly affected thereby, (i) reduce the rate or extend the time of payment of interest (other than as a result of (x) waiving the applicability of any post-default increase in interest rates or (y) an amendment approved by the Required Lenders as set forth in the definition of "Applicable Percentage" following the withdrawal by S&P and Moody's of their ratings on the Borrower's senior unsecured (non-credit enhanced) long term debt) on any Loan or fees hereunder, (ii) reduce the rate or extend the time of payment of any fees owing hereunder, (iii) extend (A) the Commitments of the Lenders, or (B) the final maturity of any Loan, or any portion thereof, or (iv) reduce the principal amount on any Loan; (b) no such amendment, change, waiver, discharge or termination shall, without the consent of each Lender directly affected thereby, (i) except as otherwise permitted under Section 3.4(b), increase the Commitments of the Lenders over the amount thereof in effect (it being understood and agreed that a waiver of any Default or Event of Default shall not constitute a change in the terms of any Commitment of any Lender), (ii) amend, modify or waive any provision of this Section 10.6 or Section 3.6, 3.10, 3.11, 3.12, 3.13, 8.1(a), 10.2, 10.3, 10.5 or 10.9, (iii) reduce or increase any percentage specified in, or otherwise modify, the definition of "Required Lenders," or (iv) consent to the assignment or transfer by the Borrower of any of its rights and obligations under (or in respect of) the Credit Documents to which it is a party; (c) no provision of Section 9 may be amended without the consent of the Administrative Agent; and (d) designation of the Master Account or of any Financial Officer may not be made without the written consent of at least two Financial Officers of the Borrower. 10.7 Counterparts. This Credit Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be an original, but all of which shall constitute one and the same instrument. It shall not be necessary in making proof of this Credit Agreement to produce or account for more than one such counterpart. 10.8 Headings. The headings of the sections and subsections hereof are provided for convenience only and shall not in any way affect the meaning or construction of any provision of this Credit Agreement. 10.9 Survival. All indemnities set forth herein, including, without limitation, in Section 3.9, 3.11, 9.7 or 10.5 shall survive the execution and delivery of this Credit Agreement, the making of the Loans, the repayment of the Loans and other obligations under the Credit Documents and the termination of the Commitments hereunder, and all representations and warranties made by the Borrower herein shall survive delivery of the Notes and the making of the Loans hereunder. 10.10 Governing Law; Submission to Jurisdiction; Venue. (a) THIS CREDIT AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. Any legal action or proceeding with respect to this Credit Agreement or any other Credit Document may be brought in the courts of the State of New York in New York County, or of the United States for the Southern District of New York, and, by execution and delivery of this Credit Agreement, the Borrower hereby irrevocably accepts for itself and in respect of its property, generally and unconditionally, the nonexclusive jurisdiction of such courts. The Borrower further irrevocably consents to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to it at the address set out for notices pursuant to Section 10.1, such service to become effective three (3) days after such mailing. Nothing herein shall affect the right of the Administrative Agent to serve process in any other manner permitted by law or to commence legal proceedings or to otherwise proceed against the Borrower in any other jurisdiction. (b) The Borrower hereby irrevocably waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Credit Agreement or any other Credit Document brought in the courts referred to in subsection (a) hereof and hereby further irrevocably waives and agrees not to plead or claim in any such court that any such action or proceeding brought in any such court has been brought in an inconvenient forum. (c) TO THE EXTENT PERMITTED BY LAW, EACH OF THE ADMINISTRATIVE AGENT, THE LENDERS AND THE BORROWER HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS CREDIT AGREEMENT, ANY OF THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY. 10.11 Severability. If any provision of any of the Credit Documents is determined to be illegal, invalid or unenforceable, such provision shall be fully severable and the remaining provisions shall remain in full force and effect and shall be construed without giving effect to the illegal, invalid or unenforceable provisions. 10.12 Entirety. This Credit Agreement together with the other Credit Documents represent the entire agreement of the parties hereto and thereto, and supersede all prior agreements and understandings, oral or written, if any, including any commitment letters or correspondence relating to the Credit Documents or the transactions contemplated herein and therein. 10.13 Binding Effect; Termination. (a) This Credit Agreement shall become effective at such time on or after the Closing Date when it shall have been executed by the Borrower and the Administrative Agent, and the Administrative Agent shall have received copies hereof (telefaxed or otherwise) which, when taken together, bear the signatures of each Lender, and thereafter this Credit Agreement shall be binding upon and inure to the benefit of the Borrower, the Administrative Agent and each Lender and their respective successors and assigns. (b) The term of this Credit Agreement shall be until no Loans or any other amounts payable hereunder or under any of the other Credit Documents shall remain outstanding and until all of the Commitments hereunder shall have expired or been terminated. 0.14 Confidentiality. The Administrative Agent and the Lenders agree to keep confidential (and to cause their respective affiliates, officers, directors, employees, agents and representatives to keep confidential) all information, materials and documents furnished to the Administrative Agent or any such Lender by or on behalf of the Borrower (whether before or after the Closing Date) which relates to the Borrower or any of its Subsidiaries (the "Information"). Notwithstanding the foregoing, the Administrative Agent and each Lender shall be permitted to disclose Information (i) to its affiliates, officers, directors, employees, agents and representatives in connection with its participation in any of the transactions evidenced by this Credit Agreement or any other Credit Documents or the administration of this Credit Agreement or any other Credit Documents; (ii) to the extent required by applicable laws and regulations or by any subpoena or similar legal process, or requested by any Governmental Authority; (iii) to the extent such Information (A) becomes publicly available other than as a result of a breach of this Credit Agreement or any agreement entered into pursuant to clause (iv) below, (B) becomes available to the Administrative Agent or such Lender on a non-confidential basis from a source other than the Borrower or (C) was available to the Administrative Agent or such Lender on a non-confidential basis prior to its disclosure to the Administrative Agent or such Lender by the Borrower; (iv) to any assignee or participant (or prospective assignee or participant) so long as such assignee or participant (or prospective assignee or participant) first specifically agrees in a writing furnished to and for the benefit of the Borrower to be bound by the terms of this Section 10.14; (v) to the extent required in connection with the exercise of remedies under this Credit Agreement or any other Credit Documents; or (vi) to the extent that the Borrower shall have consented in writing to such disclosure. Nothing set forth in this Section 10.14 shall obligate the Administrative Agent or any Lender to return any materials furnished by the Borrower. 10.15 Source of Funds. Each of the Lenders hereby represents and warrants to the Borrower that at least one of the following statements is an accurate representation as to the source of funds to be used by such Lender in connection with the financing hereunder: (a) no part of such funds constitutes assets allocated to any separate account maintained by such Lender in which any employee benefit plan (or its related trust) has any interest; (b) to the extent that any part of such funds constitutes assets allocated to any separate account maintained by such Lender, such Lender has disclosed to the Borrower the name of each employee benefit plan whose assets in such account exceed 10% of the total assets of such account as of the date of such purchase (and, for purposes of this subsection (b), all employee benefit plans maintained by the same employer or employee organization are deemed to be a single plan); (c) to the extent that any part of such funds constitutes assets of an insurance company's general account, such insurance company has complied with all of the requirements of the regulations issued under Section 401(c)(1)(A) of ERISA; or (d) such funds constitute assets of one or more specific benefit plans which such Lender has identified in writing to the Borrower. As used in this Section 10.15, the terms "employee benefit plan" and "separate account" shall have the respective meanings assigned to such terms in Section 3 of ERISA. 10.16 Conflict. To the extent that there is a conflict or inconsistency between any provision hereof, on the one hand, and any provision of any Credit Document, on the other hand, this Credit Agreement shall control. IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Credit Agreement to be duly executed and delivered as of the date first above written.     BORROWER:                                   AUTOZONE, INC.                                                              a Nevada corporation > > > > > > By:  /s/ Robert J. Hunt > > > > > > Name: Robert J. Hunt > > > > > > Title: EVP & CFO > > > > > > > > > > > > By: /s/ Harry L. Goldsmith > > > > > > Name: Harry L. Goldsmith > > > > > > Title: Sr. V.P. & General Counsel LENDERS:                                           BANK OF AMERICA, N.A.,                                                                individually in its capacity as a                                                                Lender and in its capacity as Administrative Agent > > > > > > By:  /s/ Timothy H. Spanos > > > > > > Name: Timothy H. Spanos > > > > > > Title:  Managing Director                                                              THE CHASE MANHATTAN BANK > > > > > > By:  /s/ Barry K. Bergman > > > > > > Name: Barry K. Bergman > > > > > > Title:  Vice President > > > > > > BANK ONE, NA > > > > > > > > > > > > By: /s/ Catherine A. Muszynski > > > > > > Name: Catherine A. Muszynski > > > > > > Title: Vice President                                                              FLEET NATIONAL BANK > > > > > > By:  /s/ Thomas J. Ballard > > > > > > Name: Thomas J. Ballard > > > > > > Title: Director                                                              THE BANK OF NEW YORK > > > > > > By:  /s/ Howard F. Bascom, Jr. > > > > > > Name: Howard F. Bascom, Jr. > > > > > > Title: Vice President > > > > > > CITICORP USA, INC. > > > > > > > > > > > > By: /s/ Robert Spence > > > > > > Name: > > > > > > Title:                                                              FIRST UNION NATIONAL BANK > > > > > > By: /s/ Anthony D. Braxton > > > > > > Name: Anthony D. Braxton > > > > > > Title: Vice President                                                             THE FIFTH THIRD BANK > > > > > > By: /s/ Megan Heisel > > > > > > Name: Mega Heisel > > > > > > Title: Large Corporate Accounts                                                              FIRST TENNESSEE BANK                                                              NATIONAL ASSOCIATION > > > > > > By: /s/ James H. Moore, Jr. > > > > > > Name: James H. Moore, Jr. > > > > > > Title: Senior Vice President > > > > > > FIRSTAR BANK, NA > > > > > > > > > > > > By:  /s/ Amanda Smith > > > > > > Name: Amanda Smith > > > > > > Title: Banking Officer > > > > > >                                                                HIBERNIA NATIONAL BANK > > > > > > By: /s/ Laura K. Watts > > > > > > Name: Laura K. Watts > > > > > > Title: Assistant Vice President                                                              THE INDUSTRIAL BANK OF JAPAN,                                                              LIMITED > > > > > > By: /s/ Minami Miure > > > > > > Name: Minami Miure > > > > > > Title: Senior Vice President                                                              KEYBANK NATIONAL ASSOCIATION > > > > > > By:  /s/ Mark A. LoSchiavo > > > > > > Name: Mark A. LoSchiavo > > > > > > Title: Assistant Vice President                                                               MERRILL LYNCH BANK USA > > > > > > By: /s/ Raymond J. Dardano > > > > > > Name: Raymond J. Dardano > > > > > > Title: Senior Credit Officer                                                              NATIONAL CITY BANK > > > > > > By:  /s/ James Ritchie > > > > > > Name: James Ritchie > > > > > > Title: Account Officer > > > > > > SUNTRUST BANK > > > > > > > > > > > > By:  /s/ Bryan W. Ford > > > > > > Name: Bryan W. Ford > > > > > > Title: Vice President > > > > > >                                                                UNION BANK OF CALIFORNIA, N.A. > > > > > > By: /s/ J. William Bloore > > > > > > Name: J. William Bloore > > > > > > Title: Vice President                                                              UNION PLANTERS BANK > > > > > > By:  /s/ Shea Buchignani > > > > > > Name: Shea Buchignani > > > > > > Title: Assistant Vice President                                                              WACHOVIA BANK, N.A. > > > > > > By:  /s/ Elizabeth Witherspoon > > > > > > Name: Elizabeth Witherspoon > > > > > > Title: Assistant Vice President -------------------------------------------------------------------------------- Schedule 1.1 APPLICABLE PERCENTAGE Pricing Level S&P/Moody's Rating Applicable Percentage for Eurodollar Loans Applicable Percentage for  Base Rate Loans Applicable Percentage for Facility Fee Applicable Percentage for Utilization Fee Level I A-/A3 or above 40.0 bps 0 10.0 bps 12.5 bps Level II BBB+/Baa1  50.0 bps 0 12.5 bps 12.5 bps Level III BBB/Baa2  60.0 bps 0 15.0 bps 25.0 bps Level IV BBB-/Baa3  90.0 bps 0 22.5 bps 25.0 bps Level V BB+/Ba1 or below 120.0 bps  0 30.0 bps 25.0 bps The Applicable Percentage shall be based on the applicable Pricing Level corresponding to the Rating(s) then in effect. In the event of a Split Rating, the applicable Pricing Level shall be based on the higher Rating. In the event of a Double Split Rating, the applicable Pricing Level shall be based on the Pricing Level which is one above that corresponding to the lower Rating. If no Rating exists, the applicable Pricing Level shall be based on Pricing Level V until the earlier of (A) such time as S&P and/or Moody's provides another Rating or (B) the Required Lenders have agreed to an alternative pricing grid or other method for determining Pricing Levels pursuant to an effective amendment to this Credit Agreement. As used herein: "Rating" means the senior unsecured (non-credit enhanced) long term debt rating of the Borrower, as published by S&P and/or Moody's. "Split Rating" means the ratings of S&P and Moody's would indicate different Pricing Levels, but the Pricing Levels are not more than one Pricing Level apart. "Double Split Rating" means the ratings of S&P and Moody's would indicate different Pricing Levels, but the Pricing Levels are two or more Pricing Levels apart. -------------------------------------------------------------------------------- Schedule 2.1(a) LENDERS Lender Commitment Percentage Commitment Bank of America, N.A. Bank of America Corporate Center 100 N. Tryon Street, 16th Floor Charlotte, NC 28255 Attn: Timothy H. Spanos  Tel: (704) 386-4507 Fax: (704) 388-8268 11.53846153% $75,000,000 The Chase Manhattan Bank 220 Park Avenue, 48th Floor New York, NY 10017 Attn: Barry Bergman Tel: (212) 270-0203 Fax: (212) 270-5646 11.53846153% $75,000,000 Fleet National Bank 100 Federal Street MHDE 10009E Boston, MA 02110 Attn: Thomas J. Bullard Tel: (617) 434-3824 Fax: (617) 434-6685 10.96153861% $71,250,000 Bank One, NA 1 Bank One Plaza, 14th Floor IL1-0086 Chicago, IL 60670 Attn: John D. Runger Tel: (312) 732-7101 Fax: (312) 732-1117 10.96153861% $71,250,000 The Bank of New York One Wall Street, 8th Floor Retailing Industry Division New York, NY 10286 Attn: Lucille Cuttone Telephone: (212) 635-7879 Facsimile: (212) 635-1481 1.92307692% $12,500,000 Citicorp USA, Inc. 399 Park Avenue, 5th Floor New York, NY 10043 Attn: Robert Kane Tel: (212) 559-3414 Fax: (212) 793-7460 9.61538462% $62,500,000 First Union National Bank PA4843 Widener Building, 12th Floor 1339 Chestnut Street Philadelphia, PA 19107 Attn: Mark S. Supple Tel: (215) 973-8933 Fax: (215) 786-2877 9.61538462% $62,500,000 The Fifth Third Bank 38 Fountain Square Plaza MD 109054 Cincinnati, OH 45263 Attn: Megan Heisel Tel: (513) 744-8662 Fax: (513) 744-5947 1.92307692% $12,500,000 First Tennessee Bank National Association 165 Madison Avenue, 9th Floor Memphis, TN 38103-2723 Attn: James H. Moore, Jr. Tel: (901) 523-4108 Fax: (901) 523-4267 1.53846154% $10,000,000 Firstar Bank, NA 1 Firstar Plaza, TRAM 12-3 St. Louis, MO 63101-0524 Attn: Amanda Smith Tel: (314) 418-3638 Fax: (314) 418-1963 3.84615385% $25,000,000 Hibernia National Bank 313 Carondelet St. New Orleans, LA 70130 Attn: Laura K. Watts Tel: (504) 533-2029 Fax: (504) 533-5344 0.76923077% $5,000,000 The Industrial Bank of Japan, Limited One Ninety One Peachtree Tower Suite 3825 191 Peachtree Street, N.E. Atlanta, GA 30303-1757 Attn: James Masters Tel: (404) 524-8770 x106 Fax: (404) 524-8509 1.92307692% $12,500,000 KeyBank National Association 127 Public Square, OH-01-27-0606 Cleveland, OH 44114-1306 Attn: Mark A. LoSchiavo Tel: (216) 689-0598 Fax: (216) 689-4981 1.92307692% $12,500,000 Merrill Lynch Bank USA 15 W. South Temple, Suite 300 Salt Lake City, UT 84101 Attn: Raymond J. Dardano Tel: (801) 526-8309 Fax: (801) 363-8611 2.69230769% $17,500,000 National City Bank 1900 E. 9th Street, #2077 Cleveland, OH 44114 Attn: James C. Ritchie Tel: (216) 575-9918 Fax: (216) 22-0003 1.92307692% $12,500,000 SunTrust Bank 6410 Poplar Avenue, Suite 320 Memphis, TN 38119 Attn: Bryan W. Ford Tel: (901) 762-9862 Fax: (901) 766-7565 9.61538462% $62,500,000 Union Bank of California, N.A. 350 California Street, 6th Floor San Francisco, CA 94104 Attn: William Bloore Tel: (415) 705-5041 Fax: (415) 705-7085 3.84615385% $25,000,000 Union Planters Bank 6200 Poplar Avenue, HQ4 Memphis, TN 38119 Attn: Shea Buchignani Tel: (901) 580-5583 Fax: (901) 580-5451 1.92307692% $12,500,000 Wachovia Bank, N.A. 191 Peachtree Street, NE 29th Floor Atlanta, GA 30303 Attn: Karin E. Reel Tel: (404) 332-5187 Fax: (404) 332-5016 1.92307692% $12,500,000 Total: 100% $650,000,000.00 -------------------------------------------------------------------------------- Schedule 2.1(b)(i) FORM OF NOTICE OF BORROWING Bank of America, N.A., as Administrative Agent for the Lenders 1850 Gateway Boulevard, 5th Floor Concord, California 94520-3281 Attn: Agency Administrative Services Ladies and Gentlemen: The undersigned, AUTOZONE, INC. (the "Borrower"), refers to the 364-Day Credit Agreement dated as of May 23, 2000 (as amended, modified, extended or restated from time to time, the "Credit Agreement"), among the Borrower, the Lenders, Bank of America, N.A., as Administrative Agent and The Chase Manhattan Bank, as Syndication Agent. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement. The Borrower hereby gives notice pursuant to Section 2.1 of the Credit Agreement that it requests a Revolving Loan advance under the Credit Agreement, and in connection therewith sets forth below the terms on which such Revolving Loan advance is requested to be made: (A)     Date of Borrowing            (which is a Business Day)        ______________________ (B)     Principal Amount of           Borrowing                                ______________________ (C)     Interest rate basis                     ______________________ (D)     Interest Period and the           last day thereof                        ______________________ In accordance with the requirements of Section 4.2, the Borrower hereby reaffirms the representations and warranties set forth in the Credit Agreement as provided in subsection (b) of such Section, and confirms that the matters referenced in subsections (c), (d) and (e) of such Section, are true and correct.   > > > > > > Very truly yours, > > > > > > > > > > > > AUTOZONE, INC. > > > > > > > > > > > > By: > > > > > > Name: > > > > > > Title: -------------------------------------------------------------------------------- Schedule 2.1(e) FORM OF REVOLVING NOTE May 23, 2000     FOR VALUE RECEIVED, AUTOZONE, INC., a Nevada corporation (the "Borrower"), hereby promises to pay to the order of __________________________, its successors and assigns (the "Lender"), at the office of Bank of America, N.A., as Administrative Agent (the "Administrative Agent"), at 1850 Gateway Boulevard, 5th Floor, Concord, California 94520-3281, Attn: Agency Administrative Services (or at such other place or places as the holder hereof may designate), at the times set forth in the 364-Day Credit Agreement, dated as of May 23, 2000, among the Borrower, the Lenders, the Administrative Agent and the Syndication Agent (as it may be amended, modified, extended or restated from time to time, the "Credit Agreement"; all capitalized terms not otherwise defined herein shall have the meanings set forth in the Credit Agreement), but in no event later than the Termination Date, in Dollars and in immediately available funds, the aggregate unpaid principal amount of all Revolving Loans made by the Lender to the Borrower pursuant to the Credit Agreement, and to pay interest from the date hereof on the unpaid principal amount hereof, in like money, at said office, on the dates and at the rates selected in accordance with Section 2.1(d) of the Credit Agreement. Upon the occurrence and during the continuance of an Event of Default, the balance outstanding hereunder shall bear interest as provided in Section 3.1 of the Credit Agreement. Further, in the event the payment of all sums due hereunder is accelerated under the terms of the Credit Agreement, this Note, and all other indebtedness of the Borrower to the Lender shall become immediately due and payable, without presentment, demand, protest or notice of any kind, all of which are hereby waived by the Borrower. In the event this Note is not paid when due at any stated or accelerated maturity, the Borrower agrees to pay, in addition to the principal and interest, all costs of collection, including reasonable attorneys' fees. All borrowings evidenced by this Note and all payments and prepayments of the principal hereof and interest hereon and the respective dates thereof shall be endorsed by the holder hereof on a schedule attached hereto and incorporated herein by reference, or on a continuation thereof which shall be attached hereto and made a part hereof; provided, however, that any failure to endorse such information on such schedule or continuation thereof shall not in any manner affect the obligation of the Borrower to make payments of principal and interest in accordance with the terms of this Note. This Note and the Revolving Loans evidenced hereby may be transferred in whole or in part only by registration of such transfer on the Register maintained by or on behalf of the Borrower as provided in Section 10.3(c) of the Credit Agreement. IN WITNESS WHEREOF, the Borrower has caused this Note to be duly executed by its duly authorized officer as of the day and year first above written.   > > > > > > > AUTOZONE, INC. > > > > > > > > > > > > > > By: > > > > > > > Name: > > > > > > > Title: > > > > > > > > > > > > > > By: > > > > > > > Name: > > > > > > > Title: -------------------------------------------------------------------------------- Schedule 2.2(f) FORM OF COMPETITIVE NOTE May 23, 2000   FOR VALUE RECEIVED, AUTOZONE, INC., a Nevada corporation (the "Borrower"), hereby promises to pay to the order of __________________________, its successors and permitted assigns (the "Lender"), at the office of Bank of America, N.A., as Administrative Agent (the "Administrative Agent"), at 1850 Gateway Boulevard, 5th Floor, Concord, California 94520-3281, Attn: Agency Administrative Services (or at such other place or places as the holder hereof may designate), at the times set forth in the 364-Day Credit Agreement, dated as of May 23, 2000, among the Borrower, the Lenders, the Administrative Agent and the Syndication Agent (as it may be amended, modified, extended or restated from time to time, the "Credit Agreement"; all capitalized terms not otherwise defined herein shall have the meanings set forth in the Credit Agreement), but in no event later than the Termination Date, in Dollars and in immediately available funds, the aggregate unpaid principal amount of all Competitive Loans made by the Lender to the Borrower pursuant to the Credit Agreement, and to pay interest from the date hereof on the unpaid principal amount hereof, in like money, at said office, on the dates and at the rates selected in accordance with Section 2.2 of the Credit Agreement and in the respective Competitive Bid applicable to each Competitive Loan borrowing evidenced hereby. Upon the occurrence and during the continuance of an Event of Default, the balance outstanding hereunder shall bear interest as provided in Section 3.1 of the Credit Agreement. Further, in the event the payment of all sums due hereunder is accelerated under the terms of the Credit Agreement, this Note, and all other indebtedness of the Borrower to the Lender shall become immediately due and payable, without presentment, demand, protest or notice of any kind, all of which are hereby waived by the Borrower. In the event this Note is not paid when due at any stated or accelerated maturity, the Borrower agrees to pay, in addition to the principal and interest, all costs of collection, including reasonable attorneys' fees. All borrowings evidenced by this Note and all payments and prepayments of the principal hereof and interest hereon and the respective dates thereof shall be endorsed by the holder hereof on a schedule attached hereto and incorporated herein by reference, or on a continuation thereof which shall be attached hereto and made a part hereof; provided, however, that any failure to endorse such information on such schedule or continuation thereof shall not in any manner affect the obligation of the Borrower to make payments of principal and interest in accordance with the terms of this Note. This Note and the Loans evidenced hereby may be transferred in whole or in part only by registration of such transfer on the Register maintained by or on behalf of the Borrower as provided in Section 10.3(c) of the Credit Agreement. IN WITNESS WHEREOF, the Borrower has caused this Note to be duly executed by its duly authorized officer as of the day and year first above written.   > > > > > > > AUTOZONE, INC. > > > > > > > > > > > > > > By: > > > > > > > Name: > > > > > > > Title: > > > > > > > > > > > > > > By: > > > > > > > Name: > > > > > > > Title: -------------------------------------------------------------------------------- Schedule 3.2 FORM OF NOTICE OF EXTENSION/CONVERSION Bank of America, N.A., as Administrative Agent for the Lenders 1850 Gateway Boulevard, 5th Floor Concord, California 94520-3281 Attn: Agency Administrative Services Ladies and Gentlemen: The undersigned, AutoZone, Inc. (the "Borrower"), refers to the 364-Day Credit Agreement dated as of May 23, 2000 (as amended, modified, extended or restated from time to time, the "Credit Agreement"), among the Borrower, the Lenders, Bank of America, N.A., as Administrative Agent and The Chase Manhattan Bank, as Syndication Agent. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement. The Borrower hereby gives notice pursuant to Section 3.2 of the Credit Agreement that it requests an extension or conversion of a Revolving Loan outstanding under the Credit Agreement, and in connection therewith sets forth below the terms on which such extension or conversion is requested to be made: (A)     Date of Extension or Conversion            (which is the last day of the            the applicable Interest Period)            ______________________ (B)     Principal Amount of           Extension or Conversion                     ______________________ (C)     Interest rate basis                               ______________________ (D)     Interest Period and the            last day thereof                                  ______________________ In accordance with the requirements of Section 4.2, the Borrower hereby reaffirms the representations and warranties set forth in the Credit Agreement as provided in subsection (b) of such Section, and confirms that the matters referenced in subsections (c), (d) and (e) of such Section, are true and correct.   > > > > > > > Very truly yours, > > > > > > > > > > > > > > AUTOZONE, INC. > > > > > > > > > > > > > > By: > > > > > > > Name: > > > > > > > Title: -------------------------------------------------------------------------------- Schedule 3.4(b)     FORM OF NEW COMMITMENT AGREEMENT Reference is made to the 364-Day Credit Agreement dated as of May 23, 2000, as amended and modified from time to time thereafter (the "Credit Agreement") among AutoZone, Inc., the Lenders party thereto, Bank of America, N.A., as Administrative Agent and The Chase Manhattan Bank, as Syndication Agent. Terms defined in the Credit Agreement are used herein with the same meanings. 1. The undersigned Lender hereby confirms its Commitment, effective as of the Effective Date set forth below, to make Loans under the Credit Agreement up to the principal amount of such Commitment as set forth below. If the undersigned Lender is already a Lender under the Credit Agreement, such Lender acknowledges and agrees that such Commitment is in addition to any existing Commitment of such Lender under the Credit Agreement. If the undersigned Lender is not already a Lender under the Credit Agreement, such Lender hereby acknowledges, agrees and confirms that, by its execution of this New Commitment Agreement, such Lender will, as of the Effective Date, be a party to the Credit Agreement and be bound by the provisions of the Credit Agreement and, to the extent of its Commitment, have the rights and obligations of a Lender thereunder. 2. This New Commitment Agreement shall be governed by and construed in accordance with the laws of the State of New York. 3. This New Commitment Agreement may be executed in any number of counterparts, each of which where so executed and delivered shall be an original, but all of which shall constitute one and the same instrument. It shall not be necessary in making proof of this New Commitment Agreement to produce or account for more than one such counterpart. Amount of Commitment $____________________ Effective Date of Commitment _____________________, 20___ The terms set forth above are hereby agreed to:   [Lender] By: Name: Title:     CONSENTED TO: BANK OF AMERICA, N.A., as Administrative Agent By: Name: Title:     AUTOZONE, INC. By: Name: Title:   -------------------------------------------------------------------------------- Schedule 4.1(e) FORM OF LEGAL OPINION This is the form of legal opinion delivered by AutoZone in connection with prior AutoZone credit facilities. [DATE] Bank of America, N.A., as Administrative Agent, and each of the Lenders party to the Credit Agreements referred to below c/o Bank of America, N.A. Agency Administrative Services 1850 Gateway Boulevard, 5th Floor Concord, California 94520-3281 RE: AutoZone, Inc. 364-Day Syndicated Credit Agreement Ladies and Gentlemen: I am the Senior Vice President, Secretary and General Counsel of AutoZone, Inc., a Nevada corporation ("AutoZone"), and am familiar with the transactions contemplated by the Credit Agreement dated as of November 13, 1998, as amended by that certain Amendment No. 1 to Credit Agreement dated as of July 16, 1999 among AutoZone, Inc., as Borrower, the several Lenders from time to time party thereto, Bank of America, N.A. as Agent, SunTrust Bank, Nashville, N.A., as Syndication Agent and The First National Bank of Chicago, as Documentation Agent ("Credit Agreement"). Unless the context otherwise requires, all terms used in this opinion which are specifically defined in the Credit Agreement shall have the meanings given such terms in the Credit Agreement. In connection with the opinions expressed below, I have examined, or caused to be examined, the Credit Documents. I have relied upon the representations and warranties contained in each of such documents and upon originals or copies, certified or otherwise identified to my satisfaction, of such corporate records, documents and other instruments as in my judgment are relevant to rendering the opinions expressed below. As to all matters of fact covered by such documents, I have relied, without independent investigation or verification on such documents. In such examination, I have assumed that each of the parties to the Credit Agreement, other than AutoZone, had and has, as the case may be, full power, authority and legal right to enter into each Credit Document to which it is a party and that each such Credit Document was or has been, as the case may be, duly authorized, executed and delivered by each of such parties. Based on the foregoing, it is my opinion that: (i) Each of the Company and its subsidiaries has been duly organized and is validly existing as a corporation or limited partnership under the laws of the jurisdiction of its organization, with corporate or partnership, as the case may be, power and authority to own its properties and conduct its ordinary course of business; (ii) Each of the Company and its subsidiaries has been duly qualified as a foreign corporation or limited partnership, as the case may be, for the transaction of business and is in good standing under the laws of each jurisdiction in which it owns or leases properties, or conducts any business, so as to require such qualification, or is subject to no material liability or disability by reason of failure to be so qualified in any such jurisdiction; (iii) Each of the Credit Documents to which AutoZone is a party, was or has been, as the case may be, duly authorized, executed and delivered by AutoZone and together constitute the legal, valid and binding obligations of AutoZone enforceable against AutoZone in accordance with its and their terms. The opinions expressed in paragraph (iii) above are based upon the assumption for purposes of such opinions and without independent analysis that notwithstanding the respective choice of law clauses in the Credit Documents, the governing law with respect to each of the Credit Documents is identical in all relevant respects to the law of the State of Tennessee. Insofar as such opinion relates to the enforceability of any instrument, such enforceability is subject to applicable bankruptcy, insolvency and other similar laws affecting the enforcement of creditors' rights generally whether such enforceability is considered in a proceeding in equity or at law). The enforceability of the remedies provided under the Credit Agreement may also be limited by applicable laws which may affect the remedies provided therein but which do not in my opinion affect the validity of the Credit Agreement or make such remedies inadequate for the practical realization of the benefits intended to be provided. I do not express any opinion as to matters governed by any law other than the Federal laws of the United States of America, the corporation law of the State of Nevada and the laws of the State of Tennessee. Further, I express no opinion as to the enforceability of the choice of law provisions contained in any of the Credit Documents. This opinion is rendered solely for your benefit in connection with the transactions described above. This opinion may not be used or relied upon by any other person, and may not be disclosed, quoted, filed with a governmental agency or otherwise referred to without my prior written consent except to your bank examiners, auditors and counsel and to prospective transferees of your interests under the Credit Documents and their professional advisers, or as required by law or pursuant to legal process.                                                                                 Very truly yours,     Harry L. Goldsmith -------------------------------------------------------------------------------- Schedule 6.2 FORM OF OFFICER'S COMPLIANCE CERTIFICATE For the fiscal quarter ended _________________, 20___. I, ______________________, [Title] of AutoZone, Inc. (the "Borrower") hereby certify that, to the best of my knowledge and belief, with respect to that certain 364-Day Credit Agreement dated as of May 23, 2000 (as amended, modified, extended or restated from time to time, the "Credit Agreement"; all of the defined terms in the Credit Agreement are incorporated herein by reference) among the Borrower, the Lenders party thereto, Bank of America, N.A., as Administrative Agent and The Chase Manhattan Bank, as Syndication Agent. a. The company-prepared financial statements which accompany this certificate are true and correct in all material respects and have been prepared in accordance with GAAP applied on a consistent basis, subject to changes resulting from normal year-end audit adjustments. b. Since ___________ (the date of the last similar certification, or, if none, the Closing Date) no Default or Event of Default has occurred under the Credit Agreement; and Delivered herewith are detailed calculations demonstrating compliance by the Borrower with the financial covenants contained in Section 6.10 and Section 6.11 of the Incorporated Covenants as of the end of the fiscal period referred to above. This ______ day of ___________, 20__.     AUTOZONE, INC. By: Name: Title: -------------------------------------------------------------------------------- Schedule 10.3(b) FORM OF ASSIGNMENT AND ACCEPTANCE THIS ASSIGNMENT AND ACCEPTANCE dated as of _______________, 200_ is entered into between ________________ ("Assignor") and ____________________ ("Assignee"). Reference is made to the 364-Day Credit Agreement dated as of May 23, 2000, as amended and modified from time to time thereafter (the "Credit Agreement") among AutoZone, Inc., the Lenders party thereto, Bank of America, N.A., as Administrative Agent and The Chase Manhattan Bank as Syndication Agent. Terms defined in the Credit Agreement are used herein with the same meanings. 1. The Assignor hereby sells and assigns, without recourse, to the Assignee, and the Assignee hereby purchases and assumes from the Assignor, effective as of the Effective Date set forth below, the interests set forth below (the "Assigned Interest") in the Assignor's rights and obligations under the Credit Agreement, including, without limitation, the interests set forth below in the Commitments and outstanding Loans of the Assignor on the effective date of the assignment designated below (the "Effective Date"), together with unpaid Fees accrued on the assigned Commitments to the Effective Date and unpaid interest accrued on the assigned Loans to the Effective Date. Each of the Assignor and the Assignee hereby makes and agrees to be bound by all the representations, warranties and agreements set forth in Section 10.3(b) of the Credit Agreement, a copy of which has been received by the Assignee. From and after the Effective Date (i) the Assignee, if it is not already a Lender under the Credit Agreement, shall be a party to and be bound by the provisions of the Credit Agreement and, to the extent of the interests purchased and assumed by the Assignee under this Assignment and Acceptance, have the rights and obligations of a Lender thereunder and (ii) the Assignor shall, to the extent of the interests sold and assigned by the Assignor under this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Credit Agreement. 2. This Assignment and Acceptance shall be governed by and construed in accordance with the laws of the State of New York. 3. Terms of Assignment             (a)     Date of Assignment:             (b)     Legal Name of Assignor:             (c)     Legal Name of Assignee:             (d)     Effective Date of Assignment:             (e)     Commitment of Assignee                       after giving effect to this                       Assignment and Acceptance as                       of the Effective Date                                     $_________________             (f)     Commitment of Assignor                      after giving effect to this                     Assignment and Acceptance as                     of the Effective Date                                        $_________________             (g)    Commitment Percentage of Assignee                     after giving effect to this                     Assignment and Acceptance                     as of the Effective Date                     (set forth to at least 8 decimals)                                                          %             (h)    Commitment Percentage of Assignor                     after giving effect to this                     Assignment and Acceptance                     as of the Effective Date                     (set forth to at least 8 decimals)                                                           % 4. This Assignment and Acceptance shall be effective only upon consent of the Borrower and the Administrative Agent, if applicable, delivery to the Administrative Agent of this Assignment and Acceptance together with the transfer fee payable pursuant to Section 10.3(b) in connection herewith and recordation in the Register pursuant to Section 10.3(c) of the terms hereof. 5. This Assignment and Acceptance may be executed in any number of counterparts, each of which where so executed and delivered shall be an original, but all of which shall constitute one and the same instrument. It shall not be necessary in making proof of this Assignment and Acceptance to produce or account for more than one such counterpart. The terms set forth above are hereby agreed to:   ________________________, as Assignor By: Name: Title:     _______________________, as Assignee By: Name: Title: Notice address of Assignee:   > > <<Assignee>> > >   > > > > Attn: > > Telephone: (___) > > Telecopy: (___) CONSENTED TO: BANK OF AMERICA, N.A., as Administrative Agent By: Name: Title:   AUTOZONE, INC. By: Name: Title:

Exhibit 10(A) CERTIFICATE OF AMENDMENT TO ALLEN TELECOM INC. 1982 STOCK PLAN       At a meeting held on April 28, 2000, the Board of Directors of Allen Telecom Inc. (the “Company”) duly adopted a resolution amending, effective as of December 31, 1996, the sentence immediately prior to the last sentence of Section 5(g) of the Allen Telecom Inc. 1982 Stock Plan to read as follows:     Notwithstanding anything to the contrary herein, if upon an optionee’s termination of employment the optionee becomes a senior management consultant to the Company and/or its subsidiaries under a post-employment consulting arrangement, such option shall continue to vest under its original vesting schedule, and may be exercised by the optionee, during the period ending on the earliest of (i) the ninetieth (90th) day following the date that the optionee permanently ceases to render consulting services to the Company and/or its subsidiaries, for any reason other than cessation by reason of death, under a post-employment consulting arrangement, or (ii) the date that is one year after the date described in clause (i) if the optionee ceases to render consulting services on account of his death (in which case such option may be exercised by the optionee’s executor or administrator or by his distributee to whom the option may have been transferred by will or by the laws of descent and distribution, but only to the extent that it was exercisable on the date of the optionee’s death). Executed this 28th day of April, 2000.   /s/ Laura C. Meagher -------------------------------------------------------------------------------- Laura C. Meagher Secretary

EXHIBIT 10.38 ESCROW AGREEMENT         ESCROW AGREEMENT dated as of August 14, 2000, between SanDisk Corporation, a Delaware corporation, (the “Purchaser”), Tower Semiconductor Ltd., an Israeli corporation (the “Company”) and Union Bank of California, N.A., as escrow agent (the “Escrow Agent”).         WHEREAS, Purchaser and the Company have entered into a Share Purchase Agreement, dated July 4, 2000 (the “SPA”), pursuant to which the Purchaser shall, subject to the terms and conditions of the SPA, purchase from the Company 866,551 of the Company’s ordinary shares, par value NIS1.00 per share, as may be adjusted pursuant to the terms of the SPA (the “Shares”) in consideration for an aggregate purchase price of $20,000,000 (the “Purchase Price”); and         WHEREAS, pursuant to Section 2 of the SPA, the Purchase Price (as defined in the SPA) is to be deposited in escrow pursuant to the terms and conditions of this Agreement; and         WHEREAS, pursuant to Section 2 of the SPA, at the Closing (as defined in the SPA), subject to the fulfillment of all closing conditions under the SPA, the Purchase Price will be released from escrow to the Company in accordance with the terms hereof.         NOW THEREFORE, in consideration of the mutual covenants and agreements contained herein, and upon the terms and subject to the conditions hereinafter set forth, the parties agree as follows:         1.  Appointment of Escrow Agent.   The Company and the Purchaser hereby appoint Union Bank of California, N.A. as escrow agent with respect to the Purchase Price and the Escrow Agent accepts such appointment, all upon the terms and conditions set forth herein.         2.  Deposit into Escrow Account.  Promptly following the execution and delivery of this Agreement, the Purchaser shall cause to be deposited with the Escrow Agent, and upon such deposit the Escrow Agent shall acknowledge receipt of, $20,000,000 (such funds together with any income earned thereon pursuant to Section 4 hereof after payment of expenses incurred or taxes incurred, the “Escrowed Funds”) via a wire transfer of immediately available funds to the account of the Escrow Agent set forth in Schedule 2 hereto (the “Escrow Account”). The Escrow Agent shall hold the Escrowed Funds and shall administer the same and the Escrow Account in accordance with the terms of this Agreement. The Escrow Agent shall report to the Company and the Purchaser upon receipt of the Purchase Price into the Escrow Account.         3.  Disbursement of the Escrowed Funds.         3.1  Upon receipt by the Escrow Agent of written notice from the Purchaser to the effect that the Closing set forth in Section 2 of the SPA is scheduled to occur on a specified date, the Escrow Agent shall, on the date specified in such notice release the Escrowed Funds to the Company by way of wire transfer of immediately available funds into the bank account designated by the Company in Schedule 3.1 hereto. The Purchaser shall provide the Company with a copy of the written notice referred to in the first sentence of this Section 3.1.         3.2  In the event that the written notice set forth in Section 3.1 is not received by the Escrow Agent on or prior to the earlier of (a) January 31, 2001 and (b) such time as the Escrow Agent shall receive a notice from either the Purchaser, the Company or both to the effect that the sender(s) of such notice has terminated the SPA pursuant to Section 9 of the SPA together with a copy of the actual written notice of termination as required under such Section 9, this Agreement shall terminate. Upon termination, the Escrow Agent shall deliver the Escrowed Funds to the Purchaser by way of wire transfer of immediately available funds into the bank account designated by the Purchaser in Schedule 3.2 hereto.         4.  Investments.  Purchaser and Company may deliver written and jointly signed instructions to the Escrow Agent with specific investment instructions for the Escrowed Funds. In the absence of such instructions, the Escrow Agent shall have full authority and shall, invest and reinvest the Escrowed Funds in United States Treasury obligations or other fixed income securities rated “ AA” or higher by a nationally recognized statistical rating organization or in one or more money market funds of major institutions meeting the following criteria (i) fund assets of at least $1 billion, (ii) comprised of high quality money market instruments having a dollar weighted average maturity of ninety days or less, (iii) provide for same day settlement and (iv) stable net asset value of US -------------------------------------------------------------------------------- $1.00 and rated AAA by S&P. The Escrow Agent shall not be liable or responsible for any loss suffered in connection with any investment of funds made by it pursuant hereto or in connection with the liquidation of any such investment prior to its maturity.         5.  Further Provisions Relating to the Escrow         5.1  The Company and the Purchaser shall be the sole parties entitled to bring suit concerning this Agreement (excluding an action for interpleader brought by the Escrow Agent), and specific performance of this Agreement shall be their sole and exclusive remedy against the Escrow Agent. Other than in connection with a claim of gross negligence or willful misconduct, the Escrow Agent shall not be liable for any monetary damages in connection with this Agreement. Other than in connection with a claim of gross negligence or willful misconduct and except in connection with a claim for specific performance of this Agreement, the Escrow Agent shall not be liable in law or equity for any mistake of fact or of law or any error of judgment, or for any act or any omission.         5.2  Other than in connection with a claim against the Escrow Agent of gross negligence or willful misconduct and except in connection with a claim by the Company or the Purchaser for specific performance of this Agreement, the Company and the Purchaser, jointly and equally, shall indemnify and hold harmless the Escrow Agent and its directors, officers, agents and employees against and in respect of any and all claims, suits, actions, proceedings (formal and informal), investigations, judgments, deficiencies, damages, settlements, liabilities, and legal and other expenses (including legal fees and expenses of attorneys chosen by the Escrow Agent) as and when incurred arising out of or based upon any act, omission, alleged act, or alleged omission by the Escrow Agent, or its agents, or any other cause, in any case in connection with the acceptance of, or the performance or non-performance by the Escrow Agent, or its agents, of any of the Escrow Agent’s duties under this Agreement.         5.3  The Escrow Agent makes no representation as to the validity or genuineness of any document held by or delivered to it. The Escrow Agent shall be fully protected by acting in reliance upon any notice given in proper form hereunder, advice, direction, other document, or signature believed by it to be genuine, by assuming that any person purporting to give the Escrow Agent any notice, advice, direction, or other document has been duly authorized so to do, or by acting or failing to act in good faith on the advice of any counsel retained by the Escrow Agent.         5.4  The Escrow Agent shall have no duties or responsibilities except those expressly set forth herein and shall not be responsible for or chargeable with knowledge of the terms or provisions of any agreements between the parties, including, without limitation the SPA. The Escrow Agent shall not be bound by any notice of a claim, or demand with respect thereto, or any waiver, modification, amendment, termination, cancellation, or revision of this Agreement, unless it is in writing and signed by the Company and the Purchaser and received by the Escrow Agent, and, if the Escrow Agent’s duties as Escrow Agent hereunder are affected, unless the Escrow Agent shall have given its prior written consent thereto. The Escrow Agent shall not be bound by any assignment by either of the other parties hereto of its rights hereunder.         5.5  The Escrow Agent is authorized to comply with and obey all laws, orders, judgments, decrees, and regulations of any governmental authority, court, tribunal, or arbitrator. If the Escrow Agent so complies, it shall not be liable even if such law, order, judgment, decree, or regulation is subsequently reversed, modified, annulled, set aside, vacated, or found to have been entered without jurisdiction.         5.6  If the Escrow Agent shall be uncertain as to its duties or rights hereunder, or if it shall receive any notice, advice, direction or other document from any other party with respect to the Escrowed Funds which, in the Escrow Agent’s opinion, is in conflict with any of the provisions of this Agreement, or if it should be advised that a dispute has arisen with respect to the payment, ownership, or right of possession of the Escrowed Funds or any part thereof (or as to the delivery, non-delivery) or content of any notice, advice, direction, or other document), the Escrow Agent shall be entitled, without liability, to refrain from taking any action other than to use Escrow Agent’s best efforts to keep safely the Escrowed Funds until the Escrow Agent shall be directed otherwise in writing by the other parties hereto or by an order, decree, or judgment of the competent California Court or an arbitrator duly appointed by the Company and the Purchaser, but the Escrow Agent shall be under no duty to institute or to defend any proceeding although the Escrow Agent may, in the Escrow Agent’s discretion and at the expense of the Company and the Purchaser (to be shared equally among such parties), institute or defend such proceedings.         5.7  The Escrow Agent may resign by giving 30 days’ prior written notice to the Company and the Purchaser, in which case the Escrow Agent shall appoint a successor Escrow Agent reasonably acceptable to the -------------------------------------------------------------------------------- Company and the Purchaser. If the Escrow Agent fails to do so within 30 days, it may apply to a court of competent jurisdiction for the appointment of a successor. The resigning Escrow Agent shall transfer and deliver the Escrowed Funds to the successor Escrow Agent, after the fees and expenses for all services rendered by the resigning Escrow Agent shall have been paid to it, and all of the provisions of this Escrow Agreement shall apply to the successor Escrow Agent as though it had been named herein.         6.  Compensation of Escrow Agent         The Escrow Agent shall be entitled to fees and expenses for all services rendered by it hereunder in accordance with Schedule 6 hereto, which fees and expenses shall be paid ½ each by the Company and the Purchaser. The Escrow Agent shall also be entitled to reimbursement on demand for all reasonable loss, liability, damage or expenses paid or incurred by it in the administration of its duties hereunder, including, but not limited to, all disbursements and all taxes or other governmental charges Escrow Agent may withdraw the fees shown in Schedule 6 from account income.         7.  Representations of the Company and the Purchaser         Each of the Company and the Purchaser is a corporation duly organized, validly existing and in good standing under the laws of its state or country of incorporation and has all necessary power and authority to execute and deliver this Agreement and to be bound by the provisions hereof. The execution and delivery of this Agreement and the performance by the Company and the Purchaser of their respective obligations hereunder have been duly authorized by all requisite corporate action on the part of the Company and the Purchaser. This Agreement has been validly executed and delivered by the Company and the Purchaser and constitutes the legal, valid and binding obligation of the Company and the Purchaser enforceable against each of them in accordance with its terms Company represents and warrants that any funds payable to it are not subject to any United States withholding.         8.  Survival         The covenants, agreements, representations, and warranties contained in or made pursuant to this Agreement shall survive the delivery by the Escrow Agent of the Escrowed Funds or any part thereof.         9.  Miscellaneous         9.1  At any time and from time to time, the Company and the Purchaser agree, at their expense, to take such actions and to execute and deliver such documents as may be reasonably necessary to effectuate the purposes of this Agreement.         9.2  This Agreement does not create, and shall not be construed as creating, any rights enforceable by any person other than the parties hereto.         9.3  Any demand, consent, notice or other communication authorized or required to be made under this Agreement shall be in writing and shall be given or made by registered mail (registered airmail if international post), personal delivery or facsimile (confirmed by registered mail or personal delivery), addressed to the respective Parties as set forth below:  To the Escrow Agent: Union Bank of California, N.A. 475 Sansome Street, 12th Floor San Francisco, CA 94111 Attention: Douglas Schlafer, Corporate Trust Department Telephone: (415) 296-6747 Facsimile: (415) 296-6757  To Company at: Attention:  Co-Chief Executive Officer Tower Semiconductor, Ltd. P.O. Box 619 Migdal Haemek 23105 Israel Facsimile No.:  972-6-654-7788 3 --------------------------------------------------------------------------------  with a copy to: Yigal Arnon & Co. 3 Daniel Frisch Street Tel Aviv, Israel Attention:  David H. Schapiro, Adv. Facsimile No.:  972-3-608-7714  To Purchaser at: SanDisk Corporation 140 Caspian Court Sunnyvale, California 94089 Attention:  President and CEO Facsimile No.:  (408) 542-0600  with a copy to: SanDisk Corporation 140 Caspian Court Sunnyvale, California 94089 Attention:  Vice President and General Counsel Facsimile No.:  (408) 548-0385 (or to such changed addresses as to which they may give notice).         9.4  This Agreement shall be governed by, and construed in accordance with, the laws of the State of California regardless of the laws that might otherwise govern under applicable principles of conflicts of law thereof. Any action or proceeding seeking to enforce any provision of, or based on any right arising out of, this Agreement may be brought against any of the parties solely in the courts of the State of California, and each of the parties consents to the jurisdiction of such courts (and of the appropriate appellate courts) in any such action or proceeding and waives any objection to venue laid therein. Process in any action or proceeding referred to in the preceding sentence may be served on any party anywhere in the world.         9.5  Neither the Company nor the Purchaser may assign any of its rights hereunder. This Agreement shall inure to the benefit of and be binding upon the successors of the Company and the Purchaser.         9.6  No consent or waiver, express or implied, by any party to or of any breach or default by a party in the performance of its obligations hereunder shall be deemed or construed to be a consent or waiver to or of any other breach or default in the performance by such party of the same or any other obligations of such party hereunder. Failure on the part of any party to complain of any act or failure to act of another party or to declare the other party in default, irrespective of how long such failure shall continue, shall not constitute a waiver of such party of its rights hereunder.         9.7  If any provision of this Agreement or the application thereof to any person or circumstance shall be invalid or unenforceable to any extent, the parties shall use best efforts to adopt an enforceable substitute provision expressing the intent of the parties, and remainder of this Agreement and the application of such remaining provisions to other persons or circumstances shall not be affected thereby and shall be enforced to the greatest extent permitted by law.         9.8  This Agreement, together with Schedules 2, 3.1, 3.2 and 6, contains the entire agreement between the parties hereto relative to their rights and obligations as related to the escrow. No variations, modifications, or changes herein or hereof shall be binding upon any party hereto unless set forth in a document duly executed by or on behalf of such party.         9.9  This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement. 4 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. SanDisk Corporation      By: /s/ Frank A. Calderoni      --------------------------------------------------------------------------------      Name: Frank A. Calderoni Title: Sr. Vice President Finance and           Administration      Tower Semiconductor Ltd.      By: /s/ Rafael Levin      --------------------------------------------------------------------------------      Name: Rafael Levin Title: Co-Chief Executive Officer      Union Bank of California, N.A      By: /s/ Vicki Elnick      --------------------------------------------------------------------------------      Name: Vicki Elnick Title: Vice President     

EXHIBIT 10.2 EMPLOYMENT AGREEMENT SAKS INCORPORATED AND SUBSIDIARIES SEVENTH AMENDED AND RESTATED EMPLOYMENT AGREEMENT     This Seventh Amended and Restated Employment Agreement ("Agreement") is entered into as of the 1st day of November 2000, by and between Saks Incorporated ("Company"), and R. Brad Martin ("Executive").     Company and Executive agree as follows:     1. Employment. Company hereby employs Executive as Chief Executive Officer of Company. It is anticipated that Executive will be elected Chairman of the Board.     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 $950,000 per year. In addition, the Board of Directors of Company shall, in good faith, consider granting increases in such Base Salary based upon such factors as Executive's performance and the growth and/or profitability of Company. 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 pursuant to the 1998 Senior Executive Bonus Plan for a yearly cash bonus with a maximum potential of 150% ("Maximum Bonus Potential") 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) End of Five-Years Service Stock Grants. In accordance with Executive's prior employment agreements, Company shall issue to Executive fifty thousand (50,000) shares of common stock as soon as possible after October 11, 2001, provided Executive has served the Company continuously for five years following October 11, 1996, the date of Executive's Second Amended and Restated Employment Agreement. In the event of Executive's death prior to October 11, 2001, Executive's estate shall be issued a pro rata potion of the shares, on the basis of 10,000 shares per year.         (d) Annual Stock Grant Bonus. Pursuant to the 1998 Senior Executive Bonus Plan, an amount up to twenty thousand (20,000) shares of Company common stock may be issued to Executive as soon as possible after the end of each fiscal year of Company, based upon annual targeted growth in intrinsic value of the Company or other factors, as determined by the Human Resources Committee of the Board of Directors. The Human Resources Committee, subject to approval from the Board of Directors, shall have sole and exclusive discretion to grant or withhold any portion of such yearly stock grant.         (e) Second Annual Stock Grant Bonus. Pursuant to the 1998 Senior Executive Bonus Plan, Company shall award Executive a bonus of up to 20,000 (twenty thousand) shares of Company common stock on the basis of growth in earnings per share with the Human Resources Committee of the Board of Directors setting the objectives in advance. The Human Resources Committee shall have sole and exclusive discretion to determine whether that objective has been met, and the Committee may consider matters such as nonrecurring and extraordinary items. The Human Resource Committee may allocate the 40,000 shares bonus potential in Paragraphs 3(d) and 3(e) in any manner permitted by the 1998 Senior Executive Bonus Plan so that. if less than 20,000 shares of stock may be earned under this Section 3(e), it may increase accordingly the number of shares that may be earned under Section 3(d).         (f)  New Option Grant. Executive is granted a non-qualified option ("Option") to purchase 1,323,631 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.         (g) Vesting of Restricted Stock Grants. Company has declared earned the 137,500 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.         (h) Effect of Change In Control on Options and Restricted Stock. In the event of a Change in Control (as defined in the Company's 1994 LTIP), any Options and restricted stock granted to Executive prior to such Change In Control shall immediately vest.         (i) Forgiveness of Loan. Company shall continue to forgive the original $500,000 interest-free loan due January 31, 1999, in $100,000 increments, at the end of each fiscal year; provided, however, that Executive must continue to be employed by Company for any portion of the loan to be forgiven, and provided further that Executive must repay any outstanding balance if he terminates employment.         (j) Company Aircraft. Company requires Executive to use Company aircraft for personal or family use, whenever possible. Such use is important for the safety of Executive and so that Executive may remain in communications with other Company officials as necessary. Executive may use Company aircraft or charter aircraft for such uses without further reimbursement to Company.     Upon Executive's termination of employment for any reason, Executive shall be entitled to use at his discretion and without cost to Executive, an aircraft, comparable in size and quality to the aircraft he is using as of this date, for 200 hours a year for three years.     Upon Executive's termination of employment for any reason after a Change in Control (as defined in the 1994 LTIP), Executive shall have the option to buy any one Company aircraft at its then book value on the Company's books. If he exercises this option, Company shall reimburse him for the operating costs of the aircraft for up to 200 hours per year for three years.         (k) Future Restricted Stock Agreement. Beginning in fiscal year 2001, Company shall enter into a new restricted stock agreement patterned after Executive's prior restricted stock agreement entered into in 1998, following the significant terms of the 1998 agreement as it relates to number of shares and vesting.     4. Insurance and Other Expenses 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.         (a) Company shall pay the reasonable costs for Executive's tax and financial planning, and shall buy split-dollar life insurance for Executive in accordance with the directions of the Human Resources Committee of the Board. In addition, Company shall reimburse Executive, as additional compensation, his share of annual premiums paid for split dollar life insurance.         (b) Company shall provide security for Executive's residences or shall reimburse Executive for such expenses.         (c) Executive shall be entitled to lifetime participation in Company's health plan in the event that he retires from Company.                 (d)    Executive shall be entitled to a lifetime associate discount for merchandise purchased from Company, and this provision shall survive termination of employment or expiration of this Agreement.     5. Term; termination without Cause or for Good Reason. The term of this Agreement shall be for five (5) years, provided, however, that Company may terminate this Agreement at any time without Cause, as defined below, upon thirty (30) days' prior written notice and Executive may terminate this Agreement for Good Reason. Good Reason shall mean a mandatory relocation from the Memphis, Tennessee area, or at any time Executive chooses to terminate employment within one year after a Change In Control of Company (as defined in the in the 1994 LTIP). Upon such termination of employment, this Agreement shall terminate except for Section 8, which shall continue in effect as set forth in Section 8. In the event of such termination by Company without Cause or by Executive for Good Reason, Executive shall be entitled, in addition to all earned but unpaid wages and benefits, to the following severance benefits:         (a) a sum equal to the Base Salary then in effect plus 25% of Executive's Maximum Bonus Potential times the longer of 3 years or the balance of the time remaining in the Term, and         (b) immediate vesting of all stock options and restricted stock awards (including service grants) with the ability to exercise the stock options for the shorter of two years or the original expiration period of the option, and         (c) participation in Company's health plans, with family coverage, for his life, and continuation of split-dollar insurance agreements for five years, and         (d) vesting at the retirement rate in Company's Supplemental Savings Plan with no reduction in the current rate of return,         (e) reimbursement for the cost of a full-time secretary during the balance of the term of this Agreement, and         (f) 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.     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, with it being understood that Company would follow its traditional policy of vesting all of Executive's stock options upon death, (b) other entitlements under this contract that expressly survive death, (c) vesting at the retirement rate of benefits under Company's Supplemental Savings Plan, (d) payment of earned but unpaid wages and benefits, and (e) 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 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 except for (i) earned but unpaid wages and benefits, and (ii) Company shall vest a pro rata fractional portion of Executive's stock options based on the number of days Executive was employed since the last vesting of such options. 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: 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.         (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. 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. In the event that Executive is disabled for more than twelve consecutive months during the term of this Agreement, Executive shall, at the expiration of the initial twelve consecutive month period, be entitled to receive under this Agreement 50% of his Base Salary plus the insurance and benefits described in Section 4 of this Agreement for the remaining term of this Agreement. While Executive is disabled, he shall remain employed for purposes of vesting of restricted stock and stock options, and, after his employment ends, he shall be entitled to the lifetime benefits set forth in Section 5(c). 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.     8. Non-competition; Unauthorized Disclosure.         (a) Non-competition. During the period Executive is employed under this Agreement, and for a period of two years 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 solicit, in competition with Company, any person who is a customer of the businesses conducted by Company at the date hereof or of any business in which Company is substantially engaged 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 her employment relationship in order to enter into competitive employment.         (b) Unauthorized Disclosure. During the period Executive is employed under this Agreement, and for a further period of two years 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 8:             (i) the covenants contained in paragraph (i) and (ii) of Section 8(a) shall apply within all the territories in which Company is actively engaged in the conduct of business while Executive is employed under this Agreement, including, without limitation, the territories in which customers are then being solicited;             (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 8, 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;             (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 8, 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 8 shall survive the conclusion of Executive's employment by Company.     9. General Provisions.         (a) Notices. Any notice to be given hereunder by either party to the other may be effected by personal delivery, facsimile, electronic mail or U.S. mail, registered or certified, postage prepaid with return receipt requested. Mailed 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 9(a). Notices shall be deemed communicated as of the actual receipt or refusal of receipt.     If to Executive: R. Brad Martin                                                  1025 Cherry Road                      Memphis, TN 38117     If to Company:   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 -- some of which are attached hereto as Exhibit A -- 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 any case is brought to enforce any right or provision set out in this Agreement, Company shall reimburse Executive for reasonable costs incurred (including attorneys' fees) by Executive: (i) in the case of termination of employment that occurs prior to a Change in Control only if the Executive substantially prevails, and (ii) in the case of termination of employment after a Change in Control regardless of the outcome of the action with reimbursement being made as expenses are incurred.     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.                         SAKS INCORPORATED                         BY: _____________________                                                                    James A. Coggin                             President and COO                               _____________________                                                                    Brian J. Martin                             General Counsel > > > > > > > > > >                                                                           __________________________                                                                          R. Brad Martin                                                                          Executive

                    WPS RESOURCES CORPORATION DEFERRED COMPENSATION PLAN As Amended and Restated Effective March 1, 1999         WPS RESOURCES CORPORATION DEFERRED COMPENSATION PLAN           WPS Resources Corporation Deferred Compensation Plan (the "Plan") has been established effective January 1, 1996 to promote the best interests of WPS Resources Corporation (the "Company") and the stockholders of the Company by (1) attracting and retaining well-qualified persons for service as non-employee directors of the Company and designated subsidiaries or affiliates; and (2) attracting and retaining key management employees possessing a strong interest in the successful operation of the Company and its subsidiaries or affiliates and encouraging their continued loyalty, service and counsel to the Company and its subsidiaries or affiliates. This Plan replaces Deferred Compensation Plans 008, 009, 010 and 011 previously maintained by the Wisconsin Public Service Corporation.   ARTICLE I. DEFINITIONS AND CONSTRUCTION      Section 1.01. Definitions.  The following terms have the meanings indicated below unless the context in which the term is used clearly indicates otherwise:      (a)     "Account" means the recordkeeping account or accounts maintained by a Participating Employer for each Participant, including to extent applicable to any such Participant, Reserve Account A, Reserve Account B and the Stock Account.      (b)     An "Affiliate" of, or a person "affiliated" with, a specified person is a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified and the term "Associate" used to indicate a relationship with any person, means (i) any corporation or organization (other than the registrant or a majority-owned subsidiary of the registrant) of which such person is an officer or partner or is, directly or indirectly, the beneficial owner of 10 percent or more of any class of equity securities, (ii) any trust or other estate in which such person has a substantial beneficial interest or as to which such person serves as trustee or in a similar fiduciary capacity, and (iii) any relative or spouse of such person, or any relative of such spouse, who has the same home as such person or who is a director or officer of the registrant or any of its parents or subsidiaries.      (c)     A person shall be deemed to be the "Beneficial Owner" of any securities: > (i) which such Person or any of such Person's Affiliates or Associates has the > right to acquire (whether such right is exercisable immediately or only after > the passage of time) pursuant to any agreement, arrangement, arrangement or > understanding, or upon the exercise of conversion rights, exchange rights, > rights, warrants or options, or otherwise; provided, however, that a Person > shall not be deemed the Beneficial Owner of, or to beneficially own, (A) > securities tendered pursuant to a tender or exchange offer made by or on > behalf of such Person or any of such Person's Affiliates or Associates until > such tendered securities are accepted for purchase or (B) securities issuable > upon exercise of Rights pursuant to the terms of the Company's Rights > Agreement with Firstar Trust Company, dated as of December 12, 1996, as > amended from time to time (or any successor to such Rights Agreement) at any > time before the issuance of such securities; > > (ii) which such Person or any of such Person's Affiliates or Associates, > directly or indirectly, has the right to vote or dispose of or has "beneficial > ownership" of (as determined pursuant to Rule 13d-3 of the General Rules and > Regulations under the Act), including pursuant to any agreement, arrangement > or understanding; provided, however, that a Person shall not be deemed the > Beneficial Owner of, or to beneficially own, any security under this > subparagraph (ii) as a result of an agreement, arrangement or understanding to > vote such security if the agreement, arrangement or understanding: (A) arises > solely from a revocable proxy or consent given to such Person in response to a > public proxy or consent solicitation made pursuant to, and in accordance with, > the applicable rules and regulations under the Act and (B) is not also then > reportable on a Schedule 13D under the Act (or any comparable or successor > report); or > > (iii) which are beneficially owned, directly or indirectly, by any other > Person with which such Person or any of such Person's Affiliates or Associates > has any agreement, arrangement or understanding for the purpose of acquiring, > holding, voting (except pursuant to a revocable proxy as described in Section > 1.01(c)(ii) above) or disposing of any voting securities of the Company.      (d)     "Beneficiary" means the person or entity designated by the Participant to be his beneficiary for purposes of this Plan. If a valid designation of Beneficiary is not in effect at time of the death of a Participant, the estate of the Participant is deemed to be the sole Beneficiary. If a Beneficiary dies while entitled to receive distributions from the Plan, any remaining payments shall be paid to the estate of the Beneficiary. Beneficiary designations shall be in writing, filed with the Secretary, and in such form as the Secretary may prescribe for this purpose.      (e)     "Board" means the Board of Directors of the Company.      (f)     "Bonus Deferral" means amounts credited, in accordance with an Executive's election under Section 8.02(b) of the WPS Resources Corporation Short-Term Variable Pay Plan, to an Executive's Stock Account in lieu of the payment of an equal amount as a current cash bonus.      (g)     A "Change in Control of the Company" shall be deemed to have occurred if: > (i) any Person (other than any employee benefit plan of the Company or of any > subsidiary of the Company, any Person organized, appointed or established > pursuant to the terms of any such benefit plan or any trustee, administrator > or fiduciary of such a plan) is or becomes the Beneficial Owner of securities > of the Company representing at least 30% of the combined voting power of the > Company's then outstanding securities; > > (ii) one-half or more of the members of the Board are not Continuing > Directors; > > (iii) there shall be consummated any merger, consolidation, or reorganization > of the Company with any other corporation as a result of which less than 50% > of the outstanding voting securities of the surviving or resulting entity are > owned by the former shareholders of the Company other than a shareholder who > is an Affiliate or Associate of any party to such consolidation or merger; > > (iv) there shall be consummated (x) any merger of the Company or share > exchange involving the Company in which the Company is not the continuing or > surviving corporation other than a merger of the Company in which each of the > holders of the Company's Common Stock immediately prior to the merger have the > same proportionate ownership of common stock of the surviving corporation > immediately after the merger; > > (v) there shall be consummated any sale, lease, exchange or other transfer (in > one transaction or a series of related transactions) of all, or substantially > all, of the assets of the Company to a Person which is not a wholly owned > subsidiary of the Company; or > > (vi) the shareholders of the Company approve any plan or proposal for the > liquidation or dissolution of the Company.      (h)     "Code" means the Internal Revenue Code of 1986, as interpreted by regulations and rulings issued pursuant thereto, all as amended and in effect from time to time.      (i)     "Company" means WPS Resources Corporation, a Wisconsin corporation, or any successor corporation.      (j)     "Compensation" means (i) for a Director, the Retainer Fee and (ii) for an Executive the base salary or wage payable by a Participating Employer for services performed, including elective contributions to a Section 125, 129 or 401(k) arrangement or Voluntary Deferrals to this Plan, but excluding extraordinary payments such as overtime, bonuses, meal allowances, reimbursed expenses, termination pay, moving pay, commuting expenses, Mandatory Deferrals to this Plan or other non-elective deferred compensation payments or accruals, stock options, the value of employer-provided fringe benefits or coverage, and any contributions on behalf of the Executive paid by a Participating Employer to a survivor's income benefit plan or any other employee benefit plan within the meaning of ERISA, all determined in accordance with such uniform rules, regulations or standards as may be prescribed by the Compensation Committee.      (k)     "Compensation Committee" means the Compensation Committee of the Board, which functions as the joint Compensation Committee for the Company and for Wisconsin Public Service Corporation.      (l)     "Continuing Director" means (i) any member of the Board of Directors of the Company who was a member of such Board on May 1, 1997, (ii) any successor of a Continuing Director who is recommended to succeed a Continuing Director by a majority of the Continuing Directors then on such Board and (iii) additional directors elected by a majority of the Continuing Directors then on such Board.      (m)    "Director" means a non-employee director of a Participating Employer who has been designated by the Compensation Committee as covered under or being eligible to participate in the Plan.      (n)     "ERISA" means the Employee Retirement Income Security Act of 1974, as interpreted by regulations and rulings issued pursuant thereto, all as amended and in effect from time to time.      (o)     "Executive" means a common law employee of a Participating Employer who has been designated by the Compensation Committee as covered under or otherwise being eligible to participate in this Plan.      (p)     "Mandatory Deferral" means the amount which may from time to time be credited to the Stock Account of an Executive in accordance with Section 3.01 and for which the Executive does not receive the option between receiving such amount as current cash compensation and deferring such amount into the Plan.      (q)     "Participant" means either a Director or Executive who is participating in or eligible to participate in the Plan.      (r)     "Participating Employer" means Company and any direct or indirect subsidiary of the Company that, with the consent of the Compensation Committee, adopts the Plan for the benefit of one or more Executives or Directors.      (s)     "Person" means any individual, firm, partnership, corporation or other entity, including any successor (by merger or otherwise) of such entity, or a group of any of the foregoing acting in concert.      (t)     "Retainer Fee" means those fees paid by a Participating Employer to non-employee directors for services rendered on the Board or any committee of the Board, or for service on the board of directors of a subsidiary or affiliate, including attendance fees and fees for serving as committee chair.      (u)     "Secretary" means the Secretary of the Company (or his delegate).      (v)     "Trust" means the WPS Resources Corporation Deferred Compensation Trust or other funding vehicle which may from time to time be established, as amended and in effect from time to time.      (w)     "Voluntary Deferrals" means amounts (other than Bonus Deferrals) credited, in accordance with a Participant's election, to his Account in lieu of the payment of an equal amount of current Compensation.      (x)     "WPS Resources Stock" means the common stock, $1.00 par value, of the Company.      (y)     "WPS Resources Stock Units" means the hypothetical shares of common stock, $1.00 par value, of the Company, that may be credited (i) to the Stock Account of an Executive as a result of Mandatory Deferrals or Bonus Deferrals, or (ii) to the Stock Account of either a Director or Executive as a result of Voluntary Deferrals.      Section 1.02. Construction and Applicable Law.  (a)  Wherever any words are used in the masculine, they shall be construed as though they were used in the feminine in all cases where they would so apply; and wherever any words are use in the singular or the plural, they shall be construed as though they were used in the plural or the singular, as the case may be, in all cases where they would so apply. Titles of articles and sections are for general information only, and the Plan is not to be construed by reference to such items.           This Plan, as applied to Executives, is intended to be a plan of deferred compensation maintained for a select group of management or highly compensated employees as that term is used in ERISA, and shall be interpreted so as to comply with the applicable requirements thereof. In all other respects, the Plan is to be construed and its validity determined according to the laws of the State of Wisconsin to the extent such laws are not preempted by federal law. In case any provision of the Plan is held illegal or invalid for any reason, the illegality or invalidity will not affect the remaining parts of the Plan, but the Plan shall, to the extent possible, be construed and enforced as if the illegal or invalid provision had never been inserted.   ARTICLE II. PLAN ACCOUNTS      Section 2.01. Establishment of Accounts.  One or more of the following Accounts (as applicable) will be established in the name of each Participant who (i) is identified on Schedule A as being eligible to participate in either the Voluntary Deferral component of the Plan or the Mandatory Deferral component of the Plan or in both the Voluntary Deferral and Mandatory Deferral components of the Plan, or (ii) is eligible for and has elected to make Bonus Deferrals in accordance with the procedures specified in Section 8.02(b) of the WPS Resources Corporation Short-Term Variable Pay Plan: > (a) Reserve Account A > > (b) Reserve Account B > > (c) Stock Account.      Section 2.02. Reserve Account A.  (a)  This Account will be credited with the reserve account balance accumulated by a Participant as of December 31, 1995 under the prior deferred compensation program of Wisconsin Public Service Corporation. Except for attributed earnings as described below, no further "contributions" or credits of any kind will be made to this Account on behalf of a Participant.      (b)     As of the end of each Plan Year, the Account will be credited with an interest equivalent on the balance in the Account from time to time during the year. The annual interest equivalent will be the sum (on a non-compounded basis) of the attributed earnings for each month during the year based on the Account balance as of the last day of the month. Unless modified by the Compensation Committee, the interest equivalent rate for any month will be the greater of: > (i) one-half of one percent (0.5%); or > > (ii) one-twelfth (1/12) of the return on common shareholders' equity (ROE). > For the months of April through September, ROE means the consolidated return > on equity of the Company and all subsidiaries for the twelve (12) months ended > on the preceding March 31 as calculated pursuant to the Company's standard > accounting procedure for financial reporting to shareholders. For the months > October through March, ROE means return on equity as described above for the > twelve (12) months ended on the preceding September 30.      (c)     The Compensation Committee may revise the interest equivalent rate described in Section 2.02(b) above or the manner in which it is calculated, but in no event shall the rate be less than six percent (6%) per annum. Any such revised rate shall be effective with the calendar month following such action by the Compensation Committee.      (d) Notwithstanding Sections 2.02(b) and (c), in the event of a Change in Control, the rate of interest equivalent for each month following the Change in Control for which attributed earnings are required to be calculated shall be the greater of (A) the rate of interest equivalent otherwise applicable under Section 2.02(b) and (c) above calculated based upon the consolidated return on common shareholders equity of the Company (including for this purpose any successor corporation that is the survivor of a merger with the Company or any successor to that corporation) and all subsidiaries, and (B) a rate equal to two (2) percentage points above the prime lending rate at Firstar Bank Milwaukee, Milwaukee, Wisconsin (or any successor thereto) as of the last business day of that month. The minimum rate of interest equivalent under clause (B) above shall not apply with respect to any Participant who terminates employment under circumstances entitling the Participant to benefits under a Key Executive Employment and Severance Agreement in effect between the Company and such Participant.      Section 2.03. Reserve Account B.  (a)  This Account shall be credited with Voluntary Deferrals made after December 31, 1995 which a Participant elects to allocate to this Account in accordance with Section 3.02(c)(ii).      (b)     As of the end of each Plan Year, the Account will be credited with an interest equivalent on the balance in the Account from time to time during the year. The annual interest equivalent will be the sum (on a non-compounded basis) of the attributed earnings for each month during the year based on the Account balance as of the last day of each month. Unless modified by the Compensation Committee, the interest equivalent rate for any month will be the greater of: > (i) one-half of one percent (0.5%); or > > (ii) seventy percent (70%) of one-twelfth (1/12) of the return on common > shareholders equity (ROE). For the months of April through September, ROE > means the consolidated return on equity of the Company and all subsidiaries > for the twelve (12) months ended on the preceding March 31 as calculated > pursuant to the Company's standard accounting procedure for financial > reporting to shareholders. For the months October through March, ROE means > return on equity as described above for the twelve (12) months ended on the > preceding September 30.      (c)     The Compensation Committee may revise the interest equivalent rate described in Section 2.03(b) above or the manner in which it is calculated, but in no event shall the rate be less than six percent (6%) per annum. Any such revised rate shall be effective with the calendar month following such action by the Compensation Committee.      (d)     Notwithstanding Sections 2.03(b) and (c), in the event of a Change in Control, the rate of interest equivalent for each month following the Change in Control for which attributed earnings are required to be calculated shall be the greater of (A) the rate of interest equivalent otherwise applicable under Section 2.03(b) and (c) above calculated based upon the consolidated return on common shareholders equity of the Company (including for this purpose any successor corporation that is the survivor of a merger with the Company or any successor to that corporation) and all subsidiaries, and (B) a rate equal to two (2) percentage points above the prime lending rate at Firstar Bank Milwaukee, Milwaukee, Wisconsin (or any successor thereto) as of the last business day of that month. The minimum rate of interest equivalent under clause (B) above shall not apply with respect to any Participant who terminates employment under circumstances entitling the Participant to benefits under a Key Executive Employment and Severance Agreement in effect between the Company and such Participant. Further, in the case of any other Participant, the minimum rate of interest equivalent under clause (B) shall cease to apply on the third anniversary of the Change in Control in the event that the Participant is actively employed by the Company (or any successor thereto or affiliate thereof) on such date.      Section 2.04. Stock Account.  (a)  This Account shall be credited with (i) all Mandatory Deferrals made after December 31, 1995, (ii) those Voluntary Deferrals made after December 31, 1995 which a Participant, in accordance with Section 3.02(c)(ii), elects to allocate to this Account, and (iii) all Bonus Deferrals.      (b)     As of the end of each month, all Voluntary Deferrals, Mandatory Deferrals, and Bonus Deferrals made by or on behalf of a Participant during that month and allocated to the Participant's Stock Account (the "Convertible Amount") shall be converted, for recordkeeping purposes, into whole and fractional WPS Resources Stock Units, with fractional units calculated to four decimal places. The conversion shall be accomplished by dividing each Participant's Convertible Amount by the average purchase price of all shares of WPS Resources Stock purchased during that month by or on behalf of the Trust and the WPS Resources Corporation Stock Investment Plan. Likewise, any dividends that would have been payable on the WPS Resources Stock Units credited to a Participant's Stock Account had such Units been actual shares of WPS Resources Stock shall be converted, for recordkeeping purposes, into whole and fractional WPS Resources Stock Units based on the average purchase price of all shares of WPS Resources Stock purchased by or on behalf of the Trust and the WPS Resources Corporation Stock Investment Plan during the month in which the dividend is paid.      Section 2.05. Accounts are For Recordkeeping Purposes Only.  The Plan Accounts described in this Article II above serve solely as a device for determining the amount of benefits accumulated by a Participant under the Plan, and shall not constitute or imply an obligation on the part of a Participating Employer to fund such benefits. In any event, the Company may, in its discretion, set aside assets equal to part or all of such account balances and invest such assets in Company stock, life insurance or any other investment deemed appropriate. Any such assets, including WPS Resources Stock and any other assets held under the Trust, shall be and remain the sole property of the Company and except to the extent that the Trust authorizes a Participant to direct the trustee with respect to the voting of WPS Resources Stock held in the Trust, a Participant shall have no proprietary rights of any nature whatsoever with respect to such assets.   ARTICLE III. MANDATORY AND VOLUNTARY DEFERRALS      Section 3.01. Mandatory Deferrals.  The Compensation Committee may, from time to time, authorize a Mandatory Deferral to be made on behalf of covered Executives. The authorization of any such contribution, the Executives entitled to the contribution, and the amount to be credited to each eligible Executive, shall be determined by the Compensation Committee in its sole discretion; provided that the maximum Mandatory Deferral for any year shall not exceed thirty percent (30%) of an Executive's Compensation for the year. Any Mandatory Deferral will be credited to an eligible Executive's Stock Account and converted into WPS Resources Stock Units in accordance with Section 2.04.      Section 3.02. Election to Make Voluntary Deferrals.  (a)  A Participant may elect to make Voluntary Deferrals by submitting a properly completed and signed election form to the Secretary on or before December 20, 1995. If the Participant so elects, Voluntary Deferrals will commence with respect to Compensation earned by a Participant on or after January 1, 1996. Notwithstanding the foregoing, if, as of January 1, 1996, the Participant has in effect an election under the prior deferred compensation program maintained by Wisconsin Public Service Corporation and does not file an election with the Secretary in accordance with this Section 3.02(a), the prior election shall be deemed the Participant's initial election under this Plan.      (b)     If a Director or Executive first becomes eligible to participate in the Plan following the election period described in Section 3.02(a) above (such as, for example, a Director who commences service or an Executive who is newly designated by the Compensation Committee as being eligible) the initial deferral election may be made within thirty (30) days of the date that such person first becomes eligible under the Plan, and shall be effective with respect to Compensation earned by the Participant in the first payroll commencing on or after the date on which the deferral election is made.      (c)     A Participant's election shall be in such form as the Secretary may prescribe, and shall specify: > (i) The percentage or dollar amount of Compensation to be deferred as a > Voluntary Deferral. A Director may elect to defer all or any part of his > Compensation, in whole dollar amounts or in increments of one percent (1%). An > Executive may, without the consent of the Compensation Committee, elect to > defer a portion of his Compensation, in whole dollar amounts or in increments > of one percent (1%), provided that the amount or percentage elected does not > exceed thirty percent (30%) of the Executive's Compensation. An Executive may > elect to defer more than thirty percent (30%) of Compensation only if the > Compensation Committee has approved the Executive's specific deferral > percentage or amount. > > (ii) Whether the Voluntary Deferrals are to be credited to the Participant's > Reserve Account (Reserve Account B) or the Participant's Stock Account. If the > Participant desires to allocate Voluntary Deferrals to both his Reserve and > Stock Accounts, the election must further specify the portion of the Voluntary > Deferrals, in whole dollar amounts or in increments of one percent (1%), to be > allocated to each Account.      (d)     An election shall be deemed made only when it is received by the Secretary, and shall remain in effect until modified by the Participant in accordance with Section 3.03 below or otherwise revoked in accordance with Plan rules.      Section 3.03. Revision or Modification of Voluntary Deferral Election.  (a)  A Participant's initial election under Section 3.02 (including an election not to make Voluntary Deferrals) shall remain in effect from year to year unless revised or modified by the Participant in accordance with this Section 3.03 or otherwise revoked in accordance with Plan rules.      (b)     A Participant may modify his then current election (including an election not to make Voluntary Deferrals) by filing a revised election form, properly completed and signed, with the Secretary. The revised election will be effective with respect to Compensation earned by the Participant in the first payroll period commencing on or after the date on which the revised election is received by the Secretary.      (c)     An election shall be deemed revised in accordance with this Section 3.03 only when the revised election is received by the Secretary, and once effective, the revised election shall remain in effect until further revised in accordance with this Section 3.03 or otherwise revoked in accordance with Plan rules. Revised elections are prospectively effective with respect to Compensation earned on or after the applicable effective date described in Section 3.03(b) and (c) above. A revised election does not operate to modify or otherwise reallocate the amounts deferred prior to the effective date of the revised election.      Section 3.04. Involuntary Termination of Voluntary Deferral Elections.  A deferral election shall be automatically revoked upon termination of service as a Director (in the case of a Director) or termination of employment (in the case of an Executive). In addition, an Executive's deferral election shall terminate on the first day of the Plan Year following the date that the Compensation Committee determines that the Executive is no longer eligible to participate in the Plan, including any such action that may be necessary in order for the Plan to qualify under ERISA, with respect to Executive employees, as a plan of deferred compensation for a select group of management or highly compensated employees.   ARTICLE IV. DISTRIBUTION OF RESERVE ACCOUNT A, RESERVE ACCOUNT B AND STOCK ACCOUNTS      Section 4.01. Distribution Election.  (a)  The distribution election (if any) made by a Participant under the prior deferred compensation program maintained by Wisconsin Public Service Corporation shall be his distribution election under this Plan unless and until modified in accordance with Section 4.02 below.      (b)     A new Participant shall, at the time he commences participation in the Plan, make a distribution election with respect to his Account. The election shall be in such form as the Secretary may prescribe, and shall specify the distribution commencement date, the distribution period, the method of distributing earnings credited to the Account, and the distribution method applicable following the Participant's death. Any such election shall be consistent with the following rules (or where the Participant fails to make a selection, in accordance with the default rules set forth below): > (i) Distribution Commencement Date. Unless the Participant has selected a > later commencement date (which in no event shall be later than the first > distribution period following the Participant's attainment of age 72), > distribution of a Participant's Accounts will commence within 60 days > following the end of the calendar year in which occurs the Participant's > retirement or termination of employment or service. For purposes of this Plan, > a participating Executive who is disabled shall be deemed to have retired or > terminated at the conclusion of benefits under all disability income plans > sponsored by a Participating Employer or to which a Participating Employer > contributes. Further, a participating Executive who ceases employment with a > Participating Employer in connection with an early retirement (reduction in > force) program sponsored by the Participating Employer shall, if a participant > in the Wisconsin Public Service Administrative Employees Retirement Plan, be > deemed to have retired upon commencement of retirement benefits under such > plan. > > (ii) Distribution Period. Distributions will be made in 1, 3, 6, 9, 12 or 15 > annual installments, as elected by the Participant. > > (iii) Method of Calculating Annual Distribution Amount. Unless the Participant > elects the Alternate Distribution Method, the amount to be distributed to the > Participant each year during the distribution period will be determined under > the Regular Distribution Method. The Regular and Alternate Distribution > Methods are described in more detail in Section 4.03. > > (iv) Distribution of Remaining Account Following Participant's Death. In the > event of the Participant's death, the Participant's remaining undistributed > interest will be distributed to the Beneficiary designated by the Participant > in either a single sum payment or in installments, as elected by the > Participant. If the Participant has elected that death benefits be paid in a > single sum, the payment shall be made no later than March 1 following the > calendar year in which occurs the Participant's death. If the Participant has > elected that death benefits be paid in installments, (A) any installments > previously commenced to the Participant shall continue to the Beneficiary and > (B) if installment distributions had not commenced as of the date of the > Participant's death, payments over the installment period elected by the > Participant shall commence to the Beneficiary no later than March 1 following > the calendar year in which occurs the Participant's death.      (c)     A distribution election shall be deemed made only when it is received by the Secretary, and shall remain in effect until modified by the Participant in accordance with Section 4.02 below or otherwise revoked in accordance with Plan rules.      Section 4.02. Modified Distribution Election.  A Participant may from time to time modify his distribution election by filing a revised distribution election, properly completed and signed, with the Secretary. However, a revised distribution election will be given effect only if the Participant remains employed by (or in the case of a Director, continues service on the Board or the board of directors of a Participating Employer) for twenty-four (24) consecutive months following the date that the revised election is received by the Secretary.      Section 4.03. Calculation of Annual Distribution Amount.  (a)  For any Participant whose retirement date was prior to January 1, 1996, distribution will continue to be calculated under the distribution method applicable to such Participant at the time his distributions commenced under the terms of the prior deferred compensation program maintained by Wisconsin Public Service Corporation.      (b)     For any Participant whose retirement date is after December 31, 1995, unless the Participant has selected the Alternate Distribution Option, the annual distribution amount shall be separately calculated for the Participant's interest (if any) in Reserve Account A, Reserve Account B and the Stock Account. > (i) The annual distribution amount for Reserve Account A and Reserve Account B > shall be determined by dividing the balance in each Account as of January 1 of > the year for which the distribution is being made by the number of installment > payments remaining to be made under the distribution period selected by the > Participant. Distributions from Reserve Account A and Reserve Account B shall > be made in cash. The amount of any distribution under this Section 4.03(b)(i) > will be charged pro-rata against the Participant's interest in Reserve Account > A and B. > > (ii) The annual distribution amount for the Stock Account shall be determined > on a share basis by dividing the number of WPS Resources Stock Units credited > to the Participant's Stock Account as of January 1 of the year for which the > distribution is being made by the number of installment payments remaining to > be made under the distribution period selected by the Participant, and then > rounding the quotient obtained for all but the final installment to the next > lowest whole number of WPS Resources Stock Units. The Committee will then > distribute to the Participant shares of WPS Resources Stock and/or cash equal > to the annual distribution amount. For any portion of the distribution that > the Committee elects to satisfy by making a cash payment to the Participant, > the cash payment shall be determined by multiplying the annual distribution > amount (or the portion of the annual distribution amount being satisfied in > cash) by the closing price of WPS Resources Stock on January 21 of the year in > which the distribution is being made, as such share price is reported in the > Wall Street Journal's New York Stock Exchange Composite Transactions listing. > If January 21 falls on a Saturday, Sunday or holiday, the calculation of the > cash portion of the distributions will be made based upon the closing price as > reported for the immediately preceding business day.      (c)     For any Participant whose retirement date is after December 31, 1995 and who has selected the Alternate Distribution Method, the annual distribution amount shall be separately calculated for the Participant's interest (if any) in Reserve Account A, Reserve Account B and the Stock Accounts of January 1 of the year in which distributions commence. The annual distribution amounts, once calculated, shall not thereafter be recalculated. > (i) For the year in which distribution commences, the annual distribution > amount for Reserve Account A and Reserve Account B shall be determined by > dividing the balance in each Account as of January 1 of the year in which > distribution commences by the number of installment payments selected by the > Participant. For each succeeding distribution year, the Participant shall be > entitled to a distribution equal to the annual distribution amount calculated > in accordance with the preceding sentence, plus all interest equivalent > credited to the Account during the preceding calendar year. Distributions from > Reserve Account A and Reserve Account B shall be made in cash. The amount of > any distribution under this Section 4.03(c)(i) will be charged pro-rata > against the Participant's interest in Reserve Account A and B. > > (ii) For the year in which distribution commences, the annual distribution > amount for the Stock Account shall be determined on a share basis by dividing > the number of WPS Resources Stock Units credited to the Participant's Stock > Account as of January 1 of the year in which distribution commences by the > number of installment payments selected by the Participant, and then rounding > the quotient obtained for all but the final installment to the next lowest > whole number of WPS Resources Stock Units. For each succeeding distribution > year, the Participant shall be entitled to distribution of the number of WPS > Resources Stock Units determined in accordance with the preceding sentence, > plus all additional WPS Resources Stock Units credited to the Stock Account > during the preceding calendar year on account of the assumed reinvestment of > dividends, disregarding for all but the final installment any fractional WPS > Resources Stock Units. The Committee will then distribute to the Participant > shares of WPS Resources Stock and/or cash equal to the number of WPS Resources > Stock Units required to be distributed for that year. For any portion of the > distribution that the Committee elects to satisfy by making a cash payment to > the Participant, the cash payment shall be determined by multiplying the > distribution amount (or the portion of the distribution amount being satisfied > in cash) by the closing price of WPS Resources Stock on January 21 of the year > in which the distribution is being made, as such share price is reported in > the Wall Street Journal's New York Stock Exchange Composite Transactions > listing. If January 21 falls on a Saturday, Sunday or holiday, the calculation > of the cash portion of the distributions will be made based upon the closing > price as reported for the immediately preceding business day.      Section 4.04. Time of Distribution.  WPS Resources Stock distributed to a Participant shall be distributed on January 22 (or if January 22 falls on a Saturday, Sunday or holiday, the immediately following business day). For distribution and tax reporting purposes, the value of WPS Resources Stock distributed shall equal the number of shares distributed multiplied by the closing price of WPS Resources Stock on January 21 (or if January 21 falls on a Saturday, Sunday or holiday, the immediately preceding business day) of the year in which the distribution is being made as reported in the Wall Street Journal's New York Stock Exchange Composite Transaction listing. The cash portion of any distribution will be made no later than March 1 of the year for which the distribution is being made.      Section 4.05. Other Distribution Rules.  (a)  Subject to adjustment as provided in paragraph (c) of this Section 4.05, the total number of authorized but previously unissued shares of WPS Stock which may be distributed to Participants pursuant to the Plan shall be one hundred thousand (100,000), which number shall not be reduced by or as a result of (i) any cash distributions pursuant to the Plan or (ii) the distribution to Participants pursuant to the Plan of any outstanding shares of WPS Stock purchased by or on behalf of the Trust.      (b)     The amount actually distributed to the Participant will be reduced by applicable income tax withholding. Unless the Participant has made a contrary election, income tax on the entire annual distribution amount will be withheld from the cash portion of the distribution, and WPS Resources Stock will be used to satisfy withholding obligations only to the extent that the cash portion of the distribution is insufficient for this purpose.      (c)     In the event of any merger, reorganization, consolidation, recapitalization, separation, liquidation, stock dividend, split-up, share combination or other change in the corporate structure of the Company or a Participating Employer affecting WPS Stock, such adjustment shall be made in the number and class of shares which may be distributed pursuant to the Plan as may be determined to be appropriate and equitable by the Compensation Committee in its sole discretion.   ARTICLE V. SPECIAL DEATH BENEFIT FOR PARTICIPANTS WHO DIE WHILE MAKING VOLUNTARY AND MANDATORY DEFERRALS      Section 5.01. Eligibility.  If an Executive who is identified in Schedule B (as from time to time amended by the Compensation Committee) dies prior to attainment of age sixty-two (62) and while employed by a Participating Employer, and if at the time of the Executive's death Voluntary or Mandatory Deferrals were being made by or on behalf of the Executive, then a special death benefit shall be paid to the Executive's Beneficiary. This special death benefit is in addition to any other death benefit payable under the Plan.      Section 5.02. Calculation of Special Death Benefit Amount.  The special death benefit shall be an amount equal to the lesser of one million dollars ($1,000,000) or the sum of (a), (b), (c) and (d) below.      (a)     The difference between (i) the Voluntary Deferrals (not in excess of twenty percent (20%) of Compensation) and Mandatory Deferrals that would have been made by or on behalf of the Executive during the month in which occurs the Executive's death, assuming, for this purpose that the Executive had lived, and (ii) the Voluntary Deferrals and the Mandatory Deferrals actually made during such month;      (b)     The product obtained by multiplying (i) the Voluntary Deferrals (not in excess of twenty percent (20%) of Compensation) and Mandatory Deferrals made by or on behalf of the Executive during the month prior to the month in which occurs the Executive's death, and (ii) the number of full calendar months, inclusive, from the month following the month in which occurs the Executive's death to the month preceding the month in which the Executive would have attained age sixty-two (62) had he lived;      (c)     In the event the Executive's birthday is other than the first day of a calendar month, for the month in which the Executive would have attained age sixty-two (62), the product obtained by multiplying (i) the Voluntary Deferrals (not in excess of twenty percent (20%) of Compensation) and the Mandatory Deferrals made by or on behalf of the Executive during the month prior to the month in which occurs the Executive's death, and (ii) a fraction, the numerator of which is the number of days in such month prior to the Executive's sixty-second (62nd) birthday and the denominator of which is the total number of days in the month;      (d)     A projected earnings factor equal to the amount of interest equivalent that would have accumulated on the amounts described in (a), (b) and (c) above. The projected earnings factor shall be calculated using the interest equivalent rate that was in effect under Reserve Account B for the month prior to the month in which occurs the Executive's death. The calculation shall assume that the Voluntary and Mandatory Deferrals described in (a), (b) and (c) above were credited to Reserve Account B on a monthly basis assuming that the Executive had lived and continued to make Voluntary and Mandatory Deferrals. The interest equivalent shall be compounded in the same manner as the Executive's actual Reserve Account balance, i.e., the annual interest equivalent calculated as of the end of each Plan Year will be the sum (on a non-compounded basis) of the attributed earnings for each month during the year based on the Account balance as of the last day of the month.      Section 5.03. Payment of Special Death Benefit.  (a)  The special death benefit calculated in accordance with Section 5.02 above shall be paid to the Executive's Beneficiary in fifteen (15) annual installments, with the first installment commencing within sixty (60) days of the Executive's death. The benefit calculated under Section 5.02 is a fixed amount which does not accrue earnings or interest equivalent on the undistributed balance.   ARTICLE VI. SUPPLEMENTAL RETIREMENT BENEFIT      Section 6.01. Supplemental Retirement Benefit.  (a)  An Executive who at the time of his retirement or termination of employment is identified in Schedule C shall be entitled to a supplemental retirement benefit if the Executive: > (i) retires from a Participating Employer on or after attainment of age > fifty-eight (58); or > > (ii) terminates employment with a Participating Employer on or after the > attainment of age fifty (50) provided that the Executive has completed ten > (10) or more years of service with a Participating Employer; or > > (iii) terminates employment with a Participating Employer prior to > satisfaction of the requirements specified in Section 6.01(a)(i) or (ii) above > but with the advance written approval of the Compensation Committee.      (b)     An Executive who at the time of his termination of employment is identified in Schedule C shall be entitled to a reduced supplemental benefit if the Executive terminates employment from a Participating Employer after attainment of age fifty (50) but prior to satisfying the requirements of Section 6.01(a) above.      Section 6.02. Amount of Supplemental Benefit.  (a)  An Executive who qualifies for the supplemental retirement benefit under Section 6.01(a) above shall receive a monthly amount equal to twenty percent (20%) [in the case of an Executive identified in Part I of Schedule C] or ten percent (10%) [in the case of an Executive identified in Part II of Schedule C] of the Executive's "average monthly compensation".      (b)     An Executive who qualifies for the supplemental retirement benefit under Section 6.01(b) above shall receive a monthly amount equal to the product obtained by multiplying (i) the monthly benefit determined under Section 6.02(a) above, by (ii) a fraction, the numerator of which is the Executive's years of service with a Participating Employer (including fractional years) and the denominator of which is ten (10).      (c)     The Executive's "average monthly compensation" is the Executive's "compensation", expressed on a monthly basis, during whichever period of thirty-six (36) consecutive months of employment produces the highest average. For this purpose, "compensation" shall have the same meaning as under the Wisconsin Public Service Corporation Administrative Employees' Retirement Plan with the exception that (i) Voluntary Deferrals and Mandatory Deferrals made by or on behalf of the Executive during the relevant period will be included in the Executive's compensation and (ii) the compensation limitation specified in Section 401(a)(17) of the Internal Revenue Code shall not apply.      Section 6.03. Commencement and Duration of Supplemental Retirement Benefits.  Monthly payments calculated in accordance with Section 6.02 above will commence to the Executive with a payment for the month following the later to occur of (i) the month in which the Executive retires or terminates employment, or (ii) the month in which the Executive attains age fifty-eight (58). Monthly payments to the Executive shall continue until the earlier to occur of (a) the month in which occurs the Executive's death, or (b) one hundred twenty (120) monthly payments have been made.      Section 6.04. Death After Benefit Commencement But Prior to Receipt of 120 Monthly Payments.  If the Executive dies after his supplemental retirement benefit has commenced but before receipt of 120 payments, and if the Executive leaves a surviving spouse to whom the Executive was lawfully married on the date of his death, the surviving spouse shall receive monthly payments equal to fifty percent (50%) of the amount of the benefit that was being paid to the Executive. This benefit will commence with a payment for the month following the month in which occurs the death of the Executive and shall continue until the earlier to occur of (a) the month in which occurs the death of the surviving spouse, or (b) a total of one hundred twenty (120) monthly payments have been made to either the Executive or the surviving spouse.      Section 6.05. Death Prior to Benefit Commencement.  If the Executive dies prior to commencement of his supplemental retirement benefit, and if the Executive leaves a surviving spouse to whom the Executive was lawfully married on the date of his death, the surviving spouse shall receive monthly payments equal to fifty percent (50%) of the amount that would have been paid to the Executive (disregarding, in the case of an Executive who dies while actively employed, the age and service conditions described in Section 6.01 above but with the benefit amount calculated without assuming any salary increases). This benefit will commence with a payment for the month following the month in which occurs the death of the Executive and shall continue until the earlier to occur of (a) the month in which occurs the death of the surviving spouse, or (b) one hundred twenty (120) monthly payments have been made.      Section 6.06. Special Rules Applicable Upon a Change in Control.  In the event of a Change in Control and unless otherwise waived by the Executive, an Executive who is identified in Schedule C and who is actively employed on the Change in Control date shall be entitled to receive a supplemental retirement benefit whether or not the Executive has satisfied the eligibility conditions set forth in Section 6.01. The supplemental retirement benefit shall commence to the Executive with a payment for the month following the month in which the Executive retires or otherwise terminates employment following the Change in Control, and shall continue until the earlier to occur of (a) the Executive's death, or (b) one hundred twenty (120) monthly payments have been made; provided that the Executive, in accordance with rules prescribed by the Committee but in no event after the Executive's termination of employment, may waive the application of this sentence in which case the rules of Section 6.03 shall govern the distribution of the Executive's benefit. If the Executive dies after benefit commencement but prior to receiving one hundred twenty (120) monthly payments, or if the Executive dies prior to benefit commencement, the provisions of Sections 6.04 and 6.05 shall apply. PROTECTION OF QUALIFIED RETIREMENT PLAN BENEFIT      Section 6.07. Pension Equalization Benefit.  (a)  In the case of an Executive who is identified on Schedule D ( as from time to time amended by the Compensation Committee) and who participates in the Wisconsin Public Service Corporation Administrative Employees' Retirement Plan ("Retirement Plan"), a monthly benefit shall be paid to the Executive during his lifetime, and if applicable, to his surviving spouse following the Executive's death, a monthly amount equal to the difference between: > (i) The monthly benefit that would have been payable to or on behalf of the > Participant under the Retirement Plan had the Participant's (A) compensation > for Retirement Plan purposes been calculated prior to reduction for Voluntary > and Mandatory Deferrals made to this Plan and without regard to the > compensation limitation described in Section 401(a)(17) of the Code, and (B) > benefit been calculated without regard to the maximum benefit limitation > described in Section 415 of the Internal Revenue Code; and > > (ii) The monthly benefit actually payable to or on behalf of the Executive > under the Retirement Plan.      (b)     Payments under this Section 7.01 shall cease when all benefits payable to or on behalf of the Executive under the Retirement Plan are discontinued.   ARTICLE VII. RULES WITH RESPECT TO WPS RESOURCES STOCK AND WPS RESOURCES STOCK UNITS      Section 7.01. Transactions Affecting WPS Resources Stock.  In the event of any merger, share exchange, reorganization, consolidation, recapitalization, stock dividend, stock split or other change in corporate structure affecting WPS Resources Stock, appropriate adjustments shall be made to the WPS Resources Stock Units (if any) credited to the Stock Account of each Participant.      Section 7.02. No Shareholder Rights With Respect to WPS Resources Stock Units.  Participants shall have no rights as a stockholder pertaining to WPS Resources Stock Units credited to their Stock Account. No WPS Resources Stock Unit nor any right or interest of a Participant under the Plan in any WPS Resources Stock Unit may be assigned, encumbered, or transferred, except by will or the laws of descent and distribution. The rights of a Participant hereunder with respect to any WPS Resources Stock Unit are exercisable during the Participant's lifetime only by him or his guardian or legal representative.   ARTICLE VIII. PARTICIPATING EMPLOYERS      Section 8.01. Responsibility for Benefits.  Each Participating Employer shall be responsible for providing all benefits under the Plan that became payable to a Participant who is or was employed by (or serves or served on the board of directors of) that Participating Employer. To the extent that a Participant is or was employed by two or more Participating Employers, each such Participating Employer shall be responsible for providing the portion of the Participant's benefits accrued while in the employ of that employer.   ARTICLE IX. PROVISIONS      Section 9.01. Administration.  The Compensation Committee shall administer and interpret the Plan and supervise preparation of Participant elections, forms, and any amendments thereto. To the extent necessary to comply with applicable conditions of Rule 16b-3, the Compensation Committee shall consist of not less than two members of the Board, each of whom is also a director of Parent and qualifies as a "non-employee director" for purposes of Rule 16b-3. If at any time the Compensation Committee shall not be in existence or not be composed of members of the Board who qualify as "non-employee directors", then all determinations affecting Participants who are subject to Section 16 of the Securities Exchange Act of 1934 (the "Exchange Act") shall be made by the full Board. The Board may, in its discretion, delegate to the Secretary or another committee of the Board any or all of the authority and responsibility of the Compensation Committee with respect to participation by Participants other than Participants who are subject to Section 16 of the Exchange Act at the time any such delegated authority or responsibility is exercised. Interpretation of the Plan shall be within the sole discretion of the Compensation Committee and shall be final and binding upon each Participant and Beneficiary. The Compensation Committee, and the Secretary with respect to matters assigned to him under this Plan or delegated to him by the Compensation Committee, may adopt and modify rules and regulations relating to the Plan as it deems necessary or advisable for the administration of the Plan. If the Secretary shall also be a Participant or Beneficiary, any determinations affecting the Secretary's participation in the Plan shall be made by the Compensation Committee.      Section 9.02. Compliance With Securities Exchange Act.  Transactions under the Plan are intended to comply with all applicable conditions of Rule 16b-3 or its successor under the Exchange Act. The Plan shall be administered by the Compensation Committee so that transactions under the Plan will be exempt from Section 16 of the Exchange Act pursuant to regulations and interpretations issued from time to time by the Securities and Exchange Commission.      Section 9.03. Participant Rights Unsecured.  (a)  The right of a Participant or his Beneficiary to receive a distribution hereunder shall be an unsecured claim, and neither the Participant nor any Beneficiary shall have any rights in or against any amount credited to his Account or any other specific assets of a Participating Employer. The right of a Participant or Beneficiary to the payment of benefits under this Plan shall not be assigned, encumbered, or transferred, except by will or the laws of descent and distribution. The rights of a Participant hereunder are exercisable during the Participant's lifetime only by him or his guardian or legal representative.      (b)     The Company may authorize the creation of a trust or other arrangements to assist in meeting the obligations created under the Plan. However, any liability to any person with respect to the Plan shall be based solely upon any contractual obligations that may be created pursuant to the Plan. No obligation of a Participating Employer shall be deemed to be secured by any pledge of, or other encumbrance on, any property of a Participating Employer. Nothing contained in this Plan and no action taken pursuant to its terms shall create or be construed to create a trust of any kind, or a fiduciary relationship between a Participating Employer and any Participant or Beneficiary, or any other person.      (c)     If, after a Change in Control, (i) a dispute arises with respect to the enforcement of the Participant's rights under the Plan, or (ii) any legal proceeding shall be brought to enforce or interpret any provision contained in the Plan or to recover damages for breach of the Plan, in either case so long as the Participant is not acting in bad faith or otherwise pursuing a course of action that a reasonable person would determine to be frivolous, the Participant shall recover from the Company any reasonable attorneys' fees and necessary costs and disbursements incurred as a result of such dispute or legal proceeding ("Expenses"), and prejudgment interest on any money judgment obtained by the Participant calculated at the rate of interest announced by Firstar Bank Milwaukee, Milwaukee, Wisconsin (or any successor thereto), from time to time as its prime or base lending rate from the date that payments to the Participant should have been made under this Plan. Within ten (10) days after the Participant's written request therefor, the Company shall pay to the Participant, or such other person or entity as the Participant may designate in writing to the Company, the Participant's Expenses in advance of the final disposition or conclusion of any such dispute or legal proceeding. In the case of a deceased Participant, this Section 10.03(c) shall apply with respect to the Participant's Beneficiary or estate.      Section 9.04. Income Tax Withholding.  Subject to Section 4.04(c), no later than the date as of which an amount first becomes includible in the gross income of the Participant for Federal income tax purposes, the Participant shall pay or make arrangements satisfactory to the Compensation Committee regarding the payment of, any Federal, state, local or foreign taxes of any kind required by law to be withheld with respect to such amount.      Section 9.05. Establishment, Amendment or Termination of Plan.      (a)     There shall be no time limit on the duration of the Plan. Except as provided in Section 10.05(b) below, the Board (or where specified herein, the Compensation Committee) may at any time amend or terminate the Plan; provided, however, that no amendment or termination may reduce or eliminate any Account balance accrued or credited on behalf of a Participant based on Mandatory Deferrals, Voluntary Deferrals and Bonus Deferrals already made or reduce or eliminate benefits accrued or credited based upon service already rendered.      (b)     Upon and following the occurrence of a Change in Control: > (i) The Board may at any time amend the Plan consistent with Section 10.05(a) > to (A) modify the terms and conditions applicable to (or otherwise eliminate) > Bonus Deferrals, Mandatory Deferrals and Voluntary Deferrals made (or that in > the absence of the amendment would have been made) on or after the Amendment > Date, or (B) modify the terms and conditions applicable to (or otherwise > eliminate) the accrual of benefits, with respect to periods on or after the > Amendment Date, under the supplemental benefits described in Articles VI and > VII of the Plan. > > (ii) Any amendment to the Plan or action to terminate the Plan that is not > described in Section 10.05(b)(i) above, including, without limitation, an > amendment that would affect the crediting of interest equivalent with respect > to Bonus Deferrals, Mandatory Deferrals and Voluntary Deferrals made prior to > the Amendment Date and any amendment that would affect the supplemental > benefits described in Articles VI and VII that have accrued through the > Amendment Date, shall be effective only with the written consent of the > Participant (or in the case of a deceased Participant, the Participant's > Beneficiary).      (c)     The term "Amendment Date" means the date on which an amendment to the Plan is validly adopted or the date on which the amendment is or purports to be effective, whichever is later.      Section 9.06. Administrative Expenses.  Costs of establishing and administering the Plan will be paid by the Participating Employers.      Section 9.07. Effect on Other Employee Benefit Plans.  Voluntary Deferrals, Mandatory Deferrals and Bonus Deferrals credited to a Participant's Account under this Plan shall not be considered "compensation" for the purpose of computing benefits under any qualified retirement plan maintained by a Participating Employer, but shall be considered compensation for welfare benefit plans, such as life and disability insurance programs sponsored by a Participating Employer.      Section 9.08. Successor and Assigns.  This Plan shall be binding upon and inure to the benefit of the Company and Participating Employers, their successors and assigns and the Participants and their heirs, executors, administrators, and legal representatives.      Section 9.09. Maximum Payment Limitation.  Notwithstanding any other provision of this Plan, if any portion of the payments or benefits described in this Plan or under any other agreement with or plan of the Company (in the aggregate, "Total Payments"), would constitute an "excess parachute payment", then the Total Payments to be made to the Participant shall be reduced such that the value of the aggregate Total Payments that the Participant is entitled to receive shall be one dollar ($1) less than the maximum amount which the Participant may receive without becoming subject to the tax imposed by Section 4999 of the Code (or any successor provision) or which the Company may pay without loss of deduction under Section 280G(a) of the Code (or any successor provision); provided that this Section 10.09 shall not apply in the case of a Participant who has in effect a valid employment contract providing that the Total Payments to the Participant shall be determined without regard to the maximum amount allowable under Section 280G of the Code (or any successor provision). The terms "excess parachute payment" and "parachute payment" shall have the meanings assigned to them in Section 280G of the Code (or any successor provision), and such "parachute payments" shall be valued as provided therein. Present value shall be calculated in accordance with Section 280G(d)(4) of the Code (or any successor provision). Within forty days following delivery of notice by the Company to the Participant of its belief that there is a payment or benefit due the Participant which will result in an excess parachute payment as defined in Section 280G of the Code (or any successor provision), the Participant and the Company, at the Company's expense, shall obtain the opinion (which need not be unqualified) of nationally recognized tax counsel selected by the Company's independent auditors and acceptable to the Participant in his sole discretion (which may be regular outside counsel to the Company), which opinion sets forth (A) the amount of the Base Period Income, (B) the amount and present value of Total Payments and (C) the amount and present value of any excess parachute payments determined without regard to the limitations of this Section 10.09. As used in this Section 10.09, the term "Base Period Income" means an amount equal to the Participant's "annualized includible compensation for the base period" as defined in Section 280G(d)(1) of the Code (or any successor provision). For purposes of such opinion, the value of any noncash benefits or any deferred payment or benefit shall be determined by the Company's independent auditors in accordance with the principles of Sections 280G(d)(3) and (4) of the Code (or any successor provisions), which determination shall be evidenced in a certificate of such auditors addressed to the Company and the Participant. Such opinion shall be addressed to the Company and the Participant and shall be binding upon the Company and the Participant. If such opinion determines that there would be an excess parachute payment, the payments hereunder that are includible in Total Payments or any other payment or benefit determined by such counsel to be includible in Total Payments shall be reduced or eliminated as specified by the Participant in writing delivered to the Company within thirty days of his receipt of such opinion or, if the Participant fails to so notify the Company, then as the Company shall reasonably determine, so that under the bases of calculations set forth in such opinion there will be no excess parachute payment. If such legal counsel so requests in connection with the opinion required by this Section 10.09, the Participant and the Company shall obtain, at the Company's expense, and the legal counsel may rely on in providing the opinion, the advice of a firm of recognized executive compensation consultants as to the reasonableness of any item of compensation to be received by the Participant. If the provisions of Sections 280G and 4999 of the Code (or any successor provisions) are repealed without succession, then this Section 10.09 shall be of no further force or effect.  

Exhibit 10.5.b First Amendment of FMC Corporation Savings and Investment Plan (As Amended and Restated Effective as of January 1, 1999)           WHEREAS, FMC Corporation (the "Company") maintains the FMC Corporation Savings and Investment Plan (the "Plan") and administers the Plan through the FMC Corporation Employee Welfare Benefits Plan Committee (the "Committee"); and           WHEREAS, the Plan has previously been amended, most recently in the form of an amendment and restatement effective as of January 1, 1999, and the Company now considers it desirable to amend the Plan further;           NOW, THEREFORE, by virtue of the authority reserved to the Committee by Section 12.1 of the Plan, the Plan is hereby amended effective as of January 1, 1999, except as otherwise noted, as follows:           1.     By substituting the following for the definition of Break in Service in Article 1 of the Plan: >           "Break in Service means a Period of Separation that lasts for at > least 12 consecutive months, provided that, a Period of Separation beginning > on the first date of a maternity or paternity leave of absence and ending on > the 12-month anniversary of such date will not constitute a Break in Service. > For purposes of this section, a 'maternity or paternity leave of absence' > means an absence from work for any period by reason of (a) the Employee's > pregnancy, (b) birth of the Employee's child, (c) placement of a child for > adoption with the Employee, or (d) the need to care for such child for a > period immediately following the birth or placement with the Employee."           2.     By adding the words "incentives for reduction in force," immediately after the words "severance pay;" in the definition of Compensation in Article I of the Plan.           3.     By substituting the following for the definition of Highly Compensated Employee in Article 1 of the Plan:           "Highly Compensated Employee means, effective April 1, 1997, an Employee who: > > (a)       at any time during the Determination Year or the Look-Back Year > > owns (or is considered under Code Section 318 to own) more than five percent > > of the Company or an Affiliate; or > > > > > > (b)       had more than $80,000, as adjusted, in Compensation (as defined in > > Code Section 415(c)(3)) from the Company and the Affiliates during the > > Look-Back Year. > > The 'Determination Year' is the Plan Year for which the determination of who > is a Highly Compensated Employee is being made, and the 'Look-Back Year' is > the 12 month period immediately preceding the Determination Year. > >           A former Employee of the Company or an Affiliate is a Highly > Compensated Employee for a given Determination Year if he or she separated > from service (or was deemed to have separated) before the Determination Year, > performs no services for a Participating Employer during the Determination > Year, and was a Highly Compensated Employee for the Plan Year during which he > or she separated from service (or was deemed to have separated) or for any > Determination Year ending on or after his or her 55th birthday. > >           The Secretary of the Treasury or its delegate will adjust the > $80,000 limit from time to time, to reflect increases in the cost of living. > Employees who are nonresident aliens and receive no earned income (within the > meaning of Code Section 911(d)(2)) from the Company and its Affiliates that > constitutes income from sources within the United States (within the meaning > of Code Section 861(a)(3)) are not treated as Employees for purposes of this > definition. > >           In determining who was a Highly Compensated Employee for the short > Determination Year from April 1, 1997 through December 31, 1997, the > Compensation limit was adjusted to $60,000. In determining who was a Highly > Compensated Employee for the 1998 Determination Year, the Look-Back Year was > deemed to be the 1997 calendar year."           4.       By substituting the following for the definition of Hour of Service in Article 1 of the Plan: >           "Hour of Service means each hour for which an Employee is directly > or indirectly paid or entitled to payment by the Company or an Affiliate: > >           (1)     for the performance of duties; > >           (2)     on account of a period of time during which no duties were > performed, provided that Hours of Service will not be credited for payments > made or due under a plan maintained solely for the purpose of complying with > applicable workers' compensation, unemployment compensation, or disability > insurance laws, or for payments that reimburse an Employee's for medically > related expenses; and >           (3)     for which back pay, irrespective of mitigation of damages, > is awarded or agreed to by the Company, provided that, the same Hours of > Service have not already been credited under (1) or (2) above. > > No more than 501 Hours of Service will be credited for any single continuous > period of time during which the Employee performed no duties. The > determination of Hours of Service for reasons other than the performance of > duties shall be determined in accordance with the provisions of Labor > Department Regulations Section 2530.200b-2(b), which are incorporated herein > by reference, and Hours of Service shall be credited to computation periods in > accordance with the provisions of Labor Department Regulations Section > 2530.200b-2(c), which are incorporated herein by reference." > > 5.     By substituting the following for Section 4.3.1 of the Plan, effective > as of July 1, 1997: > >           "4.3.1     A Participant forfeits the non-vested portion of his or > her Company Contribution and Contingent Accounts on the earlier of: (a) the > date as of which he or she receives a distribution of his or her entire > Company Contribution and Contingent Accounts and (b) the date his or her > Period of Separation equals five years. The nonvested amount so forfeited is a > 'Forfeiture.' If the Participant incurs a Forfeiture under clause (a) above > and his or her Period of Separation is shorter than five years, the Forfeiture > is restored, and the Period of Separation counts towards the Participant's > Years of Service, along with service before and after the Period of > Separation, in determining the Participant's Years of Service for purposes of > Section 4.2. If the Period of Separation is five years or longer, the > Forfeiture will not be restored, but the Period of Separation counts towards > the Participant's Years of Service, along with service before and after the > Period of Separation, in determining the Participant's Years of Service for > purposes of Section 4.2. If a Participant begins a Period of Separation by way > of a maternity or paternity leave, this Section 4.3.1 will be read by > substituting the number 'six' for the number 'five' wherever the latter number > appears. A 'maternity or paternity leave' is an absence from work because of > the Participant's pregnancy, the birth of a child to or placement of a child > for adoption with the Participant, or the need to care for the Participant's > child immediately following its birth to or placement with the Participant."         6.     By amending APPENDIX A Bargaining Units Covered effective as of May 1, 2000 to delete the following references as the Company has no employees covered under such collective bargaining agreements as of that date as a result of the formation of the Astaris joint venture: > "Phosphorus Chemicals Division, Pocatello, Idaho, International Association of > Machinists and Aerospace Workers, AFL-C10, Gate City Mechanics, Local 1933; > Kemmerer Coke Plant, Kemmerer, Wyoming, District No. 22, United Mine Workers > of America, in behalf of Local Union No. 1316, UMWA; Agricultural Chemicals > Division, Lawrence, Kansas, International Chemical Workers Union, Local 605; > and Phosphorus Chemicals Division Carteret, New Jersey, International Chemical > Workers Union, Local 144".           7.     By amending Appendix A Bargaining Units Covered effective as of June 1, 2000 and July 1, 2000, respectively, by adding the following to the end thereof: Agricultural Chemical Group,   Baltimore, Maryland, United   Steel Workers, Local 8-12517 June 1, 2000     Peroxygen Chemicals Division,   Spring Hill, (formerly Steam Plant),   South Charleston, West Virginia,   United Steel Workers, Local   23-12625 July 1, 2000".           IN WITNESS WHEREOF, the undersigned member of the Committee has executed the foregoing amendment on behalf of the Company and the Committee, this 19th day of September, 2000.   FMC Corporation         By:  /s/ Stephen F. Gates --------------------------------------------------------------------------------     Member, FMC Corporation Employee      Welfare Benefits Plan Committee

> > EXHIBIT 10G-2 WPS RESOURCES CORPORATION SHORT-TERM VARIABLE PAY PLAN       As Amended Effective January 1, 1999       WPS RESOURCES CORPORATION SHORT-TERM VARIABLE PAY PLAN      1.     Purpose.             The WPS Resources Corporation Short-Term Variable Pay Plan (the "Plan") has been established effective January 1, 1998, and is amended effective January 1, 1999 as set forth herein, to promote the best interests of WPS Resources Corporation ("Company") and the stockholders of the Company by (a) attracting and retaining key employees possessing a strong interest in the above-average performance of the Company and its subsidiaries and (b) encouraging their continued loyalty, service and counsel.      2.     Administration.             The Plan will be administered by the Compensation Committee of the Board of Directors of the Company (the "Committee"). The Committee shall have full and final authority and discretion to conclusively interpret the provisions of the Plan and to decide all questions of fact arising under the Plan, including the authority and discretion to: > > (i)   determine those employees who are eligible to participate in the Plan > > for any year; > > > > (ii)  review and from time to time and revise factors on which incentive > > compensation awards may be based; > > > > (iii) determine the amount (if any) awarded or to be awarded under the Plan > > to any employee for any year; and > > > > (iv)  to make all other determinations respecting the administration, > > operation and interpretation of the Plan that the Committee, in its sole > > discretion, determines to be necessary or appropriate.      3.     Designation of Participating Employees.             (a)  For each calendar year for which this Plan is in effect, the Committee shall designate: > > (i)   those employees of the Company and its subsidiaries who are eligible > > to participate in the Plan for such year ("Participants"); > > > > (ii)  the Target Award applicable to each Participant for such year (see > > Section 7); and > > > > (iii) whether each Participant is a Utility Participant or a Non-Utility > > Participant.             (b)  An employee's participation in the Plan in any year, and any amounts awarded to the employee under the Plan for any such year, does not imply that the employee is entitled to participate in or receive an award under the Plan for any subsequent year.             (c)  Nothing in the Plan shall interfere with or limit in any way the right of the Company or any subsidiary of the Company to terminate an employee's employment at any time nor confer upon any employee any right to continue in the employ of the Company or any subsidiary.      4.     Award of Incentive Compensation.             A Participant shall not have any right to an amount under this Plan until the Committee has awarded such amount to the Participant. The incentive compensation (if any) awarded to a Participant with respect to any calendar year will be an amount determined by the Committee based on both qualitative and quantitative measurements of Participant and employer performance, including, without limitation (1) utility year-end net income, (2) system reliability, (3) safety, (4) non-utility earnings per share contribution, (5) non-utility customer account growth and retention, (6) customer satisfaction and response to customer complaints, (7) environmental strategy, and (8) such other factors as the Committee in its discretion may consider relevant. In determining the amount of any incentive compensation to be awarded, the Committee may take into account the amounts determined under two non-binding target awards known as the Utility Performance Award and the Non-Utility Performance Award. In no event will the Committee make an award to a Participant unless the Participant was employed on December 31 of the year to which the award relates or the Participant terminated employment prior to December 31 of such year on account of retirement on or after age 58, permanent and total disability (as defined in the Company's long-term disability plan) or death.      5.     Utility Performance Award.             (a)  A Participant's Utility Performance Award for any year equals: > > (i)   the Participant's Base Salary for such year multiplied by > > > > (ii)  0.75 (if the Participant has been designated as a Utility Participant) > > or 0.25 (if the Participant has been designated as a Non-Utility > > Participant), multiplied by > > > > (iii) the factor determined in accordance with Section 5(d).             (b)  The Committee, in its sole discretion, may adjust the 0.75 and 0.25 factors specified in Section 5(a)(ii) above.             (c)  Definitions. > > (i)   "Base Salary" means base salary paid to the Participant by the Company > > and/or a consolidated subsidiary of the Company for services performed by > > the Participant during the applicable calendar year for which he or she has > > been designated as a Participant in the Plan. Base Salary shall include > > amounts that would have been paid to the Participant as base salary but for > > the fact that the Participant elected to defer such amounts as an elective > > contribution under a Section 125, 129 or 401(k) arrangement or as a > > Voluntary Deferral under the WPS Resources Corporation Deferred Compensation > > Plan. Base Salary shall not include extraordinary payments made to or on > > behalf of the Participant, such as overtime, bonuses, meal allowances, > > reimbursed expenses (including any tax "gross-up" payments), termination > > pay, moving pay, commuting expenses, Mandatory Deferrals under the WPS > > Resources Deferred Compensation Plan or other non-elective deferred > > compensation payments or accruals, stock options, the value of > > employer-provided fringe benefits or coverage, any contributions on behalf > > of the Participant to a survivor's income benefit plan or any other employee > > benefit plan within the meaning of ERISA, all as determined in accordance > > with such uniform rules, regulations or standards as may be prescribed by > > the Committee. In the case of an employee who is designated as a Participant > > after the first day of the calendar year, the Committee may elect to apply > > the foregoing definition with respect to the Base Salary received by the > > Participant on and after the effective date of his or her participation. > > > > (ii)  "Net Income" for any year means Wisconsin Public Service Corporation's > > after-tax earnings on common stock as reported in the Company's Form 10-K > > Annual Report for that year, as further adjusted by the Committee in its > > discretion to exclude from Net Income the effects of extraordinary items, > > non-recurring items or any other items that the Committee determines should > > be excluded from the definition of Net Income for purposes of this Plan.             (d)  For each year during which the Plan is in effect, the Committee will prescribe the criteria by (or from) which the factor applicable under Section 5(a)(iii) will be determined. Such criteria may take into account Wisconsin Public Service Corporation's Net Income or such other factors as the Committee, in its sole discretion, may determine.      6.     Non-Utility Performance Award.             (a)  A Participant's Non-Utility Performance Award for any year equals: > > (i)   the Participant's Target Award for such year multiplied by > > > > (ii)  0.25 (if the Participant has been designated as a Utility Participant) > > or 0.75 (if the Participant has been designated as a Non-Utility > > Participant), multiplied by > > > > (iii) the factor determined in accordance with Section 6(d).             (b)  The Committee, in its sole discretion, may adjust the 0.25 and 0.75 factors specified in Section 6(a)(ii) above.             (c)  Definitions. > > (i)   "EPS Impact" means, with respect to any calendar year, the fully > > diluted earnings per share of the Company taking into account only the > > after-tax net income of WPS Energy Services, Inc. and WPS Power Development, > > Inc. and their consolidated subsidiaries, as calculated to the nearest > > one-tenth of one cent in accordance with FASB 128 or any successor > > pronouncement and in a manner consistent with the methodology used by the > > Company and its consolidated subsidiaries for the purpose of reporting > > earnings per share information generally. The Committee in its discretion, > > may adjust such after-tax net income to (A) include the proportionate share > > of the after-tax net income of a non-consolidated subsidiary, and (B) > > exclude the effects of extraordinary, non-recurring items or any other items > > that the Committee determines should be excluded for purposes of this Plan. > > > > (ii)  "Account Retention" means, with respect to any calendar year, the > > percentage of "Accounts" actively served on January 1 of the calendar year > > that the Company or its non-utility subsidiaries continue to serve on > > December 31 of the same calendar year, rounded to the nearest one-tenth > > (1/10) of one percent. > > > > (iii) "Account" means an actively served customer account entered into by an > > agent or employee of the customer who has the authority to contract with WPS > > Energy Services, Inc. or WPS Power Development, Inc. with respect to all or > > a portion of the customer's business. Where a customer has multiple > > contracts with WPS Energy Services, Inc. and/or WPS Power Development, Inc., > > such contracts, although originating with the same customer, may be > > considered separate Accounts for purposes of this Plan to the extent that > > the contracts are entered into or authorized by different contacts at the > > customer each of whom has independent authority to contract with WPS Energy > > Services, Inc. and/or WPS Power Development, Inc. > > > > (iv) "Account Growth" means, with respect to any calendar year, (i) the > > total number of Accounts on December 31 of the calendar year minus the total > > number of Accounts on January 1 of the calendar year, this amount divided by > > (ii) the total number of Accounts on January 1 of the calendar year. This > > quotient shall be rounded to the nearest one-tenth (1/10) of one percent.             (d)  For each year during which the Plan is in effect, the Committee will prescribe the criteria by (or from) which the factor applicable under Section 6(a)(iii) will be determined. Such criteria may take into account EPS Impact, Account Retention, Account Growth or such other factors as the Committee, in its sole discretion, may determine.      7.     Target Award             (a)  The Target Award for each Participant shall be an amount or percentage of Base Salary selected by the Committee.             (b)  The Target Award assigned to a Participant is relevant solely for purposes of the non-binding calculation described in Section 6 above. The establishment of a Target Award with respect to any Participant does not imply that the Participant is or will become entitled to incentive compensation in the amount of the Target Award.      8.     Distribution.             (a)  Unless deferred in accordance with Section 8(b) below, incentive compensation amounts awarded under this Plan shall be paid to the eligible Participant (less applicable withholding) as soon as practicable following the date on which such payment has been authorized by the Committee.             (b)  A Participant may, but need not, elect to defer the receipt of all or any portion of the incentive compensation amounts awarded to the Participant under this Plan. If the Participant so elects, the deferred portion of the Participant's incentive compensation award will be credited to the Participant's Stock Account under the WPS Resources Corporation Deferred Compensation Plan ("Deferred Compensation Plan") for later distribution in accordance with the terms of the Deferred Compensation Plan and the Participant's elections under that plan. A Participant's election to defer all or a portion of his award under this Plan for any year shall be given effect only if the Participant's executed deferral election is received by the Committee or its delegate prior to January 1 of the calendar year during which the incentive compensation will be earned, e.g., prior to January 1, 1999 for deferral of incentive compensation amounts that may be earned in 1999. Notwithstanding the foregoing, in the case of a Participant who is designated by the Committee as being eligible to participate with respect to a particular calendar year after the beginning of such year, the Participant's deferral election for such year may be made within 30 days of the date on which the Committee designates the Participant as being eligible to participate in the Plan.      9.     Amendment or Termination.             The Committee may amend, modify or terminate the Plan at any time and for any reason, including, without limitation, the authority to alter at any time during the calendar year the amount of incentive compensation that is available or potentially available to Participants with respect to the calendar year or the terms and conditions under which such incentive compensation is or will become payable.     10.     Participant Rights Unsecured.              The right of a Participant to receive a distribution of incentive compensation awarded hereunder shall be an unsecured claim, and the Participant shall not have any rights in or against any specific assets of the Company or any of its subsidiaries. The right of a Participant to the payment of incentive compensation that has been awarded or may be awarded under this Plan may not in any manner be subject to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishment; provided that any benefits awarded to the Participant but unpaid as of the date of the Participant's death shall be paid to the Participant's estate.     11.     Successor and Assigns.              This Plan, with respect to any amount awarded to a Participant by the Committee in accordance with Section 4, shall be binding upon and inure to the benefit of the Company and its subsidiaries, their successors and assigns and to the Participant and the executor, administrator or legal representative of the Participant's estate.     12.     Governing Law.              This Plan shall be governed by and construed in accordance with the law of the State of Wisconsin.     

Exhibit 10.5.c First Amendment of FMC Corporation Savings and Investment Plan For Bargaining Unit Employees -------------------------------------------------------------------------------- (As Amended and Restated Effective as of January 1, 1999)           WHEREAS, FMC Corporation (the "Company") maintains the FMC Corporation Savings and Investment Plan for Bargaining Unit Employees (the " Plan") and administers the Plan through the FMC Corporation Employee Welfare Benefits Plan Committee (the "Committee"); and           WHEREAS, the Plan has previously been amended, most recently in the form of an amendment and restatement effective as of January 1, 1999, and the Company now considers it desirable to amend the Plan further;           NOW, THEREFORE, by virtue of the authority reserved to the Committee by Section 12.1 of the Plan, the Plan is hereby amended as follows:           1.     Effective as of January 1, 1999, the Plan is hereby amended solely for purposes of clarification by adding the words " incentives for reduction in force," immediately after the words "severance pay;" in the definition of Compensation in Article I of the Plan.           2.     Effective June 1, 2000, the Plan is hereby amended by adding the following language to the end of the phrase "Covered under this Plan effective January 1, 1990" under the Current Status under Plan column for Agricultural Chemical Group, Baltimore, Maryland, United Steel Workers, Local 8-12517 in Appendix A: > > "through May 31, 2000 - Transferred to FMC Corporation Savings and > > Investment Plan effective as of June 1, 2000".           3.     Effective July 1, 2000, the Plan is hereby amended by adding the following language to the end of the phrase "Covered under this Plan effective January 1, 1989" under the Current Status under Plan column for Peroxygen Chemicals Division Spring Hill Plant (formerly Steam Plan), South Charleston, West Virginia, United Steel Workers, Local 23-12625 in Appendix A: > > "through June 30, 2000 - Transferred to FMC Corporation Savings and > > Investment Plan effective as of July 1, 2000".           4.        Effective October 6, 2000, the Plan is hereby amended by adding the following to the end of Appendix A: > > "Transportation Workers Union of America Covered under this > > Plan effective as of > > October 6, 2000".           IN WITNESS WHEREOF, the undersigned member of the Committee has executed the foregoing amendment on behalf of the Company and the Committee, this 19th day of September, 2000.   FMC Corporation       By:  /s/ Stephen F. Gates --------------------------------------------------------------------------------     Member, FMC Corporation Employee      Welfare Benefits Plan Committee

EXHIBIT 10.3f TERMINATION PROTECTION AGREEMENT   AGREEMENT effective June 19, 2000 between Harcourt General, Inc. and Gerald T. Hughes (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 19, 2000 (the "Effective Date") and shall remain in effect until June 18, 2002 (the "Term"); provided, however, that commencing with June 19, 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 5.45% 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 19th day of June, 2000. HARCOURT GENERAL, INC. /s/ Richard A. Smith             By: Richard A. Smith Title: Chairman of the Board /s/ Gerald T. Hughes             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) 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

EXECUTION COPY U.S. $250,000,000 364-DAY CREDIT AGREEMENT Dated as of March 10, 2000 Among APPLIED MATERIALS, INC. as Borrower and THE INITIAL LENDERS NAMED HEREIN as Initial Lenders and CITICORP USA, INC. as Agent and BANK OF AMERICA, N.A. as Co-Agent TABLE OF CONTENTS Page ARTICLE I DEFINITIONS AND ACCOUNTING TERMS SECTION 1.01. Certain Defined Terms 1 SECTION 1.02. Computation of Time Periods 14 SECTION 1.03. Accounting Terms 14 ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES SECTION 2.01. The Revolving Credit Advances 15 SECTION 2.02. Making the Revolving Credit Advances 15 SECTION 2.03. The Competitive Bid Advances 16 SECTION 2.04. Fees 19 SECTION 2.05. Termination or Reduction of the Commitments 19 SECTION 2.06. Repayment of Revolving Credit Advances 19 SECTION 2.07. Interest on Revolving Credit Advances 19 SECTION 2.08. Interest Rate Determination 20 SECTION 2.09. Optional Conversion of Revolving Credit Advances 21 SECTION 2.10. Optional Prepayments of Revolving Credit Advances 21 SECTION 2.11. Increased Costs 22 SECTION 2.12. Illegality 22 SECTION 2.13. Payments and Computations 23 SECTION 2.14. Taxes 23 SECTION 2.15. Sharing of Payments, Etc. 25 SECTION 2.16. Evidence of Debt 25 SECTION 2.17. Use of Proceeds 26 SECTION 2.18. Increase in the Aggregate Commitments 26 SECTION 2.19. Extension of Termination Date 27 ARTICLE III CONDITIONS TO EFFECTIVENESS AND LENDING SECTION 3.01. Conditions Precedent to Effectiveness of Sections 2.01 and 2.03 29 SECTION 3.02. Conditions Precedent to Each Revolving Credit Borrowing, Increase Date and Extension Date 30 SECTION 3.03. Conditions Precedent to Each Competitive Bid Borrowing 31 SECTION 3.04. Determinations Under Section 3.01 31 ARTICLE IV REPRESENTATIONS AND WARRANTIES SECTION 4.01. Representations and Warranties of the Borrower 31 ARTICLE V COVENANTS OF THE BORROWER SECTION 5.01. Affirmative Covenants 33 SECTION 5.02. Negative Covenants 37 SECTION 5.03. Financial Covenants 40 ARTICLE VI EVENTS OF DEFAULT SECTION 6.01. Events of Default 41 ARTICLE VII THE AGENT SECTION 7.01. Authorization and Action 42 SECTION 7.02. Agent's Reliance, Etc. 43 SECTION 7.03. Citicorp and Affiliates 43 SECTION 7.04. Lender Credit Decision 43 SECTION 7.05. Indemnification 43 SECTION 7.06. Successor Agent 44 SECTION 7.07. Other Agents 44 ARTICLE VIII MISCELLANEOUS SECTION 8.01. Amendments, Etc. 44 SECTION 8.02. Notices, Etc. 44 SECTION 8.03. No Waiver; Remedies 45 SECTION 8.04. Costs and Expenses 45 SECTION 8.05. Right of Set-off 46 SECTION 8.06. Binding Effect 46 SECTION 8.07. Assignments and Participations 46 SECTION 8.08. Confidentiality 48 SECTION 8.09. Governing Law 48 SECTION 8.10. Execution in Counterparts 48 SECTION 8.11. Jurisdiction, Etc. 49 SECTION 8.12. Waiver of Jury Trial 50 Schedules Schedule I - List of Applicable Lending Offices Schedule 5.01(a) - Existing Liens Schedule 5.02(a)(xii) - Special Unencumbered Property Exhibits Exhibit A-1 - Form of Revolving Credit Note Exhibit A-2 - Form of Competitive Bid Note Exhibit B-1 - Form of Notice of Revolving Credit Borrowing Exhibit B-2 - Form of Notice of Competitive Bid Borrowing Exhibit C - Form of Assignment and Acceptance Exhibit D - Form of Opinion of Managing Director, Legal Affairs or of the Vice President, Legal Affairs and Intellectual Property of the Borrower Exhibit E - Form of Opinion of Orrick, Herrington & Sutcliffe, LLP 364-DAY CREDIT AGREEMENT Dated as of March 10, 2000 APPLIED MATERIALS, INC., a Delaware corporation (the "Borrower"), the banks, financial institutions and other institutional lenders (the "Initial Lenders") listed on the signature pages hereof, BANK OF AMERICA, N.A., as Co-Agent, and CITICORP USA, INC. ("Citicorp"), as agent (the "Agent") for the Lenders (as hereinafter defined), agree as follows: ARTICLE I DEFINITIONS AND ACCOUNTING TERMS SECTION 1.01. Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "Adjusted CD Rate" means, for any Interest Period for each Adjusted CD Rate Advance comprising part of the same Revolving Credit Borrowing, an interest rate per annum equal to the sum of: (a) the rate per annum obtained by dividing (i) the rate of interest determined by the Agent to be the average (rounded upward to the nearest whole multiple of 1/100 of 1% per annum, if such average is not such a multiple) of the consensus - bid rate determined by each of the Reference Banks for the bid rates per annum, at 9:00 A.M. (New York City time) (or as soon thereafter as practicable) two Business Days before the first day of such Interest Period, of New York certificate of deposit dealers of recognized standing selected by such Reference Bank for the purchase at face value of certificates of deposit of such Reference Bank in an amount substantially equal to such Reference Bank's Adjusted CD Rate Advance comprising part of such Revolving Credit Borrowing (except that, in the case of Citibank as a Reference Bank, such determination shall be made with respect to an amount substantially equal to Citicorp's Adjusted CD Rate Advance comprising part of such Revolving Credit Borrowing) and with a maturity equal to such Interest Period, by (ii) a percentage equal to 100% minus the Adjusted CD Rate Reserve Percentage (as defined below) for such Interest Period, plus (b) the Assessment Rate (as defined below) for such Interest Period. The "Adjusted CD Rate Reserve Percentage" for any Interest Period for each Adjusted CD Rate Advance comprising part of the same Revolving Credit Borrowing means the reserve percentage applicable on the first day of such Interest Period under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (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 with deposits exceeding $5 billion with respect to liabilities consisting of or including (among other liabilities) U.S. dollar nonpersonal time deposits in the United States with a maturity equal to such Interest Period and in an amount of $100,000. The "Assessment Rate" for any Interest Period for each Adjusted CD Rate Advance comprising part of the same Revolving Credit Borrowing means the annual assessment rate estimated by the Agent on the first day of such Interest Period for determining the then current annual assessment payable by Citibank to the Federal Deposit Insurance Corporation (or any successor) for insuring U.S. dollar deposits of Citibank in the United States. The Adjusted CD Rate for any Interest Period for each Adjusted CD Rate Advance comprising part of the same Revolving Credit Borrowing shall be determined by the Agent on the basis of applicable rates furnished to and received by the Agent from the Reference Banks two Business Days before the first day of such Interest Period, subject, however, to the provisions of Section 2.08. "Adjusted CD Rate Advance" means a Revolving Credit Advance that bears interest as provided in Section 2.07(a)(iii). "Advance" means a Revolving Credit Advance or a Competitive Bid Advance. "Affiliate" means, as to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person. For purposes of this definition, the term "control" (including the terms "controlling", "controlled by" and "under common control with") of a Person means the possession, direct or indirect, of the power to vote, for purposes of Section 5.02(g) 10%, and for all other purposes 5%, or more of the Voting Stock of such Person or to direct or cause the direction of the management and policies of such Person, whether through the ownership of Voting Stock, by contract or otherwise. "Agent's Account" means the account of the Agent maintained by the Agent at Citibank at its office at 399 Park Avenue, New York, New York 10043, Account No. 36852248, Attention: Lenny Sarcona. "AMJ" means Applied Materials Japan, Inc., a corporation organized under the laws of Japan. "Applicable Lending Office" means, with respect to each Lender, such Lender's Domestic Lending Office in the case of a Base Rate Advance, such Lender's Eurodollar Lending Office in the case of a Eurodollar Rate Advance and such Lender's CD Lending Office in the case of an Adjusted CD Rate Advance and, in the case of a Competitive Bid Advance, the office of such Lender notified by such Lender to the Agent as its Applicable Lending Office with respect to such Competitive Bid Advance. "Applicable Margin" means, as of any date, a percentage per annum determined by reference to the Public Debt Rating in effect on such date as set forth below: Public Debt Rating Applicable Applicable Applicable S&P/Moody's Margin for Margin for Margin for Base Rate Eurodollar Rat Adjusted CD Rate Advances Advances Advances Level 1 A+/A1 or above 0% 0.180% 0.305% Level 2 A/A2 0% 0.220% 0.345% Level 3 A-/A3 0% 0.370% 0.495% Level 4 BBB+/Baa1 0% 0.475% 0.600% Level 5 BBB/Baa2 0% 0.575% 0.700% Level 6 Lower than Level 5 0% 0.800% 0.925% "Applicable Percentage" means, as of any date, a percentage per annum determined by reference to the Public Debt Rating in effect on such date as set forth below: Public Debt Rating Applicable S&P/Moody's Percentage Level 1 A+/A1 or above 0.070% Level 2 A/A2 0.075% Level 3 A-/A3 0.080% Level 4 BBB+/Baa1 0.100% Level 5 BBB/Baa2 0.125% Level 6 Lower than Level 5 0.200% "Applicable Utilization Fee" means, as of any date prior to the Term Loan Conversion Date that the aggregate Advances exceed 33_% of the aggregate Commitments, and as of any date on and after the Term Loan Conversion Date, a percentage per annum determined by reference to the Public Debt Rating in effect on such date as set forth below: Public Debt Rating Applicable S&P/Moody's Utilization Fee Level 1 A+/A1 or above 0.000% Level 2 A/A2 0.125% Level 3 A-/A3 0.175% Level 4 BBB+/Baa1 0.175% Level 5 BBB/Baa2 0.175% Level 6 Lower than Level 5 0.250% "Assignment and Acceptance" means an assignment and acceptance entered into by a Lender and an Eligible Assignee, and accepted by the Agent, in substantially the form of Exhibit C hereto. "Assuming Lender" has the meaning specified in Section 2.18(d). "Assumption Agreement" has the meaning specified in Section 2.18(d)(ii). "Base Rate" means a fluctuating interest rate per annum in effect from time to time, which rate per annum shall at all times be equal to the highest of: (a) the rate of interest announced publicly by Citibank in New York, New York, from time to time, as Citibank's base rate; (b) the sum (adjusted to the nearest 1/4 of 1% or, if there is no nearest 1/4 of 1%, to the next higher 1/4 of 1%) of (i) 1/2 of 1% per annum, plus (ii) the rate obtained by dividing (A) the latest three-week moving average of secondary market morning offering rates in the United States for three-month certificates of deposit of major United States money market banks, such three- week moving average (adjusted to the basis of a year of 360 days) being determined weekly on each Monday (or, if such day is not a Business Day, on the next succeeding Business Day) for the three- week period ending on the previous Friday by Citibank on the basis of such rates reported by certificate of deposit dealers to and published by the Federal Reserve Bank of New York or, if such publication shall be suspended or terminated, on the basis of quotations for such rates received by Citibank from three New York certificate of deposit dealers of recognized standing selected by Citibank, by (B) a percentage equal to 100% minus the average of the daily percentages specified during such three-week period by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, but not limited to, any emergency, supplemental or other marginal reserve requirement) for Citibank with respect to liabilities consisting of or including (among other liabilities) three-month U.S. dollar non-personal time deposits in the United States, plus (iii) the average during such three-week period of the annual assessment rates estimated by Citibank for determining the then current annual assessment payable by Citibank to the Federal Deposit Insurance Corporation (or any successor) for insuring U.S. dollar deposits of Citibank in the United States; and (c) 1/2 of one percent per annum above the Federal Funds Rate. "Base Rate Advance" means a Revolving Credit Advance that bears interest as provided in Section 2.07(a)(i). "Benefit Arrangement" means at any time an employee benefit plan within the meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan and which is maintained or otherwise contributed to by any member of the ERISA Group. "Borrowing" means a Revolving Credit Borrowing or a Competitive Bid Borrowing. "Business Day" means a day of the year on which banks are not required or authorized by law to close in New York City and, if the applicable Business Day relates to any Eurodollar Rate Advances or LIBO Rate Advances, on which dealings are carried on in the London interbank market. "Capitalized Lease" means any lease the obligation for rentals with respect to which is required to be capitalized on a Consolidated balance sheet of the lessee and its Subsidiaries in accordance with GAAP. "Capitalized Rentals" of any Person means at any date the amount at which the aggregate rentals due and to become due under all Capitalized Leases under which such Person is a lessee would be reflected as a liability on a Consolidated balance sheet of such Person. "CD Lending Office" means, with respect to any Lender, the office of such Lender specified as its "CD Lending Office" opposite its name on Schedule I hereto or in the Assumption Agreement or the Assignment and Acceptance pursuant to which it became a Lender, or such other office of such Lender as such Lender may from time to time specify to the Borrower and the Agent. "Citibank" means Citibank, N.A. "Commitment" means as to any Lender (a) the amount set forth opposite such Lender's name on the signature pages hereof, (b) if such Lender has become a Lender hereunder pursuant to an Assumption Agreement, the amount set forth in such Assumption Agreement or (b) if such Lender has entered into any Assignment and Acceptance, the amount set forth for such Lender in the Register maintained by the Agent pursuant to Section 8.07(d), as such amount may be reduced pursuant to Section 2.05 or increased pursuant to Section 2.18. "Commitment Date" has the meaning specified in Section 2.18(b). "Commitment Increase" has the meaning specified in Section 2.18(a). "Competitive Bid Advance" means an advance by a Lender to the Borrower as part of a Competitive Bid Borrowing resulting from the competitive bidding procedure described in Section 2.03 and refers to a Fixed Rate Advance or a LIBO Rate Advance. "Competitive Bid Borrowing" means a borrowing consisting of simultaneous Competitive Bid Advances from each of the Lenders whose offer to make one or more Competitive Bid Advances as part of such borrowing has been accepted under the competitive bidding procedure described in Section 2.03. "Competitive Bid Note" means a promissory note of the Borrower payable to the order of any Lender, in substantially the form of Exhibit A-2 hereto, evidencing the indebtedness of the Borrower to such Lender resulting from a Competitive Bid Advance made by such Lender. "Competitive Bid Reduction" has the meaning specified in Section 2.01. "Consenting Lender" has the meaning specified in Section 2.19(b). "Consolidated" refers to the consolidation of accounts in accordance with GAAP. "Consolidated Debt" means all Debt of the Borrower and its Subsidiaries, determined in accordance with GAAP on a consolidated basis after eliminating intercompany items. "Consolidated Net Income" for any period means the net income of the Borrower and its Subsidiaries for such period, determined in accordance with GAAP on a consolidated basis after eliminating earnings or losses attributable to outstanding Minority Interests. "Consolidated Net Tangible Assets" means, at any date, the total amount of all Tangible Assets of the Borrower and its Subsidiaries after deducting therefrom all liabilities which in accordance with GAAP would be included on their consolidated balance sheet, except Consolidated Debt. "Consolidated Tangible Net Worth" means, at any date, total stockholders' equity as indicated in the most recent quarterly or annual consolidated financial statements of the Borrower and its Subsidiaries less Intangible Assets. "Consolidated Total Assets" means, at any date, the total assets of the Borrower and its Subsidiaries on a consolidated basis determined in accordance with GAAP. "Convert", "Conversion" and "Converted" each refers to a conversion of Revolving Credit Advances of one Type into Revolving Credit Advances of the other Type pursuant to Section 2.08 or 2.09. "Debt" of any Person means, without duplication, (a) all Indebtedness of such Person for borrowed money, (b) all obligations of such Person for the deferred and unpaid purchase price of property or services (other than trade payables and accrued expenses incurred in the ordinary course of such Person's business), (c) all Indebtedness of such Person evidenced by notes, bonds, debentures or other similar evidences of indebtedness, (d) all obligations 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) including, without limitation, obligations secured by Liens arising from the sale or transfer of notes or accounts receivable; provided that Debt shall not include any sale or transfer of notes or accounts receivable whether or not precautionary Liens are filed or recorded in connection with such sale or transfer of such notes or accounts receivable, if and only if such sale or transfer (A) is accounted for as true sale under GAAP and (B) pursuant to which there is no recourse (other than recourse for breach of customary representations and warranties or in connection with any such sales or transfers by AMJ) to the seller of such notes or accounts receivable (as evidenced by there being no accounting reserve taken or required to be taken, which in the event a reserve is taken, the amount of Debt shall be deemed to be the amount of such reserve), and provided, further, that all trade payables and accrued expenses constituting current liabilities shall be excluded, (e) all Capitalized Rentals, (f) reimbursement obligations of such Person in respect of credit enhancement instruments, which reimbursement obligations are then due and payable by such Person, (g) all Debt of others referred to in clauses (a) through (f) above or clause (h) below guaranteed directly or indirectly in any manner by such Person, or in effect guaranteed directly or indirectly by such Person through an agreement (1) to pay or purchase such Debt or to advance or supply funds for the payment or purchase of such Debt, (2) 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 Debt or to assure the holder of such Debt against loss, (3) 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 (4) otherwise to assure a creditor against loss, and (h) all Debt referred to in clauses (a) through (g) above secured by (or for which the holder of such Debt has an existing right, contingent or otherwise, to be secured by) any Lien on property (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 Debt, including, without limitation, obligations secured by Liens arising from the sale or transfer of notes, accounts receivable or other assets, other than obligations secured by Liens on notes, accounts receivable or other assets sold or transferred in a transaction which is accounted for as a true sale under GAAP. The Borrower's obligations under operating leases and Off-Balance Sheet Leases shall be excluded form this definition; provided that (A) no such exclusion shall be made if and to the extent that GAAP would require such obligations to be classified as debt for borrowed money and (B) in any event the term "Debt" shall include the Excess Lease Financed Amount (if any). "Default" means any Event of Default or any event that would constitute an Event of Default but for the requirement that notice be given or time elapse or both. "Domestic Lending Office" means, with respect to any Lender, the office of such Lender specified as its "Domestic Lending Office" opposite its name on Schedule I hereto or in the Assumption Agreement or the Assignment and Acceptance pursuant to which it became a Lender, or such other office of such Lender as such Lender may from time to time specify to the Borrower and the Agent. "Effective Date" has the meaning specified in Section 3.01. "Eligible Assignee" means (i) a Lender; (ii) an Affiliate of a Lender; and (iii) any other Person that has a rating for any class of non-credit enhanced long-term senior unsecured debt of not lower than A by S&P or A2 by Moody's approved by the Agent and, unless an Event of Default has occurred and is continuing at the time any assignment is effected in accordance with Section 8.07, the Borrower, such approval not to be unreasonably withheld or delayed; provided, however, that neither the Borrower nor an Affiliate of the Borrower shall qualify as an Eligible Assignee. "Environmental Action" means any action, suit, demand, demand letter, claim, notice of non-compliance or violation, notice of liability or potential liability, investigation, proceeding, consent order or consent agreement relating in any way to any Environmental Law, Environmental Permit or Hazardous Substances or arising from alleged injury or threat of injury to health, safety or the environment, including, without limitation, (a) by any governmental or regulatory authority for enforcement, cleanup, removal, response, remedial or other actions or damages and (b) by any governmental or regulatory authority or any third party for damages, contribution, indemnification, cost recovery, compensation or injunctive relief. "Environmental Laws" means any and all federal, state, local and foreign statutes, laws, judicial decisions, regulations, ordinances, rules, judgments, orders, decrees, plans, injunctions, permits, concessions, grants, franchises, licenses, agreements and other governmental restrictions relating to the environment or the effect of the environment on human health or to emissions, discharges or releases of pollutants, contaminants, Hazardous Substances or wastes into the environment including, without limitation, ambient air, surface water, ground water or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, Hazardous Substances or wastes or the clean-up or other remediation thereof. "Environmental Permit" means any permit, approval, identification number, license or other authorization required under any Environmental Law. "Equity Affiliate" means any Person in which the Borrower or any of its Subsidiaries holds an equity investment that is accounted for under the equity method. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, or any successor statute. "ERISA Affiliate" means any member of the ERISA Group. "ERISA Group" means the Borrower, any Subsidiary and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Borrower or any Subsidiary, are treated as a single employer under Section 414 of the Internal Revenue Code. "Eurocurrency Liabilities" has the meaning assigned to that term in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time. "Eurodollar Lending Office" means, with respect to any Lender, the office of such Lender specified as its "Eurodollar Lending Office" opposite its name on Schedule I hereto or in the Assumption Agreement or the Assignment and Acceptance pursuant to which it became a Lender (or, if no such office is specified, its Domestic Lending Office), or such other office of such Lender as such Lender may from time to time specify to the Borrower and the Agent. "Eurodollar Rate" means, for any Interest Period for each Eurodollar Rate Advance comprising part of the same Revolving Credit Borrowing, an interest rate per annum equal to the rate per annum obtained by dividing (a) the rate per annum (rounded upward to the nearest whole multiple of 1/16 of 1% per annum) appearing on Dow Jones Markets Telerate Page 3750 (or any successor page) as the London interbank offered rate for deposits in U.S. dollars at approximately 11:00 A.M. (London time) two Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period or, if for any reason such rate is not available, the average (rounded upward to the nearest whole multiple of 1/16 of 1% per annum, if such average is not such a multiple) of the rate per annum at which deposits in U.S. dollars are offered by the principal office of each of the Reference Banks in London, England to prime banks in the London interbank market at 11:00 A.M. (London time) two Business Days before the first day of such Interest Period in an amount substantially equal to such Reference Bank's Eurodollar Rate Advance comprising part of such Revolving Credit Borrowing to be outstanding during such Interest Period (except that, in the case of Citibank as a Reference Bank, such determination shall be made with respect to an amount substantially equal to Citicorp's Eurodollar Rate Advance comprising part of such Revolving Credit Borrowing) and for a period equal to such Interest Period by (b) a percentage equal to 100% minus the Eurodollar Rate Reserve Percentage for such Interest Period. If the Dow Jones Markets Telerate Page 3759 (or any successor page) is unavailable, the Eurodollar Rate for any Interest Period for each Eurodollar Rate Advance comprising part of the same Revolving Credit Borrowing shall be determined by the Agent on the basis of applicable rates furnished to and received by the Agent from the Reference Banks two Business Days before the first day of such Interest Period, subject, however, to the provisions of Section 2.08. "Eurodollar Rate Advance" means a Revolving Credit Advance that bears interest as provided in Section 2.07(a)(ii). "Eurodollar Rate Reserve Percentage" for any Interest Period for all Eurodollar Rate Advances or LIBO Rate Advances comprising part of the same Borrowing means the reserve percentage applicable two Business Days before the first day of such Interest Period under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, without limitation, any emergency, supplemental or other marginal reserve requirement) for a member bank of the Federal Reserve System in New York City with respect to liabilities or assets consisting of or including Eurocurrency Liabilities (or with respect to any other category of liabilities that includes deposits by reference to which the interest rate on Eurodollar Rate Advances or LIBO Rate Advances is determined) having a term equal to such Interest Period. "Events of Default" has the meaning specified in Section 6.01. "Excess Lease Financed Amount" means the amount (if any) by which the Lease Financed Amount exceeds (a) $250,000,000 at any time when the Borrower's Public Debt Rating is lower than BBB+ by S&P or Baa1 by Moody's or (b) $500,000,000 at any time when the Borrower's Public Debt rating is at least BBB+ by S&P or Baa1 by Moody's. "Existing Off-Balance Sheet Lease" means the Master Lease dated as of April 30, 1997 between the Borrower and Credit Suisse Leasing, 92A, L.P. and the Operative Documents (as defined therein) as they may be amended or supplemented from time to time. "Extension Date" has the meaning specified in Section 2.19(b). "Federal Funds Rate" means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day on such transactions received by the Agent from three Federal funds brokers of recognized standing selected by it. "Fixed Rate Advances" has the meaning specified in Section 2.03(a)(i). "GAAP" means at any time generally accepted accounting principles as then in effect, applied on a basis consistent (except for changes concurred in by the Borrower's independent public accountants) with the most recent audited consolidated financial statements of the Borrower and its Subsidiaries delivered to the Lenders; provided that, if the Borrower notifies the Agent that the Borrower wishes to amend any covenant in Article V or any definition of a term used in any such covenant to eliminate the effect of any change in generally accepted accounting principles on the operation of such covenant (or if the Agent notifies the Borrower that the Required Lenders wish to amend any such covenant or definition for such purpose), then, for purposes of such covenant or definition only, "GAAP" shall mean GAAP as in effect immediately before the relevant change in generally accepted accounting principles became effective, until either such notice is withdrawn or such covenant or definition is amended in a manner satisfactory to the Borrower and the Required Lenders. "Hazardous Substances" means any toxic, radioactive, caustic or otherwise hazardous substance, including petroleum, its derivatives, by- products and other hydrocarbons, or any substance having any constituent elements displaying any of the foregoing characteristics. "Hedge Agreements" means interest rate swap, cap or collar agreements, interest rate future or option contracts, currency swap agreements, currency future or option contracts and other similar agreements. "Increase Date" has the meaning specified in Section 2.18(a). "Increasing Lender" has the meaning specified in Section 2.18(b). "Indebtedness" of any Person means and includes all obligations of such Person which in accordance with GAAP should be classified upon a balance sheet of such Person as liabilities of such Person. "Information Memorandum" means the information memorandum dated February 15, 2000 used by the Agent in connection with the syndication of the Commitments. "Intangible Assets" means at any date the total amount of all assets of the Borrower and its Subsidiaries that are properly classified as "intangible assets" in accordance with GAAP and, in any event, shall include, without limitation, goodwill, patents, trade names, trademarks, copyrights, franchises, experimental expense, organization expense, unamortized debt discount and expense, and deferred charges other than prepaid insurance, prepaid leases and prepaid taxes and current deferred taxes which are classified on the balance sheet of the Borrower and its Subsidiaries as a current asset in accordance with GAAP and in which classification the Borrower's independent public accountants concur; provided that the foregoing Intangible Assets shall be deemed to be in an amount equal to zero at all times during which such Intangible Assets, in the aggregate, are less than 2% of stockholders' equity of the Borrower. "Interest Period" means, for each Eurodollar Rate Advance or Adjusted CD Rate Advance comprising part of the same Revolving Credit Borrowing and each LIBO Rate Advance comprising part of the same Competitive Bid Borrowing, the period commencing on the date of such Advance or the date of the Conversion of any Advance into such an Advance and ending on the last day of the period selected by the Borrower pursuant to the provisions below and, thereafter, with respect to Eurodollar Rate Advances or Adjusted CD Rate Advances, each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on the last day of the period selected by the Borrower pursuant to the provisions below. The duration of each such Interest Period shall be one, two, three or six months in the case of a Eurodollar Rate Advance or a LIBO Rate Advance, and 30, 60, 90, 120 or 180 days in the case of an Adjusted CD Rate Advance, in each case, as the Borrower may, upon notice received by the Agent not later than 11:00 A.M. (New York City time) on the third Business Day prior to the first day of such Interest Period, select; provided, however, that: (i) the Borrower may not select any Interest Period that ends after the Termination Date or, if the Revolving Credit Advances have been converted to a term loan pursuant to Section 2.06 prior to such selection, that ends after the Maturity Date; (ii) Interest Periods commencing on the same date for Eurodollar Rate Advances or Adjusted CD Rate Advances comprising part of the same Revolving Credit Borrowing or for LIBO Rate Advances comprising part of the same Competitive Bid Borrowing shall be of the same duration; (iii) whenever the last day of any Interest Period would otherwise occur on a day other than a Business Day, the last day of such Interest Period shall be extended to occur on the next succeeding Business Day, provided, however, in the case of an Interest Period for a Eurodollar Rate Advance or a LIBO Rate Advance, that, if such extension would cause the last day of such Interest Period to occur in the next following calendar month, the last day of such Interest Period shall occur on the next preceding Business Day; and (iv) in the case of an Interest Period for a Eurodollar Rate Advance or a LIBO Rate Advance, whenever the first day of any Interest Period occurs on a day of an initial calendar month for which there is no numerically corresponding day in the calendar month that succeeds such initial calendar month by the number of months equal to the number of months in such Interest Period, such Interest Period shall end on the last Business Day of such succeeding calendar month. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated and rulings issued thereunder. "Lease Financed Amount" means, with respect to Off-Balance Sheet Leases, (a) in the case of the Existing Off-Balance Sheet Lease, the sum of the aggregate outstanding principal amount of the Loans (as defined therein) and the outstanding Investment Amounts (as defined therein) or (b) in the case of any other Off-Balance Sheet Lease, the sum of the comparable amounts as defined therein. "Lenders" means the Initial Lenders, each Assuming Lender that shall become a party hereto pursuant to Section 2.18 or 2.19 and each Person that shall become a party hereto pursuant to Section 8.07. "LIBO Rate" means, for any Interest Period for all LIBO Rate Advances comprising part of the same Competitive Bid Borrowing, an interest rate per annum equal to the rate per annum obtained by dividing (a) the rate per annum (rounded upward to the nearest whole multiple of 1/16 of 1% per annum) appearing on Dow Jones Markets Telerate Page 3750 ( or any successor page) as the London interbank offered rate for deposits in U.S. dollars at approximately 11:00 A.M. (London time) two Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period or, if for any reason such rate is not available, the average (rounded upward to the nearest whole multiple of 1/16 of 1% per annum, if such average is not such a multiple) of the rate per annum at which deposits in U.S. dollars are offered by the principal office of each of the Reference Banks in London, England to prime banks in the London interbank market at 11:00 A.M. (London time) two Business Days before the first day of such Interest Period in an amount substantially equal to the amount that would be the Reference Banks' respective ratable shares of such Borrowing if such Borrowing were to be a Revolving Credit Borrowing to be outstanding during such Interest Period (except that, in the case of Citibank as a Reference Bank, such determination shall be made with respect to an amount substantially equal to Citicorp's ratable share of such Borrowing if such Borrowing were to be a Revolving Credit Borrowing) and for a period equal to such Interest Period by (b) a percentage equal to 100% minus the Eurodollar Rate Reserve Percentage for such Interest Period. If the Dow Jones Markets Telerate Page 3759 (or any successor page) is unavailable, the LIBO Rate for any Interest Period for each LIBO Rate Advance comprising part of the same Competitive Bid Borrowing shall be determined by the Agent on the basis of applicable rates furnished to and received by the Agent from the Reference Banks two Business Days before the first day of such Interest Period, subject, however, to the provisions of Section 2.08. "LIBO Rate Advances" means a Competitive Bid Advance bearing interest based on the LIBO Rate. "Lien" means any lien, security interest or other charge or encumbrance of any kind, or any other type of preferential arrangement, including, without limitation, the lien or retained security title of a conditional vendor and any easement, right of way or other encumbrance on title to real property. Off Balance Sheet Leases and the arrangements set forth therein shall be excluded from this definition; provided that: (a) if any portion of the Lease Financed Amount is included in Debt under the last sentence of the definition of Debt, then for purposes of Section 5.02(e), Off-Balance Sheet Leases and the arrangements set forth therein shall be deemed to create a Lien securing the Excess Lease Financed Amount; and (b) if Off-Balance Sheet Leases and the arrangements set forth therein create a lien on any property or assets other than (i) the property and assets leased pursuant to Off-Balance Sheet Leases, (ii) rights of the Borrower as sublessor of any portion of such property and assets and (iii) Permitted Lease Collateral, such lien shall not be excluded from this definition. "Margin Stock" means "margin stock" as such term is defined in Regulation U. "Material Adverse Effect" means any material adverse change in the business, condition (financial or otherwise) or operations of the Borrower or the Borrower and its Subsidiaries taken as a whole. "Material Debt" means Debt (other than the Notes) of the Borrower and/or one or more of its Subsidiaries, arising in one or more related or unrelated transactions, in an aggregate principal or face amount exceeding $50,000,000. "Material Financial Obligations" means a principal or face amount of Debt and/or payment obligations (calculated after giving effect to any applicable netting agreements) in respect of Hedge Agreements of the Borrower and/or one or more of its Subsidiaries, arising in one or more related or unrelated transactions, exceeding in the aggregate $50,000,000. "Material Plan" means, at any time, a Plan or Plans having aggregate Unfunded Liabilities in excess of $50,000,000. "Maturity Date" means the earlier of (a) the first anniversary of the Termination Date and (b) the date of termination in whole of the aggregate Commitments pursuant to Section 2.05 or 6.01. "Minority Interests" means any shares of stock of any class of a Subsidiary (other than directors' qualifying shares as required by law) that are not owned by the Borrower and/or one or more of its Subsidiaries. "Moody's" means Moody's Investors Service, Inc. "Multiemployer Plan" means, at any time, an employee pension benefit plan within the meaning of Section 4001(a)(3) of ERISA to which any member of the ERISA Group is then making or accruing an obligation to make contributions or has within the preceding five plan years made contribution, including for these purposes any Person which ceased to be a member of the ERISA Group during such five year period. "Non-Consenting Lender" has the meaning specified in Section 2.19(b). "Note" means a Revolving Credit Note or a Competitive Bid Note. "Notice of Competitive Bid Borrowing" has the meaning specified in Section 2.03(a). "Notice of Revolving Credit Borrowing" has the meaning specified in Section 2.02(a). "Off-Balance Sheet Leases" means one or more lease agreements and related agreements entered into by the Borrower or any of its Subsidiaries form time to time, in each case in a transaction which the Borrower or such Subsidiary intends to be treated as an "operating lease" for financial reporting purposes but as a loan for one or more of the following purposes: (a) federal, state and local income or franchise tax, (b) bankruptcy, (c) real estate law and (d) commercial law (including uniform commercial law). The term "Off-Balance Sheet Leases" shall include, without limitation, the Existing Off-Balance Sheet Lease. "PBGC" means the Pension Benefit Guaranty Corporation (or any successor). "Permitted Lease Collateral" means (a) in the case of the Existing Off-Balance Sheet Lease, Cash Collateral (as defined therein) or Treasuries (as defined therein) pledged pursuant to the Pledge Agreement (as defined therein), in each case securing the obligations of the Borrower under the Existing Off-Balance Sheet Lease or (b) in the case of any other Off-Balance Sheet Lease, any comparable assets securing obligations of the Borrower or a Subsidiary thereunder. "Person" means an individual, partnership, corporation (including a business trust), joint stock company, trust, unincorporated association, joint venture, limited liability company or other entity, or a government or any political subdivision or agency thereof. "Plan" means, at any time, an employee pension benefit plan (other than a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Internal Revenue Code and either (i) is maintained, or contributed to, by any member of the ERISA Group for employees of any member of the ERISA Group or (ii) has at any time within the preceding five years been maintained, or contributed to, by any Person which was at such time a member of the ERISA Group for employees of any Person which was at such time a member of the ERISA Group. "Public Debt Rating" means, as of any date for S&P, the lowest rating that has been most recently announced by S&P for any class of non-credit enhanced long-term senior unsecured debt issued by the Borrower and, as of any date for Moody's, the lowest rating that has been most recently announced by Moody's for any class of non-credit enhanced long-term senior unsecured debt issued by the Borrower. For purposes of the foregoing, (a) if only one of S&P and Moody's shall have in effect a Public Debt Rating, the Applicable Margin, the Applicable Percentage and the Applicable Utilization Fee shall be determined by reference to the available rating; (b) if neither S&P nor Moody's shall have in effect a Public Debt Rating, the Applicable Margin, the Applicable Percentage and the Applicable Utilization Fee will be set in accordance with Level 6 under the definition of "Applicable Margin", "Applicable Percentage" or "Applicable Utilization Fee", as the case may be; (c) if the ratings established by S&P and Moody's shall fall within different levels, the Applicable Margin, the Applicable Percentage and the Applicable Utilization Fee shall be based upon the higher rating; (d) if any rating established by S&P or Moody's shall be changed, such change shall be effective as of the date on which such change is first announced publicly by the rating agency making such change; and (e) if S&P or Moody's shall change the basis on which ratings are established, each reference to the Public Debt Rating announced by S&P or Moody's, as the case may be, shall refer to the then equivalent rating by S&P or Moody's, as the case may be. "Reference Banks" means Citibank, Bank of America, N.A. and Wells Fargo Bank, N.A.. "Register" has the meaning specified in Section 8.07(d). "Reportable Event" means any "reportable event" as defined in section 4043 of ERISA for which the 30-day notice requirement has not been waived under applicable regulations. "Required Lenders" means at any time Lenders owed at least 51% of the then aggregate unpaid principal amount of the Revolving Credit Advances owing to Lenders, or, if no such principal amount is then outstanding, Lenders having at least 51% of the Commitments. "Revolving Credit Advance" means an advance by a Lender to the Borrower as part of a Revolving Credit Borrowing and refers to a Base Rate Advance, a Eurodollar Rate Advance or an Adjusted CD Rate Advance (each of which shall be a "Type" of Revolving Credit Advance). "Revolving Credit Borrowing" means a borrowing consisting of simultaneous Revolving Credit Advances of the same Type made by each of the Lenders pursuant to Section 2.01. "Revolving Credit Note" means a promissory note of the Borrower payable to the order of any Lender, delivered pursuant to a request made under Section 2.16 in substantially the form of Exhibit A-1 hereto, evidencing the aggregate indebtedness of the Borrower to such Lender resulting from the Revolving Credit Advances made by such Lender. "S&P" means Standard & Poor's, a division of The McGraw-Hill Companies, Inc. "SEC" means the Securities and Exchange Commission. "Subsidiary" means, as to any Person, any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by such Person; unless otherwise specified, "Subsidiary" means a Subsidiary of the Borrower. "Tangible Assets" means, at any date, Consolidated Total Assets (less depreciation, depletion and other properly deductible valuation reserves) after deducting (but without duplication) Intangible Assets. "Term Loan Conversion Date" means the Termination Date on which all Revolving Credit Advances outstanding on such date are converted into a term loan pursuant to Section 2.06. "Term Loan Election" has the meaning specified in Section 2.06. "Termination Date" means the earlier of (a) March 9, 2001, subject to the extension thereof pursuant to Section 2.19 and (b) the date of termination in whole of the Commitments pursuant to Section 2.05 or 6.01; provided, however, that the Termination Date of any Lender that is a Non-Consenting Lender to any requested extension pursuant to Section 2.19 shall be the Termination Date in effect immediately prior to the applicable Extension Date for all purposes of this Agreement. "Unfunded Liabilities" means, with respect to any Plan at any time, the amount (if any) by which (i) the value of all benefit liabilities under such Plan, determined on a plan termination basis using the assumptions prescribed by the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair market value of all Plan assets allocable to such liabilities under Title IV of ERISA (excluding any accrued but unpaid contributions), all determined as of the then most recent valuation date for such Plan, but only to the extent that such excess represents a potential liability of a member of the ERISA Group to the PBGC or any other Person under Title IV of ERISA. "Voting Stock" means capital stock issued by a corporation, or equivalent interests in any other Person, the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of directors (or persons performing similar functions) of such Person, even if the right so to vote has been suspended by the happening of such a contingency. SECTION 1.02. Computation of Time Periods. In this Agreement in the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each mean "to but excluding". SECTION 1.03. Accounting Terms. All accounting terms not specifically defined herein shall be construed in accordance with GAAP. ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES SECTION 2.01. The Revolving Credit Advances. Each Lender severally agrees, on the terms and conditions hereinafter set forth, to make Revolving Credit Advances to the Borrower from time to time on any Business Day during the period from the Effective Date until the Termination Date in an aggregate amount not to exceed at any time outstanding such Lender's Commitment, provided that the aggregate amount of the Commitments of the Lenders shall be deemed used from time to time to the extent of the aggregate amount of the Competitive Bid Advances then outstanding and such deemed use of the aggregate amount of the Commitments shall be allocated among the Lenders ratably according to their respective Commitments (such deemed use of the aggregate amount of the Commitments being a "Competitive Bid Reduction"). Each Revolving Credit Borrowing shall be in an aggregate amount of $10,000,000 or an integral multiple of $1,000,000 in excess thereof and shall consist of Revolving Credit Advances of the same Type made on the same day by the Lenders ratably according to their respective Commitments. Within the limits of each Lender's Commitment, the Borrower may borrow under this Section 2.01, prepay pursuant to Section 2.10 and reborrow under this Section 2.01. SECTION 2.02. Making the Revolving Credit Advances. (a) Each Revolving Credit Borrowing shall be made on notice, given not later than (x) 1:00 P.M. (New York City time) on the third Business Day prior to the date of the proposed Revolving Credit Borrowing in the case of a Revolving Credit Borrowing consisting of Eurodollar Rate Advances, (y) 1:00 P.M. (New York City time) on the second Business Day prior to the date of the proposed Revolving Credit Borrowing in the case of a Revolving Credit Borrowing consisting of Adjusted CD Rate Advances or (z) 12:00 noon (New York City time) on the date of the proposed Revolving Credit Borrowing in the case of a Revolving Credit Borrowing consisting of Base Rate Advances, by the Borrower to the Agent, which shall give to each Lender prompt notice thereof by telecopier or telex. Each such notice of a Revolving Credit Borrowing (a "Notice of Revolving Credit Borrowing") shall be by telephone, confirmed immediately in writing, or telecopier or telex in substantially the form of Exhibit B-1 hereto, specifying therein the requested (i) date of such Revolving Credit Borrowing, (ii) Type of Advances comprising such Revolving Credit Borrowing, (iii) aggregate amount of such Revolving Credit Borrowing, and (iv) in the case of a Revolving Credit Borrowing consisting of Eurodollar Rate Advances or Adjusted CD Rate Advances, initial Interest Period for each such Revolving Credit Advance. Each Lender shall, before 2:00 P.M. (New York City time) on the date of such Revolving Credit Borrowing make available for the account of its Applicable Lending Office to the Agent at the Agent's Account, in same day funds, such Lender's ratable portion of such Revolving Credit Borrowing. After the Agent's receipt of such funds and upon fulfillment of the applicable conditions set forth in Article III, the Agent will make such funds available to the Borrower at the Agent's address referred to in Section 8.02. (b) Anything in subsection (a) above to the contrary notwithstanding, (i) the Borrower may not select Eurodollar Rate Advances or Adjusted CD Rate Advances for any Revolving Credit Borrowing if the aggregate amount of such Revolving Credit Borrowing is less than $10,000,000 or if the obligation of the Lenders to make Eurodollar Rate Advances shall then be suspended pursuant to Section 2.08 or 2.12 and (ii) the Eurodollar Rate Advances and Advances may not be outstanding as part of more than six separate Revolving Credit Borrowings. (c) Each Notice of Revolving Credit Borrowing shall be irrevocable and binding on the Borrower. (d) Unless the Agent shall have received notice from a Lender prior to the date of any Revolving Credit Borrowing that such Lender will not make available to the Agent such Lender's ratable portion of such Revolving Credit Borrowing, the Agent may assume that such Lender has made such portion available to the Agent on the date of such Revolving Credit Borrowing in accordance with subsection (a) of this Section 2.02 and the Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Lender shall not have so made such ratable portion available to the Agent, such Lender and the Borrower severally agree to repay to the Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Agent, at (i) in the case of the Borrower, the interest rate applicable at the time to Revolving Credit Advances comprising such Revolving Credit Borrowing and (ii) in the case of such Lender, the Federal Funds Rate. If such Lender shall repay to the Agent such corresponding amount, such amount so repaid shall constitute such Lender's Revolving Credit Advance as part of such Revolving Credit Borrowing for purposes of this Agreement. (e) The failure of any Lender to make the Revolving Credit Advance to be made by it as part of any Revolving Credit Borrowing shall not relieve any other Lender of its obligation, if any, hereunder to make its Revolving Credit Advance on the date of such Revolving Credit Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the Revolving Credit Advance to be made by such other Lender on the date of any Revolving Credit Borrowing. SECTION 2.03. The Competitive Bid Advances. (a) Each Lender severally agrees that the Borrower may make Competitive Bid Borrowings under this Section 2.03 from time to time on any Business Day during the period from the date hereof until the date occurring 30 days prior to the Termination Date in the manner set forth below; provided that, following the making of each Competitive Bid Borrowing, the aggregate amount of the Advances then outstanding shall not exceed the aggregate amount of the Commitments of the Lenders (computed without regard to any Competitive Bid Reduction). (i) The Borrower may request a Competitive Bid Borrowing under this Section 2.03 by delivering to the Agent, by telecopier or telex, a notice of a Competitive Bid Borrowing (a "Notice of Competitive Bid Borrowing"), in substantially the form of Exhibit B-2 hereto, specifying therein the requested (v) date of such proposed Competitive Bid Borrowing, (w) aggregate amount of such proposed Competitive Bid Borrowing, (x) in the case of a Competitive Bid Borrowing consisting of LIBO Rate Advances, Interest Period, or in the case of a Competitive Bid Borrowing consisting of Fixed Rate Advances, maturity date for repayment of each Fixed Rate Advance to be made as part of such Competitive Bid Borrowing (which maturity date may not be earlier than the date occurring 30 days after the date of such Competitive Bid Borrowing or later than the Termination Date), (y) interest payment date or dates relating thereto, and (z) other terms (if any) to be applicable to such Competitive Bid Borrowing, not later than 11:00 A.M. (New York City time) (A) at least one Business Day prior to the date of the proposed Competitive Bid Borrowing, if the Borrower shall specify in the Notice of Competitive Bid Borrowing that the rates of interest to be offered by the Lenders shall be fixed rates per annum (the Advances comprising any such Competitive Bid Borrowing being referred to herein as "Fixed Rate Advances") and (B) at least four Business Days prior to the date of the proposed Competitive Bid Borrowing, if the Borrower shall instead specify in the Notice of Competitive Bid Borrowing that the Advances comprising such Competitive Bid Borrowing shall be LIBO Rate Advances. The Agent shall in turn promptly notify each Lender of each request for a Competitive Bid Borrowing received by it from the Borrower by sending such Lender a copy of the related Notice of Competitive Bid Borrowing. (ii) Each Lender may, if, in its sole discretion, it elects to do so, irrevocably offer to make one or more Competitive Bid Advances to the Borrower as part of such proposed Competitive Bid Borrowing at a rate or rates of interest specified by such Lender in its sole discretion, by notifying the Agent (which shall give prompt notice thereof to the Borrower), (A) before 9:30 A.M. (New York City time) on the date of such proposed Competitive Bid Borrowing, in the case of a Competitive Bid Borrowing consisting of Fixed Rate Advances, (B) before 10:00 A.M. (New York City time) three Business Days before the date of such proposed Competitive Bid Borrowing, in the case of a Competitive Bid Borrowing consisting of LIBO Rate Advances, of the minimum amount and maximum amount of each Competitive Bid Advance which such Lender would be willing to make as part of such proposed Competitive Bid Borrowing (which amounts of such proposed Competitive Bid Advances may, subject to the proviso to the first sentence of this Section 2.03(a), exceed such Lender's Commitment), the rate or rates of interest therefor and such Lender's Applicable Lending Office with respect to such Competitive Bid Advance; provided that if the Agent in its capacity as a Lender shall, in its sole discretion, elect to make any such offer, it shall notify the Borrower of such offer at least 30 minutes before the time and on the date on which notice of such election is to be given to the Agent by the other Lenders. If any Lender shall elect not to make such an offer, such Lender shall so notify the Agent before 10:00 A.M. (New York City time) by the other Lenders, and such Lender shall not be obligated to, and shall not, make any Competitive Bid Advance as part of such Competitive Bid Borrowing; provided that the failure by any Lender to give such notice shall not cause such Lender to be obligated to make any Competitive Bid Advance as part of such proposed Competitive Bid Borrowing. (iii) The Borrower shall, in turn, (A) before 11:00 A.M. (New York City time) on the date of such proposed Competitive Bid Borrowing, in the case of a Competitive Bid Borrowing consisting of Fixed Rate Advances, (B) before 12:00 noon (New York City time) three Business Days before the date of such proposed Competitive Bid Borrowing, in the case of a Competitive Bid Borrowing consisting of LIBO Rate Advances, either: (x) cancel such Competitive Bid Borrowing by giving the Agent notice to that effect, or (y) accept one or more of the offers made by any Lender or Lenders pursuant to paragraph (ii) above, in its sole discretion, by giving notice to the Agent of the amount of each Competitive Bid Advance (which amount shall be equal to or greater than the minimum amount, and equal to or less than the maximum amount, notified to the Borrower by the Agent on behalf of such Lender for such Competitive Bid Advance pursuant to paragraph (ii) above) to be made by each Lender as part of such Competitive Bid Borrowing, and reject any remaining offers made by Lenders pursuant to paragraph (ii) above by giving the Agent notice to that effect. The Borrower shall accept the offers made by any Lender or Lenders to make Competitive Bid Advances in order of the lowest to the highest rates of interest offered by such Lenders. If two or more Lenders have offered the same interest rate, the amount to be borrowed at such interest rate will be allocated among such Lenders in proportion to the amount that each such Lender offered at such interest rate. (iv) If the Borrower notifies the Agent that such Competitive Bid Borrowing is cancelled pursuant to paragraph (iii)(x) above, the Agent shall give prompt notice thereof to the Lenders and such Competitive Bid Borrowing shall not be made. (v) If the Borrower accepts one or more of the offers made by any Lender or Lenders pursuant to paragraph (iii)(y) above, the Agent, shall in turn promptly notify (A) each Lender that has made an offer as described in paragraph (ii) above, of the date and aggregate amount of such Competitive Bid Borrowing and whether or not any offer or offers made by such Lender pursuant to paragraph (ii) above have been accepted by the Borrower, (B) each Lender that is to make a Competitive Bid Advance as part of such Competitive Bid Borrowing, of the amount of each Competitive Bid Advance to be made by such Lender as part of such Competitive Bid Borrowing, and (C) each Lender that is to make a Competitive Bid Advance as part of such Competitive Bid Borrowing, upon receipt, that the Agent has received forms of documents appearing to fulfill the applicable conditions set forth in Article III. Each Lender that is to make a Competitive Bid Advance as part of such Competitive Bid Borrowing shall, before 11:00 A.M. (New York City time) on the date of such Competitive Bid Borrowing specified in the notice received from the Agent pursuant to clause (A) of the preceding sentence or any later time when such Lender shall have received notice from the Agent pursuant to clause (C) of the preceding sentence, make available for the account of its Applicable Lending Office to the Agent at its address referred to in Section 8.02, in same day funds, such Lender's portion of such Competitive Bid Borrowing. Upon fulfillment of the applicable conditions set forth in Article III and after receipt by the Agent of such funds, the Agent will make such funds available to such Borrower at the location specified by such Borrower in its Notice of Competitive Bid Borrowing. Promptly after each Competitive Bid Borrowing the Agent will notify each Lender of the amount of the Competitive Bid Borrowing, the consequent Competitive Bid Reduction and the dates upon which such Competitive Bid Reduction commenced and will terminate. (vi) If the Borrower notifies the Agent that it accepts one or more of the offers made by any Lender or Lenders pursuant to paragraph (iii)(y) above, such notice of acceptance shall be irrevocable and binding on the Borrower. (b) Each Competitive Bid Borrowing shall be in an aggregate amount of $10,000,000 or an integral multiple of $1,000,000 in excess thereof and, following the making of each Competitive Bid Borrowing, the Borrower shall be in compliance with the limitation set forth in the proviso to the first sentence of subsection (a) above. (c) Within the limits and on the conditions set forth in this Section 2.03, the Borrower may from time to time borrow under this Section 2.03, repay or prepay pursuant to subsection (d) below, and reborrow under this Section 2.03, provided that a Competitive Bid Borrowing shall not be made within three Business Days of the date of any other Competitive Bid Borrowing. (d) The Borrower shall repay to the Agent for the account of each Lender that has made a Competitive Bid Advance, on the maturity date of each Competitive Bid Advance (such maturity date being that specified by the Borrower for repayment of such Competitive Bid Advance in the related Notice of Competitive Bid Borrowing delivered pursuant to subsection (a)(i) above and provided in the Competitive Bid Note evidencing such Competitive Bid Advance), the then unpaid principal amount of such Competitive Bid Advance. The Borrower shall have no right to prepay any principal amount of any Competitive Bid Advance unless, and then only on the terms, specified by the Borrower for such Competitive Bid Advance in the related Notice of Competitive Bid Borrowing delivered pursuant to subsection (a)(i) above and set forth in the Competitive Bid Note evidencing such Competitive Bid Advance. (e) The Borrower shall pay interest on the unpaid principal amount of each Competitive Bid Advance from the date of such Competitive Bid Advance to the date the principal amount of such Competitive Bid Advance is repaid in full, at the rate of interest for such Competitive Bid Advance specified by the Lender making such Competitive Bid Advance in its notice with respect thereto delivered pursuant to subsection (a)(ii) above, payable on the interest payment date or dates specified by the Borrower for such Competitive Bid Advance in the related Notice of Competitive Bid Borrowing delivered pursuant to subsection (a)(i) above, as provided in the Competitive Bid Note evidencing such Competitive Bid Advance. Upon the occurrence and during the continuance of an Event of Default, the Borrower shall pay interest on the amount of unpaid principal of and interest on each Competitive Bid Advance owing to a Lender, payable in arrears on the date or dates interest is payable thereon, at a rate per annum equal at all times to 2% per annum above the rate per annum required to be paid on such Competitive Bid Advance under the terms of the Competitive Bid Note evidencing such Competitive Bid Advance unless otherwise agreed in such Competitive Bid Note. (f) The indebtedness of the Borrower resulting from each Competitive Bid Advance made to the Borrower as part of a Competitive Bid Borrowing shall be evidenced by a separate Competitive Bid Note of the Borrower payable to the order of the Lender making such Competitive Bid Advance. SECTION 2.04. Fees. (a) Facility Fee. The Borrower agrees to pay to the Agent for the account of each Lender a facility fee on the aggregate amount of such Lender's Commitment from the date hereof in the case of each Initial Lender and from the effective date specified in the Assumption Agreement or in the Assignment and Acceptance pursuant to which it became a Lender in the case of each other Lender until the Termination Date at a rate per annum equal to the Applicable Percentage in effect from time to time, payable in arrears quarterly on the last day of each March, June, September and December, commencing March 31, 2000, and on the Termination Date. (b) Agent's Fees. The Borrower shall pay to the Agent for its own account such fees as may from time to time be agreed in writing between the Borrower and the Agent. SECTION 2.05. Termination or Reduction of the Commitments. (a) Optional. The Borrower shall have the right, upon at least three Business Days' notice to the Agent, to terminate in whole or reduce ratably in part the unused portions of the respective Commitments of the Lenders, provided that each partial reduction shall be in the aggregate amount of $10,000,000 or an integral multiple of $1,000,000 in excess thereof and provided further that the aggregate amount of the Commitments of the Lenders shall not be reduced to an amount that is less than the aggregate principal amount of the Competitive Bid Advances then outstanding. (b) Mandatory. On the Termination Date, if the Borrower has made the Term Loan Election in accordance with Section 2.06 prior to such date, and from time to time thereafter upon each prepayment of the Revolving Credit Advances, the Commitments of the Lenders shall be automatically and permanently reduced on a pro rata basis by an amount equal to the amount by which (i) the aggregate Commitments immediately prior to such reduction exceeds (ii) the aggregate unpaid principal amount of all Revolving Credit Advances outstanding at such time. SECTION 2.06. Repayment of Revolving Credit Advances. The Borrower shall, subject to the next succeeding sentence, repay to the Agent for the ratable account of the Lenders on the Termination Date the aggregate principal amount of the Revolving Credit Advances then outstanding. The Borrower may, upon not less than 15 days' notice to the Agent, elect (the "Term Loan Election") to convert all of the Revolving Credit Advances outstanding on the Termination Date in effect at such time into a term loan which the Borrower shall repay in full ratably to the lenders on the Maturity Date; provided that the Term Loan Election may not be exercised if a Default has occurred and is continuing on the date of notice of the Term Loan Election or on the date on which the Term Loan Election is to be effected. All Revolving Credit Advances converted into a term loan pursuant to this Section 2.06 shall continue to constitute Revolving Credit Advances except that the Borrower may not reborrow pursuant to Section 2.01 after all or any portion of such Revolving Credit Advances have been prepared pursuant to Section 2.10. SECTION 2.07. Interest on Revolving Credit Advances. (a) Scheduled Interest. The Borrower shall pay interest on the unpaid principal amount of each Revolving Credit Advance owing to each Lender from the date of such Revolving Credit Advance until such principal amount shall be paid in full, at the following rates per annum: (i) Base Rate Advances. During such periods as such Revolving Credit Advance is a Base Rate Advance, a rate per annum equal at all times to the sum of (x) the Base Rate in effect from time to time plus (y) the Applicable Margin in effect from time to time plus (z) the Applicable Utilization Fee, if any, in effect from time to time, payable in arrears quarterly on the last day of each March, June, September and December during such periods and on the date such Base Rate Advance shall be Converted or paid in full. (ii) Eurodollar Rate Advances. During such periods as such Revolving Credit Advance is a Eurodollar Rate Advance, a rate per annum equal at all times during each Interest Period for such Revolving Credit Advance to the sum of (x) the Eurodollar Rate for such Interest Period for such Revolving Credit Advance plus (y) the Applicable Margin in effect from time to time plus (z) the Applicable Utilization Fee, if any, in effect from time to time, payable in arrears on the last day of such Interest Period and, if such Interest Period has a duration of more than three months, on each day that occurs during such Interest Period every three months from the first day of such Interest Period and on the date such Eurodollar Rate Advance shall be Converted or paid in full. (iii) Adjusted CD Rate Advances. During such periods as such Revolving Credit Advance is an Adjusted CD Rate Advance, a rate per annum equal at all times during each Interest Period for such Revolving Credit Advance to the sum of (x) the Adjusted CD Rate for such Interest Period for such Revolving Credit Advance plus (y) the Applicable Margin in effect from time to time plus (z) the Applicable Utilization Fee, if any, in effect from time to time, payable in arrears on the last day of such Interest Period and, if such Interest Period has a duration of more than 90 days, on each day that occurs during such Interest Period every 90 days from the first day of such Interest Period and on the date such Adjusted CD Rate Advance shall be Converted or paid in full. (b) Default Interest. Upon the occurrence and during the continuance of an Event of Default, the Borrower shall pay interest on (i) the unpaid principal amount of each Revolving Credit Advance owing to each Lender, payable in arrears on the dates referred to in clause (a)(i), (a)(ii) or (a)(iii) above, at a rate per annum equal at all times to 2% per annum above the rate per annum required to be paid on such Revolving Credit Advance pursuant to clause (a)(i), (a)(ii) or (a)(iii) above and (ii) to the fullest extent permitted by law, the amount of any interest, fee or other amount payable hereunder that is not paid when due, from the date such amount shall be due until such amount shall be paid in full, payable in arrears on the date such amount shall be paid in full and on demand, at a rate per annum equal at all times to 2% per annum above the rate per annum required to be paid on Base Rate Advances pursuant to clause (a)(i) above. SECTION 2.08. Interest Rate Determination. (a) Each Reference Bank agrees to furnish to the Agent timely information for the purpose of determining each Eurodollar Rate, each Adjusted CD Rate and each LIBO Rate. If any one or more of the Reference Banks shall not furnish such timely information to the Agent for the purpose of determining any such interest rate, the Agent shall determine such interest rate on the basis of timely information furnished by the remaining Reference Banks. The Agent shall give prompt notice to the Borrower and the Lenders of the applicable interest rate determined by the Agent for purposes of Section 2.07(a)(i), (ii) or (iii), and the rate, if any, furnished by each Reference Bank for the purpose of determining the interest rate under Section 2.07(a)(ii) or (iii). (b) If, with respect to any Eurodollar Rate Advances, the Required Lenders notify the Agent that the Eurodollar Rate for any Interest Period for such Advances will not adequately reflect the cost to such Required Lenders of making, funding or maintaining their respective Eurodollar Rate Advances for such Interest Period, the Agent shall forthwith so notify the Borrower and the Lenders, whereupon (i) each Eurodollar Rate Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance, and (ii) the obligation of the Lenders to make, or to Convert Revolving Credit Advances into, Eurodollar Rate Advances shall be suspended until the Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist. (c) If the Borrower shall fail to select the duration of any Interest Period for any Eurodollar Rate Advances or Adjusted CD Rate Advances in accordance with the provisions contained in the definition of "Interest Period" in Section 1.01, the Agent will forthwith so notify the Borrower and the Lenders and such Advances will automatically, on the last day of the then existing Interest Period therefor, be Converted into Base Rate Advances. (d) On the date on which the aggregate unpaid principal amount of Eurodollar Rate Advances or Adjusted CD Rate Advances comprising any Borrowing shall be reduced, by payment or prepayment or otherwise, to less than $10,000,000, such Advances shall automatically Convert into Base Rate Advances. (e) Upon the occurrence and during the continuance of any Event of Default, (i) each Eurodollar Rate Advance and each Adjusted CD Rate Advance will automatically, on the last day of the then existing Interest Period therefor Convert into a Base Rate Advance and (ii) the obligation of the Lenders to make, or to Convert Advances into, Eurodollar Rate Advances or Adjusted CD Rate Advances shall be suspended. (f) If, with respect to Eurodollar Rate Advances, Dow Jones Markets Telerate Page 3750 (or any successor page) is unavailable and fewer than two Reference Banks furnish timely information to the Agent for determining the Eurodollar Rate or LIBO Rate for any Eurodollar Rate Advances or LIBO Rate Advances, as the case may be, or if fewer than two Reference Banks furnish timely information to the Agent for determining the Adjusted CD Rate for any Adjusted CD Rate Advances, (i) the Agent shall forthwith notify the Borrower and the Lenders that the interest rate cannot be determined for such Eurodollar Rate Advances, LIBO Rate Advances or Adjusted CD Rate Advances, as the case may be, (ii) with respect to Eurodollar Rate Advances or Adjusted CD Rate Advances, as the case may be, each such Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance (or if such Advance is then a Base Rate Advance, will continue as a Base Rate Advance), and (iii) the obligation of the Lenders to make Eurodollar Rate Advances, LIBO Rate Advances or Adjusted CD Rate Advances, as the case may be, or to Convert Revolving Credit Advances into Eurodollar Rate Advances or Adjusted CD Rate Advances, as the case may be, shall be suspended until the Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist. SECTION 2.09. Optional Conversion of Revolving Credit Advances. The Borrower may on any Business Day, upon notice given to the Agent not later than 12:00 noon (New York City time) on the third Business Day prior to the date of the proposed Conversion and subject to the provisions of Sections 2.08 and 2.12, Convert all Revolving Credit Advances of one Type comprising the same Borrowing into Revolving Credit Advances of another Type; provided, however, that any Conversion of Eurodollar Rate Advances or Adjusted CD Rate Advances into Advances of another type shall be made only on the last day of an Interest Period for such Advances, any Conversion of Base Rate Advances into Eurodollar Rate Advances or Adjusted CD Rate Advances shall be in an amount not less than the minimum amount specified in Section 2.02(b) and no Conversion of any Revolving Credit Advances shall result in more separate Revolving Credit Borrowings than permitted under Section 2.02(b). Each such notice of a Conversion shall, within the restrictions specified above, specify (i) the date of such Conversion, (ii) the Revolving Credit Advances to be Converted, and (iii) if such Conversion is into Eurodollar Rate Advances or Adjusted CD Rate Advances, the duration of the initial Interest Period for each such Advance. Each notice of Conversion shall be irrevocable and binding on the Borrower. SECTION 2.10. Optional Prepayments of Revolving Credit Advances. The Borrower may, upon notice at least three Business Days' prior to the date of such prepayment, in the case of Eurodollar Rate Advances or Adjusted CD Rate Advances, and not later than 12:00 noon (New York City time) on the date of such prepayment, in the case of Base Rate Advances, to the Agent stating the proposed date and aggregate principal amount of the prepayment, and if such notice is given the Borrower shall, prepay the outstanding principal amount of the Revolving Credit Advances comprising part of the same Revolving Credit Borrowing in whole or ratably in part, together with accrued interest to the date of such prepayment on the principal amount prepaid; provided, however, that (x) each partial prepayment shall be in an aggregate principal amount of $10,000,000 or an integral multiple of $1,000,000 in excess thereof and (y) in the event of any such prepayment of a Eurodollar Rate Advance or an Adjusted CD Rate Advance, the Borrower shall be obligated to reimburse the Lenders in respect thereof pursuant to Section 8.04(c). SECTION 2.11. Increased Costs. (a) If, due to either (i) the introduction of or any change in or in the interpretation of any law or regulation after the Effective Date or (ii) the compliance with any guideline or request from any central bank or other governmental authority (whether or not having the force of law) after the Effective Date, there shall be any increase in the cost to any Lender of agreeing to make or making, funding or maintaining Eurodollar Rate Advances, LIBO Rate Advances or Adjusted CD Rate Advances (excluding for purposes of this Section 2.11 any such increased costs resulting from (i) Taxes or Other Taxes (as to which Section 2.14 shall govern) and (ii) changes in the basis of taxation of overall net income or overall gross income by the United States or by the foreign jurisdiction or state under the laws of which such Lender is organized or has its Applicable Lending Office or any political subdivision thereof), then the Borrower shall from time to time, upon demand by such Lender (with a copy of such demand to the Agent), pay to the Agent for the account of such Lender additional amounts sufficient to compensate such Lender for such increased cost. A certificate as to the amount of such increased cost, submitted to the Borrower and the Agent by such Lender, shall be conclusive and binding for all purposes, absent manifest error. (b) If any Lender determines that compliance with any law or regulation or any guideline or request from any central bank or other governmental authority (whether or not having the force of law) affects or would affect the amount of capital required or expected to be maintained by such Lender or any corporation controlling such Lender and that the amount of such capital is increased by or based upon the existence of such Lender's commitment to lend hereunder and other commitments of this type, then, upon demand by such Lender (with a copy of such demand to the Agent), the Borrower shall pay to the Agent for the account of such Lender, from time to time as specified by such Lender, additional amounts sufficient to compensate such Lender or such corporation in the light of such circumstances, to the extent that such Lender reasonably determines such increase in capital to be allocable to the existence of such Lender's commitment to lend hereunder. A certificate as to such amounts submitted to the Borrower and the Agent by such Lender shall be conclusive and binding for all purposes, absent manifest error. (c) If any Lender fails to give the Borrower any prompt notice required by this Section 2.11, the Borrower shall not be required to indemnify and compensate such Lender or the Agent under this Section 2.11 for any amounts attributable to the event or factual circumstance required to be disclosed in such notice and arising during or with respect to any period ending more than 90 days before notice thereof has been delivered to the Borrower, provided that this subsection (c) shall in no way limit the right of any Lender or the Agent to demand or receive compensation to the extent that such compensation relates to any law, rule, regulation, interpretation, administration, request or directive (or any change therein) which by its terms has retroactive application if such notice is given within 90 days after the date of enactment or effectiveness of such retroactive law, rule, regulation, interpretation, administration, request or directive (or change therein). SECTION 2.12. Illegality. Notwithstanding any other provision of this Agreement, if any Lender shall notify the Agent that the introduction of or any change in or in the interpretation of any law or regulation makes it unlawful, or any central bank or other governmental authority asserts that it is unlawful, for any Lender or its Eurodollar Lending Office to perform its obligations hereunder to make Eurodollar Rate Advances or to fund or maintain Eurodollar Rate Advances hereunder, (a) each Eurodollar Rate Advance will automatically, upon such demand, Convert into a Base Rate Advance and (b) the obligation of the Lenders to make Eurodollar Rate Advances or LIBO Rate Advances or to Convert Revolving Credit Advances into Eurodollar Rate Advances shall be suspended until the Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist. SECTION 2.13. Payments and Computations. (a) The Borrower shall make each payment hereunder not later than 11:00 A.M. (New York City time) on the day when due to the Agent at the Agent's Account in same day funds. The Agent will promptly thereafter cause to be distributed like funds relating to the payment of principal or interest or facility fees ratably (other than amounts payable pursuant to Section 2.03, 2.11, 2.14 or 8.04(c)) to the Lenders for the account of their respective Applicable Lending Offices, and like funds relating to the payment of any other amount payable to any Lender to such Lender for the account of its Applicable Lending Office, in each case to be applied in accordance with the terms of this Agreement. Upon any Assuming Lender becoming a Lender hereunder as a result of a Commitment Increase pursuant to Section 2.18 or an extension of the Termination Date pursuant to Section 2.19, and upon the Agent's receipt of such Lender's Assumption Agreement and recording of the information contained therein in the Register, from and after the applicable Increase Date or Extension Date, as the case may be, the Agent shall make all payments hereunder and under any Notes issued in connection therewith in respect of the interest assumed thereby to the Assuming Lender. Upon its acceptance of an Assignment and Acceptance and recording of the information contained therein in the Register pursuant to Section 8.07(c), from and after the effective date specified in such Assignment and Acceptance, the Agent shall make all payments hereunder and under the Notes in respect of the interest assigned thereby to the Lender assignee thereunder, and the parties to such Assignment and Acceptance shall make all appropriate adjustments in such payments for periods prior to such effective date directly between themselves. (b) All computations of interest based on the Base Rate shall be made by the Agent on the basis of a year of 365 or 366 days, as the case may be, all computations of interest based on the Eurodollar Rate, the LIBO Rate, the Adjusted CD Rate or the Federal Funds Rate or in respect of Fixed Rate Advances and of facility fees shall be made by the Agent on the basis of a year of 360 days, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest or facility fees are payable. Each determination by the Agent of an interest rate hereunder shall be conclusive and binding for all purposes, absent manifest error. (c) Whenever any payment hereunder or under the Notes shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest or facility fee, as the case may be; provided, however, that, if such extension would cause payment of interest on or principal of Eurodollar Rate Advances or LIBO Rate Advances to be made in the next following calendar month, such payment shall be made on the next preceding Business Day. (d) Unless the Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Lenders hereunder that the Borrower will not make such payment in full, the Agent may assume that the Borrower has made such payment in full to the Agent on such date and the Agent may, in reliance upon such assumption, cause to be distributed to each Lender on such due date an amount equal to the amount then due such Lender. If and to the extent the Borrower shall not have so made such payment in full to the Agent, each Lender shall repay to the Agent forthwith on demand such amount distributed to such Lender together with interest thereon, for each day from the date such amount is distributed to such Lender until the date such Lender repays such amount to the Agent, at the Federal Funds Rate in the case of Advances denominated in Dollars. SECTION 2.14. Taxes. (a) Any and all payments by the Borrower hereunder or under the Notes shall be made, in accordance with Section 2.13, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each Lender and the Agent, taxes imposed on its overall net income, and franchise taxes imposed on it in lieu of net income taxes, by the jurisdiction under the laws of which such Lender or the Agent (as the case may be) is organized or any political subdivision thereof and, in the case of each Lender, taxes imposed on its overall net income, and franchise taxes imposed on it in lieu of net income taxes, by the jurisdiction of such Lender's Applicable Lending Office or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities in respect of payments hereunder or under the Notes being hereinafter referred to as "Taxes"). If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under any Note to any Lender or the Agent, (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.14) such Lender or the Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. (b) In addition, the Borrower shall pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies that arise from any payment made hereunder or under the Notes or from the execution, delivery or registration of, performing under, or otherwise with respect to, this Agreement or the Notes (hereinafter referred to as "Other Taxes"). (c) The Borrower shall indemnify each Lender and the Agent for and hold it harmless against the full amount of Taxes or Other Taxes (including, without limitation, taxes of any kind imposed by any jurisdiction on amounts payable under this Section 2.14) imposed on or paid by such Lender or the Agent (as the case may be) and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto. This indemnification shall be made within 30 days from the date such Lender or the Agent (as the case may be) makes written demand therefor. (d) Within 30 days after the date of any payment of Taxes, the Borrower shall furnish to the Agent, at its address referred to in Section 8.02, the original or a certified copy of a receipt evidencing such payment. In the case of any payment hereunder or under the Notes by or on behalf of the Borrower through an account or branch outside the United States or by or on behalf of the Borrower by a payor that is not a United States person, if the Borrower determines that no Taxes are payable in respect thereof, the Borrower shall furnish, or shall cause such payor to furnish, to the Agent, at such address, an opinion of counsel acceptable to the Agent stating that such payment is exempt from Taxes. For purposes of this subsection (d) and subsection (e), the terms "United States" and "United States person" shall have the meanings specified in Section 7701 of the Internal Revenue Code. (e) Each Lender organized under the laws of a jurisdiction outside the United States, on or prior to the date of its execution and delivery of this Agreement in the case of each Initial Lender and on the date of the Assumption Agreement or the Assignment and Acceptance pursuant to which it becomes a Lender in the case of each other Lender, and from time to time thereafter as requested in writing by the Borrower (but only so long as such Lender remains lawfully able to do so), shall provide each of the Agent and the Borrower with two original Internal Revenue Service forms 1001 or 4224, as appropriate, or any successor or other form prescribed by the Internal Revenue Service, certifying that such Lender is exempt from or entitled to a reduced rate of United States withholding tax on payments pursuant to this Agreement or the Notes. If the form provided by a Lender at the time such Lender first becomes a party to this Agreement indicates a United States interest withholding tax rate in excess of zero, withholding tax at such rate shall be considered excluded from Taxes unless and until such Lender provides the appropriate forms certifying that a lesser rate applies, whereupon withholding tax at such lesser rate only shall be considered excluded from Taxes for periods governed by such form; provided, however, that, if at the date of the Assignment and Acceptance pursuant to which a Lender assignee becomes a party to this Agreement, the Lender assignor was entitled to payments under subsection (a) in respect of United States withholding tax with respect to interest paid at such date, then, to such extent, the term Taxes shall include (in addition to withholding taxes that may be imposed in the future or other amounts otherwise includable in Taxes) United States withholding tax, if any, applicable with respect to the Lender assignee on such date. If any form or document referred to in this subsection (e) requires the disclosure of information, other than information necessary to compute the tax payable and information required on the date hereof by Internal Revenue Service form 1001 or 4224, that the Lender reasonably considers to be confidential, the Lender shall give notice thereof to the Borrower and shall not be obligated to include in such form or document such confidential information. (f) For any period with respect to which a Lender has failed to provide the Borrower with the appropriate form described in Section 2.14(e) (other than if such failure is due to a change in law occurring subsequent to the date on which a form originally was required to be provided, or if such form otherwise is not required under subsection (e) above), such Lender shall not be entitled to indemnification under Section 2.14(a) or (c) with respect to Taxes imposed by the United States by reason of such failure; provided, however, that should a Lender become subject to Taxes because of its failure to deliver a form required hereunder, the Borrower shall take such steps as the Lender shall reasonably request to assist the Lender to recover such Taxes. (g) Any Lender claiming any additional amounts payable pursuant to this Section 2.14 agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its Eurodollar Lending Office if the making of such a change would avoid the need for, or reduce the amount of, any such additional amounts that may thereafter accrue and would not, in the reasonable judgment of such Lender, be otherwise disadvantageous to such Lender. SECTION 2.15. Sharing of Payments, Etc. If any Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on account of the Revolving Credit Advances owing to it (other than pursuant to Section 2.11, 2.14 or 8.04(c)) in excess of its ratable share of payments on account of the Revolving Credit Advances obtained by all the Lenders, such Lender shall forthwith purchase from the other Lenders such participations in the Revolving Credit Advances owing to them as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each of them; provided, however, that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender, such purchase from each Lender shall be rescinded and such Lender shall repay to the purchasing Lender the purchase price to the extent of such recovery together with an amount equal to such Lender's ratable share (according to the proportion of (i) the amount of such 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. The Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Section 2.15 may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off) with respect to such participation as fully as if such Lender were the direct creditor of the Borrower in the amount of such participation. SECTION 2.16. Evidence of Debt. (a) 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 Revolving Credit Advance owing to such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder in respect of Revolving Credit Advances. The Borrower agrees that upon notice by any Lender to the Borrower (with a copy of such notice to the Agent) to the effect that a Revolving Credit Note is required or appropriate in order for such Lender to evidence (whether for purposes of pledge, enforcement or otherwise) the Revolving Credit Advances owing to, or to be made by, such Lender, the Borrower shall promptly execute and deliver to such Lender a Revolving Credit Note payable to the order of such Lender in a principal amount up to the Commitment of such Lender. (b) The Register maintained by the Agent pursuant to Section 8.07(d) shall include a control account, and a subsidiary account for each Lender, in which accounts (taken together) shall be recorded (i) the date and amount of each Borrowing made hereunder, the Type of Advances comprising such Borrowing and, if appropriate, the Interest Period applicable thereto, (ii) the terms of each Assumption Agreement and each Assignment and Acceptance delivered to and accepted by it, (iii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iv) the amount of any sum received by the Agent from the Borrower hereunder and each Lender's share thereof. (c) Entries made in good faith by the Agent in the Register pursuant to subsection (b) above, and by each Lender in its account or accounts pursuant to subsection (a) above, shall be prima facie evidence of the amount of principal and interest due and payable or to become due and payable from the Borrower to, in the case of the Register, each Lender and, in the case of such account or accounts, such Lender, under this Agreement, absent manifest error; provided, however, that the failure of the Agent or such Lender to make an entry, or any finding that an entry is incorrect, in the Register or such account or accounts shall not limit or otherwise affect the obligations of the Borrower under this Agreement. SECTION 2.17. Use of Proceeds. The proceeds of the Advances shall be available (and the Borrower agrees that it shall use such proceeds) solely for general corporate purposes of the Borrower and its Subsidiaries, including commercial paper backstop. SECTION 2.18. Increase in the Aggregate Commitments. (a) The Borrower may, at any time but in any event not more than once in any calendar year prior to the Termination Date, by notice to the Agent, request that the aggregate amount of the Commitment be increased by integral multiples of $10,000,000 in excess thereof (each a "Commitment Increase") to be effective as of a date that is at least 90 days prior to the scheduled Termination Date then in effect (the "Increase Date") as specified in the related notice to the Agent; provided, however that (i) in no event shall the aggregate amount of the Commitments at any time exceed $300,000,000 and (ii) on the date of any request by the Borrower for a Commitment Increase and on the related Increase Date, the applicable conditions set forth in Article III shall be satisfied. (b) The Agent shall promptly notify the Lenders of a request by the Borrower for a Commitment Increase, which notice shall include (i) the proposed amount of such requested Commitment Increase, (ii) the proposed Increase Date and (iii) the date by which Lenders wishing to participate in the Commitment Increase must commit to an increase in the amount of their respective Commitments (the "Commitment Date"). Each Lender that is willing to participate in such requested Commitment Increase (each an "Increasing Lender") shall, in its sole discretion, give written notice to the Agent on or prior to the Commitment Date of the amount by which it is willing to increase its Commitment. If the Lenders notify the Agent that they are willing to increase the amount of their respective Commitments by an aggregate amount that exceeds the amount of the requested Commitment Increase, the requested Commitment Increase shall be allocated among the Lenders willing to participate therein in such amounts as are agreed between the Borrower and the Agent. (c) Promptly following each Commitment Date, the Agent shall notify the Borrower as to the amount, if any, by which the Lenders are willing to participate in the requested Commitment Increase. If the aggregate amount by which the Lenders are willing to participate in any requested Commitment Increase on any such Commitment Date is less than the requested Commitment Increase, then the Borrower may extend offers to one or more Eligible Assignees to participate in any portion of the requested Commitment Increase that has not been committed to by the Lenders as of the applicable Commitment Date; provided, however, that the Commitment of each such Eligible Assignee shall be in an amount of $15,000,000 or an integral multiple of $1,000,000 in excess thereof. (d) On each Increase Date, each Eligible Assignee that accepts an offer to participate in a requested Commitment Increase in accordance with Section 2.18(c) (each such Eligible Assignee and each Eligible Assignee that agrees to an extension of the Termination Date in accordance with Section 2.18(c), an "Assuming Lender") shall become a Lender party to this Agreement as of such Increase Date and the Commitment of each Increasing Lender for such requested Commitment Increase shall be so increased by such amount (or by the amount allocated to such Lender pursuant to the last sentence of Section 2.18(b)) as of such Increase Date; provided, however, that the Agent shall have received on or before such Increase Date the following, each dated such date: (i) (A) certified copies of resolutions of the Board of Directors of the Borrower or the Executive Committee of such Board approving the Commitment Increase and the corresponding modifications to this Agreement and (B) an opinion of counsel for the Borrower (which may be in-house counsel), in substantially the form of Exhibit D hereto; (ii) an assumption agreement from each Assuming Lender, if any, in form and substance satisfactory to the Borrower and the Agent (each an "Assumption Agreement"), duly executed by such Eligible Assignee, the Agent and the Borrower; and (iii) confirmation from each Increasing Lender of the increase in the amount of its Commitment in a writing satisfactory to the Borrower and the Agent. On each Increase Date, upon fulfillment of the conditions set forth in the immediately preceding sentence of this Section 2.18(d), the Agent shall notify the Lenders (including, without limitation, each Assuming Lender) and the Borrower, on or before 1:00 P.M. (New York City time), by telecopier or telex, of the occurrence of the Commitment Increase to be effected on such Increase Date and shall record in the Register the relevant information with respect to each Increasing Lender and each Assuming Lender on such date. SECTION 2.19. Extension of Termination Date. (a) At least 30 days but not more than 45 days prior to the Termination Date, the Borrower, by written notice to the Agent, may request an extension of the Termination Date in effect at such time by 364 days from its then scheduled expiration; provided, however, that the Borrower shall not have made the Term Loan Election for Revolving Credit Advances outstanding on such Termination Date prior to such time. The Agent shall promptly notify each Lender of such request, and each Lender shall in turn, in its sole discretion, not later than 20 days prior to the Termination Date, notify the Borrower and the Agent in writing as to whether such Lender will consent to such extension. If any Lender shall fail to notify the Agent and the Borrower in writing of its consent to any such request for extension of the Termination Date at least 20 days prior to the Termination Date, such Lender shall be deemed to be a Non- Consenting Lender with respect to such request. The Agent shall notify the Borrower not later than 15 days prior to the Termination Date of the decision of the Lenders regarding the Borrower's request for an extension of the Termination Date. (b) If all the Lenders consent in writing to any such request in accordance with subsection (a) of this Section 2.19, the Termination Date in effect at such time shall, effective as at the Termination Date (the "Extension Date"), be extended for 364 days; provided that on each Extension Date, the applicable conditions set forth in Article III shall be satisfied. If less than all of the Lenders consent in writing to any such request in accordance with subsection (a) of this Section 2.19, the Termination Date in effect at such time shall, effective as at the applicable Extension Date, be extended as to those Lenders that so consented (each a "Consenting Lender") but shall not be extended as to any other Lender (each a "Non-Consenting Lender"). To the extent that the Termination Date is not extended as to any Lender pursuant to this Section 2.19 and the Commitment of such Lender is not assumed in accordance with subsection (c) of this Section 2.19 on or prior to the applicable Extension Date, the Commitment of such Non-Consenting Lender shall automatically terminate in whole on such unextended Termination Date without any further notice or other action by the Borrower, such Lender or any other Person; provided that such Non- Consenting Lender's rights under Sections 2.11, 2.14 and 8.04, and its obligations under Section 7.05, shall survive the Termination Date for such Lender as to matters occurring prior to such date. It is understood and agreed that no Lender shall have any obligation whatsoever to agree to any request made by the Borrower for any requested extension of the Termination Date. (c) If less than all of the Lenders consent to any such request pursuant to subsection (a) of this Section 2.19, the Agent shall promptly so notify the Consenting Lenders, and each Consenting Lender may, in its sole discretion, give written notice to the Agent not later than 10 days prior to the Termination Date of the amount of the Non-Consenting Lenders' Commitments for which it is willing to accept an assignment. If the Consenting Lenders notify the Agent that they are willing to accept assignments of Commitments in an aggregate amount that exceeds the amount of the Commitments of the Non- Consenting Lenders, such Commitments shall be allocated among the Consenting Lenders willing to accept such assignments in such amounts as are agreed between the Borrower and the Agent. If after giving effect to the assignments of Commitments described above there remains any Commitments of Non-Consenting Lenders, the Borrower may arrange for one or more Consenting Lenders or other Eligible Assignees as Assuming Lenders to assume, effective as of the Extension Date, any Non-Consenting Lender's Commitment and all of the obligations of such Non-Consenting Lender under this Agreement thereafter arising, without recourse to or warranty by, or expense to, such Non- Consenting Lender; provided, however, that the amount of the Commitment of any such Assuming Lender as a result of such substitution shall in no event be less than $15,000,000 unless the amount of the Commitment of such Non- Consenting Lender is less than $15,000,000, in which case such Assuming Lender shall assume all of such lesser amount; and provided further that: (i) any such Consenting Lender or Assuming Lender shall have paid to such Non-Consenting Lender (A) the aggregate principal amount of, and any interest accrued and unpaid to the effective date of the assignment on, the outstanding Advances, if any, of such Non-Consenting Lender plus (B) any accrued but unpaid facility fees owing to such Non- Consenting Lender as of the effective date of such assignment; (ii) all additional costs reimbursements, expense reimbursements and indemnities payable to such Non-Consenting Lender, and all other accrued and unpaid amounts owing to such Non-Consenting Lender hereunder, as of the effective date of such assignment shall have been paid to such Non-Consenting Lender; and (iii) with respect to any such Assuming Lender, the applicable processing and recordation fee required under Section 8.07(a) for such assignment shall have been paid; provided further that such Non-Consenting Lender's rights under Sections 2.11, 2.14 and 8.04, and its obligations under Section 7.05, shall survive such substitution as to matters occurring prior to the date of substitution. At least three Business Days prior to any Extension Date, (A) each such Assuming Lender, if any, shall have delivered to the Borrower and the Agent an Assumption Agreement, duly executed by such Assuming Lender, such Non- Consenting Lender, the Borrower and the Agent, (B) any such Consenting Lender shall have delivered confirmation in writing satisfactory to the Borrower and the Agent as to the increase in the amount of its Commitment and (C) each Non- Consenting Lender being replaced pursuant to this Section 2.19 shall have delivered to the Agent any Note or Notes held by such Non-Consenting Lender. Upon the payment or prepayment of all amounts referred to in clauses (i), (ii) and (iii) of the immediately preceding sentence, each such Consenting Lender or Assuming Lender, as of the Extension Date, will be substituted for such Non-Consenting Lender under this Agreement and shall be a Lender for all purposes of this Agreement, without any further acknowledgment by or the consent of the other Lenders, and the obligations of each such Non-Consenting Lender hereunder shall, by the provisions hereof, be released and discharged. (d) If all of the Lenders (after giving effect to any assignments pursuant to subsection (b) of this Section 2.19) consent in writing to a requested extension (whether by execution or delivery of an Assumption Agreement or otherwise) not later than one Business Day prior to such Extension Date, the Agent shall so notify the Borrower, and, so long as no Default shall have occurred and be continuing as of such Extension Date, or shall occur as a consequence thereof, the Termination Date then in effect shall be extended for the additional 364-day period as described in subsection (a) of this Section 2.19, and all references in this Agreement, and in the Notes, if any, to the "Termination Date" shall, with respect to each Consenting Lender and each Assuming Lender for such Extension Date, refer to the Termination Date as so extended. Promptly following each Extension Date, the Agent shall notify the Lenders (including, without limitation, each Assuming Lender) of the extension of the scheduled Termination Date in effect immediately prior thereto and shall thereupon record in the Register the relevant information with respect to each such Consenting Lender and each such Assuming Lender. ARTICLE III CONDITIONS TO EFFECTIVENESS AND LENDING SECTION 3.01. Conditions Precedent to Effectiveness of Sections 2.01 and 2.03. Sections 2.01 and 2.03 of this Agreement shall become effective on and as of the first date (the "Effective Date") on which the following conditions precedent have been satisfied: (a) There shall have occurred no material adverse change in the properties, business, profits or condition (financial or otherwise) of the Borrower or of the Borrower and its Subsidiaries taken as a whole since October 31, 1999. (b) Except as set forth under the heading "Legal Proceedings" in the Borrower's 1999 Form 10-K, there shall exist no action, suit or proceeding pending against, or to the knowledge of the Borrower threatened against or affecting, the Borrower or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official (i) in which there is a reasonable possibility of an adverse determination which would have a Material Adverse Effect, or (ii) which in any manner draws into question the validity of this Agreement or the Notes. (c) All governmental and third party consents and approvals necessary in connection with the transactions contemplated hereby shall have been obtained (without the imposition of any conditions that are not acceptable to the Lenders) and shall remain in effect, and no law or regulation shall be applicable in the reasonable judgment of the Lenders that restrains, prevents or imposes materially adverse conditions upon the transactions contemplated hereby. (d) The Borrower shall have notified each Lender and the Agent in writing as to the proposed Effective Date. (e) The Borrower shall have paid all accrued fees and expenses of the Agent and the Lenders (including the accrued fees and expenses of counsel to the Agent) as agreed separately in writing by the parties to such agreement. (f) On the Effective Date, the following statements shall be true and the Agent shall have received for the account of each Lender a certificate signed by a duly authorized officer of the Borrower, dated the Effective Date, stating that: (i) The representations and warranties contained in Section 4.01 are correct on and as of the Effective Date, and (ii) No event has occurred and is continuing that constitutes a Default. (g) The Agent shall have received on or before the Effective Date the following, each dated such day, in form and substance satisfactory to the Agent and (except for the Revolving Credit Notes) in sufficient copies for each Lender: (i) The Revolving Credit Notes to the order of the Lenders to the extent requested by any Lender pursuant to Section 2.16. (ii) Certified copies of the general resolutions of the Board of Directors of the Borrower which authorize the Borrower to enter into this Agreement and the Notes, and of all documents evidencing other necessary corporate action and governmental approvals, if any, with respect to this Agreement and the Notes. (iii) A certificate of the Secretary or an Assistant Secretary of the Borrower certifying the names and true signatures of the officers of the Borrower authorized to sign this Agreement and the Notes and the other documents to be delivered hereunder. (iv) A favorable opinion of the Managing Director, Legal Affairs or of the Vice President, Legal Affairs and Intellectual Property of the Borrower, substantially in the form of Exhibit D hereto and as to such other matters as any Lender through the Agent may reasonably request. (v) A favorable opinion of Orrick, Herrington & Sutcliffe L.L.P., counsel for the Borrower, substantially in the form of Exhibit E hereto and as to such other matters as any Lender through the Agent may reasonably request. (vi) A favorable opinion of Shearman & Sterling, counsel for the Agent, in form and substance satisfactory to the Agent. SECTION 3.02. Conditions Precedent to Each Revolving Credit Borrowing, Increase Date and Extension Date. The obligation of each Lender to make a Revolving Credit Advance on the occasion of each Revolving Credit Borrowing, each Commitment Increase and each extension of Commitments pursuant to Section 2.19 shall be subject to the conditions precedent that the Effective Date shall have occurred and on the date of such Revolving Credit Borrowing, the applicable Increase Date or the applicable Extension Date (a) the following statements shall be true (and each of the giving of the applicable Notice of Revolving Credit Borrowing, request for Commitment Increase, request for extension of Commitments and the acceptance by the Borrower of the proceeds of such Revolving Credit Borrowing shall constitute a representation and warranty by the Borrower that on the date of such Borrowing, such Increase Date or such Extension Date such statements are true): (i) the representations and warranties contained in Section 4.01 (except, in the case of Revolving Credit Borrowings, the representations set forth in subsection (d)(ii) thereof and in subsection (e)(i) thereof) are correct on and as of the date of such Revolving Credit Borrowing, before and after giving effect to such Revolving Credit Borrowing and to the application of the proceeds therefrom, as though made on and as of such date, and (ii) no event has occurred and is continuing, or would result from such Revolving Credit Borrowing or from the application of the proceeds therefrom, that constitutes a Default; and (b) the Agent shall have received such other approvals, opinions or documents as any Lender through the Agent may reasonably request. SECTION 3.03. Conditions Precedent to Each Competitive Bid Borrowing. The obligation of each Lender that is to make a Competitive Bid Advance on the occasion of a Competitive Bid Borrowing to make such Competitive Bid Advance as part of such Competitive Bid Borrowing is subject to the conditions precedent that (i) the Agent shall have received the written confirmatory Notice of Competitive Bid Borrowing with respect thereto, (ii) on or before the date of such Competitive Bid Borrowing, but prior to such Competitive Bid Borrowing, the Agent shall have received a Competitive Bid Note payable to the order of such Lender for each of the one or more Competitive Bid Advances to be made by such Lender as part of such Competitive Bid Borrowing, in a principal amount equal to the principal amount of the Competitive Bid Advance to be evidenced thereby and otherwise on such terms as were agreed to for such Competitive Bid Advance in accordance with Section 2.03, and (iii) on the date of such Competitive Bid Borrowing the following statements shall be true (and each of the giving of the applicable Notice of Competitive Bid Borrowing and the acceptance by the Borrower of the proceeds of such Competitive Bid Borrowing shall constitute a representation and warranty by the Borrower that on the date of such Competitive Bid Borrowing such statements are true): (a) the representations and warranties contained in Section 4.01 are correct on and as of the date of such Competitive Bid Borrowing, before and after giving effect to such Competitive Bid Borrowing and to the application of the proceeds therefrom, as though made on and as of such date (except in the case of the representations and warranties set forth in subsection (d)(ii) thereof and in subsection (e)(i) thereof, as may have been disclosed in the most recent quarterly report on Form 10-Q or in the most recent annual report on Form 10-K filed by the Borrower with the SEC), (b) no event has occurred and is continuing, or would result from such Competitive Bid Borrowing or from the application of the proceeds therefrom, that constitutes a Default. SECTION 3.04. Determinations Under Section 3.01. For purposes of determining compliance with the conditions specified in Section 3.01, each Lender shall be deemed to have consented to, approved or accepted or to be satisfied with each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to the Lenders unless an officer of the Agent responsible for the transactions contemplated by this Agreement shall have received notice from such Lender prior to the date that the Borrower, by notice to the Lenders, designates as the proposed Effective Date, specifying its objection thereto. The Agent shall promptly notify the Lenders of the occurrence of the Effective Date. ARTICLE IV REPRESENTATIONS AND WARRANTIES SECTION 4.01. Representations and Warranties of the Borrower. The Borrower represents and warrants as follows: (a) Corporate Existence and Power. Each of the Borrower and each Subsidiary: (i) is a corporation duly organized and validly existing under the laws of its jurisdiction of incorporation; (ii) has all requisite power and authority and all necessary licenses and permits to own and operate its properties and to carry on its business as now conducted and as presently proposed to be conducted, except where failures to have such licenses and permits would not, in the aggregate, have a Material Adverse Effect; and (iii) is duly licensed or qualified and is in good standing as a foreign corporation in each jurisdiction wherein the nature of the business transacted by it or the nature of the property owned or leased by it makes such licensing or qualification necessary, except where failures to be so licensed, qualified or in good standing would not, in the aggregate, have a Material Adverse Effect. (b) Corporate and Governmental Authorization; No Contravention. The execution, delivery and performance by the Borrower of this Agreement and the Notes are within the Borrower's corporate powers, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official and do not contravene, or constitute a default under, any provision of applicable law or regulation or of the certificate of incorporation or by-laws of the Borrower or of any agreement, judgment, injunction, order, decree or other instrument binding upon the Borrower or any of its Subsidiaries or result in the creation or imposition of any Lien on any asset of the Borrower or any of its Subsidiaries. (c) Binding Effect. This Agreement constitutes a valid and binding agreement of the Borrower and each Note, when executed and delivered in accordance with this Agreement, will constitute a valid and binding obligation of the Borrower, in each case enforceable in accordance with its terms, except as limited by (i) bankruptcy, insolvency or similar laws affecting creditors' rights generally and (ii) general principles of equity. (d) Financial Information. (i) The consolidated balance sheet of the Borrower and its Subsidiaries as of October 31, 1999 and the related consolidated statements of operations and cash flows for the fiscal year then ended, reported on by PricewaterhouseCoopers LLP and set forth in the Borrower's 1999 Form 10-K (or an exhibit thereto), a copy of which has been obtained by each of the Lenders, fairly present, in conformity with generally accepted accounting principles, the consolidated financial position of the Borrower and its Subsidiaries as of such date and their consolidated results of operations and cash flows for such fiscal year. (ii) There has been no material adverse change since October 31, 1999 in the business, financial position or results of operations of the Borrower and its Subsidiaries, considered as a whole. (e) Litigation. Except as set forth under the heading "Legal Proceedings" in the Borrower's 1999 Form 10-K, there is no action, suit or proceeding pending against, or to the knowledge of the Borrower threatened against or affecting, the Borrower or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official (i) in which there is a reasonable possibility of an adverse determination which would have a Material Adverse Effect, or (ii) which in any manner draws into question the validity of this Agreement or the Notes. (f) Compliance with ERISA. Each member of the ERISA Group has fulfilled its obligations under the minimum funding standards of ERISA and the Internal Revenue Code with respect to each Plan and is in compliance in all material respects with the presently applicable provisions of ERISA and the Internal Revenue Code with respect to each Plan. No member of the ERISA Group has (i) sought a waiver of the minimum funding standard under Section 412 of the Internal Revenue Code in respect of any Plan, (ii) failed to make any contribution or payment to any Plan or Multiemployer Plan or in respect of any Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement, which has resulted or could result in the imposition of a Lien or the posting of a bond or other security under ERISA or the Internal Revenue Code which will violate Section 5.02(a) hereof or (iii) incurred any unpaid liability in excess of $50,000,000 under Title IV of ERISA other than a liability to the PBGC for premiums under Section 4007 of ERISA. (g) Environmental Matters. The Borrower has a process of conducting periodic internal reviews relating to compliance by the Borrower and its Subsidiaries with Environmental Laws and liabilities thereunder. On the basis of such reviews, except as set forth in the Borrower's 1999 Form 10-K, nothing has come to the attention of the Borrower which would lead it to believe that costs associated with compliance with Environmental Laws or liabilities thereunder (including, without limitation, any capital or operating expenses required for cleanup, closure of properties or compliance with Environmental Laws or any permit, license or approval, any related constraints on operating activities and any potential liabilities to third parties) would have a Material Adverse Effect. (h) Taxes. All federal and state income tax returns required to be filed by the Borrower or any Subsidiary in any jurisdiction have, in fact, been filed and all other tax returns required to be filed in any other jurisdiction have, in fact, been filed, except where the failure to so file in such jurisdictions (other than in connection with federal or state income tax returns) would not have a Material Adverse Effect, and all taxes, assessments, fees and other governmental charges upon the Borrower or any Subsidiary or upon any of their respective properties, income or franchises, which are shown to be due and payable in such returns, have been paid. For all taxable years ending on or before October 1994, the Federal income tax liability of the Borrower and its Subsidiaries has been satisfied and either the period of limitations on assessment of additional Federal income tax has expired or the Borrower and its Subsidiaries have entered into an agreement with the Internal Revenue Service closing conclusively the total tax liability for the taxable year. The provisions for taxes on the books of the Borrower and each Subsidiary are adequate for all open years, and for its current fiscal period. (i) No Regulatory Restrictions on Borrowing. The Borrower is not (i) an "investment company" within the meaning of the Investment Company Act of 1940, as amended, (ii) a "holding company" or a "subsidiary company" of a holding company within the meaning of the Public Utility Holding Company Act of 1935, as amended, or (iii) otherwise subject to any regulatory scheme applicable to it which restricts its ability to incur debt under this Agreement. (j) Full Disclosure. All written information heretofore furnished by the Borrower to the Agent or any Lender for purposes of or in connection with this Agreement or any transaction contemplated hereby does not, and all such written information hereafter furnished by the Borrower to the Agent or any Lender will not, contain any untrue statement of a material fact or in the aggregate omit a material fact necessary to make the statements therein not misleading on the date as of which such information is stated or certified. There is no fact peculiar to the Borrower or its Subsidiaries which the Borrower has not disclosed to the Lenders in writing which has had or, so far as the Borrower can now reasonably foresee, will have a Material Adverse Effect. ARTICLE V COVENANTS OF THE BORROWER SECTION 5.01. Affirmative Covenants. So long as any Advance shall remain unpaid or any Lender shall have any Commitment hereunder, the Borrower will: (a) Compliance with Laws, Etc. Comply, and cause each Subsidiary to comply, in all material respects with all applicable laws, ordinances, rules, regulations, and requirements of governmental authorities (including, without limitation, Environmental Laws and ERISA and the rules and regulations thereunder) except (A) where the necessity of compliance therewith is contested in good faith by appropriate proceedings or (B) where the violation of which, individually or in the aggregate, would not reasonably be expected to (x) result in a Material Adverse Effect or (y) if such violation is not remedied, result in any Lien not permitted under Section 5.02(a). (b) Payment of Obligations. Pay and discharge, and cause each Subsidiary to pay and discharge, at or before maturity, all their respective material obligations and liabilities, including, without limitation, tax liabilities, except where the same may be contested in good faith by appropriate proceedings, and maintain, and cause each Subsidiary to maintain, in accordance with GAAP, appropriate reserves for the accrual of any of the same. (c) Maintenance of Property; Insurance. (i) Keep, and cause each Subsidiary to keep, all property useful and necessary in its business in good working order and condition, ordinary wear and tear excepted; provided that nothing in this Section 5.01(c)(i) shall prevent the abandonment of any property if such abandonment does not result in any Default hereunder and the Borrower determines, in the exercise of its reasonable business judgment, that such abandonment is in the interest of the Borrower. (ii) Maintain, and cause each Subsidiary to maintain, insurance coverage by financially sound and reputable insurers and in such forms and amounts and against such risks as are customary for corporations of established reputation engaged in the same or a similar business and owning and operating similar properties in similar locations. (d) Preservation of Corporate Existence, Etc. Preserve, renew and keep in full force and effect, and cause each Subsidiary to preserve, renew and keep in full force and effect, their respective corporate existence and their respective rights, privileges and franchises, except to the extent that failures to maintain their respective rights, privileges and franchises could not, in the aggregate, reasonably be expected to have a Material Adverse Effect; provided that nothing in this Section 5.01(d) shall prohibit (A) the merger of a Subsidiary into the Borrower or the merger or consolidation of a Subsidiary with or into another Person if the corporation surviving such consolidation or merger is a Subsidiary and if, in each case, after giving effect thereto, no Default shall have occurred and be continuing or (B) the termination on of the corporate existence of any Subsidiary if such termination does not result in any Default hereunder and the Borrower determines, in the exercise of its reasonable business judgment, that such termination is in the interest of the Borrower. (e) Visitation Rights. Permit any Lender (i) to visit and inspect during normal business hours (at the expense of such Lender unless an Event of Default has occurred and is continuing), under the Borrower's guidance and, so long as no Default shall have occurred and be continuing, upon not less than three Business Days' prior notice, any of the properties of the Borrower or any Subsidiary, (ii) to examine (to the extent material to ascertaining compliance with the terms and provisions hereof or to the extent reasonably related to the financial condition or material operations of the Borrower or a Subsidiary) all of their books of account, records, reports and other papers, and to make copies and extracts therefrom (other than attorney-client privileged and attorney work-product documents) and (iii) to the extent material to ascertaining compliance with the terms and provisions hereof or to the extent reasonably related to the financial condition or material operations of the Borrower or a Subsidiary, to discuss their respective affairs, finances and accounts with their respective officers, employees (who are managers or officers), and independent public accountants and by this provision the Borrower authorizes said accountants to discuss with such Lenders the finances and affairs of the Borrower and its Subsidiaries; provided that such Lender shall have given prior written notice to the Borrower of its intention to discuss such finances and affairs with such accountants and have given the Borrower the opportunity to participate in such discussions, all at such reasonable times and as often as may be reasonably requested. Notwithstanding the above, the Borrower may, if and to the extent required by applicable law, deny such access or information to any Lender. Notwithstanding anything to the contrary in the foregoing provisions of this Section 5.01(e), neither the Agent nor any Lender shall have access to, nor may they request copies of, any information constituting trade secrets relating to technology unless the Agent or such Lender shall have executed and delivered to the Borrower a confidentiality agreement satisfactory to the Borrower. (f) Keeping of Books. Keep, and cause each of its Subsidiaries to keep, proper books of record and account, in which full, true and correct entries shall be made of all dealings and transactions in relation to its business and activities in accordance with generally accepted accounting principles in effect from time to time. (g) Reporting Requirements. Deliver to each of the Lenders (except as stated in clause (ix) below) or make available electronically: (i) as soon as available and in any event within 45 days after the end of each quarterly fiscal period (except the last) of each fiscal year, copies of: (A) a consolidated balance sheet of the Borrower and its Subsidiaries as of the close of such quarterly fiscal period, setting forth in comparative form the consolidated figures as of the close of the fiscal year then most recently ended, (B) consolidated statements of operations of the Borrower and its Subsidiaries for such quarterly fiscal period and for the portion of the fiscal year ending with such quarterly fiscal period, in each case setting forth in comparative form the consolidated figures for the corresponding period and portion of the preceding fiscal year and (C) a consolidated statement of cash flows of the Borrower and its Subsidiaries for the portion of the fiscal year ending with such quarterly fiscal period, setting forth in comparative form the consolidated figures for the corresponding period of the preceding fiscal year, it being agreed that (1) delivery of such financial statements shall be deemed to be a representation by the Borrower that such financial statements fairly present, in conformity with GAAP, the consolidated financial position of the Borrower and its Subsidiaries as of the close of such quarterly fiscal period and their consolidated results of operations and cash flows for the portion of the fiscal year ending at the end of such quarterly fiscal period (subject to normal year-end adjustments) and (2) the Borrower may satisfy the requirements of this Section 5.01(a)(i) by filing its Quarterly Report on Form 10-Q with the SEC; provided that such Form 10-Q satisfies the foregoing requirements of this paragraph (i); (ii) as soon as available and in any event within 90 days after the close of each fiscal year of the Borrower, copies of: (A) a consolidated balance sheet of the Borrower and its Subsidiaries as of the close of such fiscal year, and (B) consolidated statements of operations and cash flows of the Borrower and its Subsidiaries for such fiscal year, in each case setting forth in comparative form the consolidated figures for the two preceding fiscal years, all in reasonable detail and accompanied by a report thereon of a firm of independent public accountants of recognized national standing selected by the Borrower to the effect that the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Borrower and its Subsidiaries as of the end of the fiscal year being reported on and their consolidated results of operations and cash flows for said year in conformity with GAAP and that the examination of such accountants in connection with such financial statements has been conducted in accordance with generally accepted auditing standards, it being agreed that the Borrower may satisfy the requirements of this Section 5.01(a)(ii) by filing its Annual Report on Form 10-K with the SEC; provided that such Form 10-K (including the exhibits filed therewith) satisfies the requirements of this paragraph (ii); (iii) promptly upon receipt thereof, one copy of each interim or special audit made by independent accountants of the books of the Borrower or any Subsidiary and any management letter received from such accountants, in all cases, material to the financial condition or operations of the Borrower or of the Borrower and its Subsidiaries taken as a whole; (iv) promptly upon their becoming available, one copy of each financial statement, report, notice or proxy statement sent by the Borrower to stockholders generally and of each regular or periodic report, and any registration statement or prospectus (other than those on Form S-8) filed by the Borrower or any Subsidiary with any securities exchange or the SEC or any successor agency; provided that the filing of such document with the SEC shall satisfy such requirement, and copies of any orders in any proceedings to which the Borrower or any of its Subsidiaries is a party, issued by any governmental agency, Federal or state, having jurisdiction over the Borrower or any of its Subsidiaries, which orders are material to the financial condition or operations of the Borrower or the Borrower and its Subsidiaries taken as a whole; (v) promptly upon the occurrence thereof, written notice of (A) a Reportable Event with respect to any Plan; (B) the institution of any steps by the Borrower, any ERISA Affiliate, the PBGC or any other person to terminate any Plan if such termination were to result in a liability of the Borrower or any Subsidiary to the PBGC in an amount which could materially and adversely affect the condition, financial or otherwise, of the Borrower or of the Borrower and its Subsidiaries taken as a whole; (C) the institution of any steps by the Borrower or any ERISA Affiliate to withdraw from any Plan or any Multiemployer Plan if such withdrawal would result in a liability of the Borrower or any Subsidiary in an amount which could materially and adversely affect the condition, financial or otherwise, of the Borrower or of the Borrower and its Subsidiaries taken as a whole; (D) a "prohibited transaction" within the meaning of Section 406 of ERISA (which has not been exempted under or pursuant to Section 408 of ERISA) in connection with any Plan if such "prohibited transaction" would result in a liability of the Borrower or any Subsidiary in an amount which could materially and adversely affect the condition, financial or otherwise, of the Borrower or of the Borrower and its Subsidiaries taken as a whole; (E) any increase in the contingent liability of the Borrower or any Subsidiary with respect to any post-retirement welfare liability in an amount that could have a Material Adverse Effect; or (F) the taking of any action by, or the threat in writing of the taking of any action by, the Internal Revenue Service, the Department of Labor or the PBGC with respect to any of the foregoing; (vi) within the periods provided in paragraphs (i) and (ii) above, a certificate of an authorized financial officer of the Borrower stating that such officer has reviewed the provisions of this Agreement and (A) setting forth the information and computations (in sufficient detail) required in order to establish whether the Borrower was in compliance with the requirements of Sections 5.02(a), 5.02(e) and 5.03 at the end of the period covered by the financial statements then being furnished and (B) stating whether there existed as of the date of such financial statements and whether, to the best of such officer's knowledge, there exists on the date of the certificate or existed at any time during the period covered by such financial statements any Default and, if any such condition or event exists on the date of the certificate, specifying the nature and period of existence thereof and the action the Borrower is taking and proposes to take with respect thereto; (vii) within the period provided in paragraph (ii) above, a certificate of the accountants who render an opinion with respect to such financial statements, stating (A) that they have reviewed this Agreement, and (B) whether, in making their audit, such accountants have become aware of any Default under Section 6.01 insofar as any such terms or provisions pertain to or involve accounting matters or determinations, and if any such condition or event then exists specifying the nature and period of existence thereof; (viii) within five days after any officer of the Borrower obtains knowledge of any Default, if such Default is then continuing, a certificate of the chief financial officer or the chief accounting officer of the Borrower setting forth the details thereof and the action which the Borrower is taking and proposes to take with respect thereto; (ix) promptly upon any change in the Public Debt Rating, a notice reporting such change and stating the date on which such change was publicly announced by the relevant rating agency, such notice to be delivered by the Borrower to the Agent (which shall promptly advise the Lenders thereof if the Applicable Margin, the Applicable Percentage or the Applicable Utilization Fee is affected by such change in the Public Debt Rating); and (x) from time to time such additional information regarding the financial position or business of the Borrower and its Subsidiaries as the Agent, at the request of any Lender, may reasonably request. SECTION 5.02. Negative Covenants. So long as any Advance shall remain unpaid or any Lender shall have any Commitment hereunder, the Borrower will not: (a) Liens, Etc. Create, incur or suffer to exist, or permit any of its Subsidiaries to create, incur or suffer to exist, any Lien on or with respect to any of its properties, whether now owned or hereafter acquired, or upon any income or profits therefrom, or acquire or agree to acquire, or permit any Subsidiary to acquire, any property or assets upon conditional sales agreements or other title retention devices, except: (i) Liens for property taxes and assessments or governmental charges or levies and Liens securing claims or demands of mechanics and materialmen, provided that payment thereof is not at the time required by Section 5.01(a) or (b); (ii) any Lien of or resulting from any judgment or award; provided that either (A) the amount secured thereby does not exceed $50,000,000 or (B) if the amount secured thereby does exceed $50,000,000, the time for the appeal or petition for rehearing of such judgment or award shall not have expired, or the Borrower or a Subsidiary shall in good faith be prosecuting an appeal or proceeding for a review thereof, and execution of such judgment or award shall be stayed pending such appeal or proceeding for review; (iii) Liens incidental to the conduct of business conducted by the Borrower and its Subsidiaries in the ordinary course of business or the ownership of properties and assets owned by the Borrower and its Subsidiaries (including Liens in connection with worker's compensation, unemployment insurance and other like laws, warehousemen's and attorneys' liens and statutory landlords' liens) and Liens to secure the performance of bids, tenders or trade contracts, or to secure statutory obligations, surety or appeal bonds or other Liens of like general nature incurred in the ordinary course of business of the Borrower and its Subsidiaries and not in connection with the borrowing of money, provided in each case, the obligation secured is not overdue or, if overdue, is being contested in good faith by appropriate actions or proceedings; (iv) survey exceptions or encumbrances, encroachments, easements or reservations, or rights of others for rights-of-way, utilities and other similar purposes, zoning restrictions, declarations of covenants, conditions and restrictions, other title exceptions or other restrictions as to the use of real properties, which are necessary or appropriate in the good faith judgment of the Borrower for the conduct of the business of the Borrower and its Subsidiaries and which, individually or in the aggregate, do not in any event materially impair their use in the operation of the business of the Borrower or of the Borrower and its Subsidiaries taken as a whole; (v) Liens securing Indebtedness of a Subsidiary to the Borrower or to another Subsidiary; (vi) Liens existing as of the Effective Date and reflected in Schedule 5.02(a) hereto, including any renewals, extensions or replacements of any such Lien, provided that: (A) no additional property is encumbered in connection with any such renewal, extension or replacement of any such Lien; and (B) there is no increase in the aggregate principal amount of Debt secured by any such Lien from that which was outstanding or permitted to be outstanding with respect to such Lien as of the Effective Date or the date of such renewal, extension or replacement, whichever is greater; (vii) Liens incurred after the Effective Date given to secure the payment of the purchase price and/or other direct costs incurred in connection with the acquisition, construction, improvement or rehabilitation of assets including Liens incurred by the Borrower or any Subsidiary securing Debt incurred in connection with industrial development bond and pollution control financings, including Liens existing on such assets at the time of acquisition thereof or at the time of acquisition by the Borrower or a Subsidiary of any business entity (including a Subsidiary) then owning such assets, whether or not such existing Liens were given to secure the payment of the purchase price of the assets to which they attach, provided that (A) except in the case of Liens existing on assets at the time of acquisition of a Subsidiary then owning such assets, the Lien shall be created within twelve (12) months of the later of the acquisition of, or the completion of the construction or improvement in respect of, such assets and shall attach solely to the assets acquired, purchased, or financed, (B) except in the case of Liens existing on assets at the time of acquisition of a Subsidiary then owning such assets or Liens in connection with industrial development bond or pollution control financings, at the time of the incurrence of such Lien, the aggregate amount remaining unpaid on all Debt secured by Liens on such assets whether or not assumed by the Borrower or a Subsidiary shall not exceed an amount equal to 75% of the lesser of the total purchase price or fair market value, at the time such Debt is incurred, of such assets (as determined in good faith by the Board of Directors of the Borrower), and (C) all such Debt shall have been incurred within the applicable limitation provided in Section 5.02(e); (viii) Liens arising from the sale or transfer of accounts receivable and notes receivable of AMJ, provided that (A) AMJ shall receive adequate consideration therefor and (B) all Debt, if any, secured by such Liens is incurred within the applicable limitation of Section 5.02(e); (ix) Liens on notes or accounts receivable sold or transferred in a transaction which is accounted for as a true sale under GAAP; (x) Liens securing Debt, to the extent that such Liens are not otherwise permitted by this Section 5.02(a), provided that (A) immediately after giving effect to the incurrence of any such Lien, the sum of the aggregate principal amount of all outstanding Debt secured by Liens permitted solely by reason of this Sections 5.02(a)(x) shall not exceed 15% of Consolidated Net Tangible Assets, and (B) the incurrence of such Debt is permitted by Section 5.02(e); and (xi) Liens incurred in connection with any renewals, extensions or refundings of any Debt secured by Liens described in Sections 5.02(a)(vii), (viii), (ix) or (x), provided that there is no increase in the aggregate principal amount of Debt secured thereby and no additional property is encumbered. In the event that any property of the Borrower or its Subsidiaries is subjected to a lien in violation of this Section 5.02(a), but no other provision of this Agreement including, without limitation, Section 5.02(e) (the Indebtedness secured by such lien being referred to as "Prohibited Secured Indebtedness"), such violation shall not constitute an Event of Default hereunder if the Borrower, substantially simultaneously with the incurrence of such lien, makes or causes to be made a provision whereby the Notes will be secured equally and ratably with all Prohibited Secured Indebtedness and delivers to the Lenders an opinion to that effect, and, in any case, the Notes shall have the benefit, to the full extent that, and with such priority as, the Lenders may be entitled to under applicable law, of an equitable lien to secure the Notes on such property of the Borrower or its Subsidiaries that secures Prohibited Secured Indebtedness. The opinion referred to in the preceding sentence shall be addressed to each of the Lenders, shall contain such qualifications and limitations as are reasonably acceptable to the Lenders and shall be delivered by counsel of nationally recognized standing selected by the Borrower and satisfactory to the Required Lenders. Such counsel shall be deemed to be satisfactory to the Required Lenders unless, during the 15 day period after the Lenders have received written notice identifying such counsel, Lenders having more than 40% of the aggregate amount of the Commitments or, if the Commitments shall have been terminated, more than 40% of the aggregate unpaid principal amount of the Advances, shall have objected to such selection in writing to the Borrower. Notwithstanding any of the foregoing provisions of this Section 5.02(a) including, without limitation, the terms and provisions of the preceding paragraph of this Section 5.02(a), the Borrower shall not, and shall not permit any Subsidiary to, create or incur, or suffer to be incurred or to exist, any Lien (other than Liens described in Section 5.02(a)(i) through (iv), inclusive) upon any land, property or buildings (or any interest therein) described as Special Unencumbered Property in Schedule 5.02(a)(xii) hereto. (b) Consolidations, Mergers and Sales of Assets. Consolidate or merge with or into any other Person or sell, lease or otherwise transfer, directly or indirectly, all or substantially all of its assets to any other Person; provided that the Borrower may merge with another Person if immediately after giving effect to such merger (x) no Default shall exist and (y) the Borrower is the surviving entity. (c) Accounting Changes. Make or permit, or permit any of its Subsidiaries to make or permit, any change in accounting policies or reporting practices, except as required or permitted by GAAP. (d) Change in Nature of Business. Engage, or permit any of its Subsidiaries to engage, in any business if, as a result, the primary business, taken on a consolidated basis, which would then be engaged in by the Borrower and its Subsidiaries would be substantially changed from the business of the manufacture of capital equipment for the electronics industry. (e) Debt. Consolidated Debt shall at all times be less than 50% of Consolidated Net Tangible Assets; provided that, at any time when the equity investments (valued at their then current book value) of the Borrower and its Subsidiaries in Equity Affiliates would otherwise exceed 5% of Consolidated Net Tangible Assets, Consolidated Net Tangible Assets shall be adjusted for purposes of this Section by deducting such equity investments (valued at their then current book value). (f) Use of Proceeds. Use proceeds of the Advances made under this Agreement, directly or indirectly, for the purpose, whether immediate, incidental or ultimate, of buying or carrying Margin Stock unless, at all times when any such proceeds are used to buy or carry Margin Stock, not more than 25% of the value (as determined by any reasonable method) of the assets (either of the Borrower only or of the Borrower and its Subsidiaries on a consolidated basis) which are subject to any restriction in Sections 5.02(a) or 5.02(b) consists of Margin Stock. (g) Transactions with Affiliates. Enter into or be a party to, or permit any Subsidiary to enter into or be a party to, any transaction or arrangement with any Affiliate (including, without limitation, the purchase from, sale to or exchange of property with, or the rendering of any service by or for, any Affiliate), except in the ordinary course of and pursuant to the reasonable requirements of the Borrower's or such Subsidiary's (as the case may be) business and upon fair and reasonable terms no less favorable to the Borrower or such Subsidiary than would be obtained in a comparable arm's-length transaction with a Person other than an Affiliate. SECTION 5.03. Financial Covenants. So long as any Advance shall remain unpaid or any Lender shall have any Commitment hereunder, the Borrower will maintain Consolidated Tangible Net Worth at an amount not less than the amount determined by adding the following: (a) $1,973,000,000 plus (b) 50% of Consolidated Net Income for the period from October 27, 1997 to and including the date of any calculation hereunder. ARTICLE VI EVENTS OF DEFAULT SECTION 6.01. Events of Default. If any of the following events ("Events of Default") shall occur and be continuing: (a) the Borrower shall fail to pay any principal of any Advance when due or shall fail to pay any interest, fee, or other amount payable hereunder within five days after it becomes due; (b) any representation, warranty, certification or statement made by the Borrower in this Agreement or in any certificate, financial statement or other document delivered pursuant to this Agreement shall prove to have been incorrect in any material respect when made (or deemed made); (c) the Borrower shall fail to perform or observe any other term, covenant or agreement contained in this Agreement on its part to be performed or observed (other than clause (a) above) if such failure shall remain unremedied for 30 days after written notice thereof shall have been given to the Borrower by the Agent or any Lender; (d) the Borrower or any Subsidiary shall fail to make any payment in respect of any Material Financial Obligations when due or within any applicable grace period; (e) any event or condition shall occur which results in the acceleration of the maturity of any Material Debt or enables (or, with the giving of notice or lapse of time or both, would enable) the holder of such Debt or any Person acting on such holder's behalf to accelerate the maturity thereof; (f) the Borrower or any Subsidiary shall 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 seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due, or shall take any corporate action to authorize any of the foregoing; provided that no event otherwise constituting an Event of Default under this clause (f) shall be an Event of Default if the total assets of all entities with respect to which an event has occurred which would otherwise have constituted an Event of Default under this clause (f) or clause (g) do not exceed $50,000,000 in the aggregate; (g) an involuntary case or other proceeding shall be commenced against the Borrower or any Subsidiary seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 60 days; or an order for relief shall be entered against the Borrower or any Subsidiary under the federal bankruptcy laws as now or hereafter in effect; provided that no event otherwise constituting an Event of Default under this clause (g) shall be an Event of Default if the total assets of all entities with respect to which an event has occurred which would otherwise have constituted an Event of Default under clause (f) or this clause (g) do not exceed $50,000,000 in the aggregate; (h) any ERISA Affiliate shall fail to pay when due (or in the case of an ERISA Affiliate acquired by the Borrower or a Subsidiary after the due date thereof, within 30 days after such ERISA Affiliate is so acquired) an amount or amounts aggregating in excess of $50,000,000 which it shall have become liable to pay under Title IV of ERISA; or notice of intent to terminate a Material Plan shall be filed under Title IV of ERISA by any ERISA Affiliate, any plan administrator or any combination of the foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to terminate, to impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or to cause a trustee to be appointed to administer any Material Plan; or there shall occur a complete or partial withdrawal from, or a default, within the meaning of Section 4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans which could cause one or more ERISA Affiliates to incur a current payment obligation in excess of $50,000,000; (i) final judgments or orders for the payment of money in excess of $50,000,000 in the aggregate (excluding amounts with respect to which a financially sound and reputable insurer has admitted liability) shall be rendered against the Borrower or any Subsidiary and such judgments or orders shall continue unsatisfied and unstayed for a period of 30 consecutive days; or (j) either (i) any person or group of persons (within the meaning of Section 13 or 14 of the Exchange Act) shall have acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by the SEC under said Act) of 30% or more of the outstanding shares of Voting Stock of the Borrower; or (ii) during any period of 12 consecutive calendar months, commencing before or after the date of this Agreement, individuals who were directors of the Borrower on the first day of such period (the "Initial Directors") shall cease for any reason to constitute a majority of the board of directors of the Borrower unless the Persons replacing such individuals were nominated or elected by a majority of the directors (x) who were Initial Directors at the time of such nomination or election and/or (y) who were nominated or elected by a majority of directors who were Initial Directors at the time of such nomination or election; then, and in any such event, the Agent (i) shall at the request, or may with the consent, of the Required Lenders, by notice to the Borrower, declare the obligation of each Lender to make Advances to be terminated, whereupon the same shall forthwith terminate, and (ii) shall at the request, or may with the consent, of the Required Lenders, by notice to the Borrower, declare the Advances, all interest thereon and all other amounts payable under this Agreement to be forthwith due and payable, whereupon the Advances, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower; provided, however, that in the case of any of the Events of Default specified in clause (f) or (g) above with respect to the Borrower, without any notice to the Borrower or any other act by the Agent or the Lenders, the Commitments shall thereupon terminate and the Notes (together with accrued interest thereon) shall immediately become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrower. ARTICLE VII THE AGENT SECTION 7.01. Authorization and Action. Each Lender hereby appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers and discretion under this Agreement as are delegated to the Agent by the terms hereof, together with such powers and discretion as are reasonably incidental thereto. As to any matters not expressly provided for by this Agreement (including, without limitation, enforcement or collection of the Notes), the Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Required Lenders, and such instructions shall be binding upon all Lenders and all holders of Notes; provided, however, that the Agent shall not be required to take any action that exposes the Agent to personal liability or that is contrary to this Agreement or applicable law. The Agent agrees to give to each Lender prompt notice of each notice given to it by the Borrower pursuant to the terms of this Agreement. SECTION 7.02. Agent's Reliance, Etc. Neither the Agent nor any of its directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it or them under or in connection with this Agreement, except for its or their own gross negligence or willful misconduct. Without limitation of the generality of the foregoing, the Agent: (i) may treat the Lender that made any Advance as the holder of the Debt resulting therefrom until the Agent receives and accepts an Assumption Agreement entered into by an Assuming Lender as provided in Section 2.18 or 2.19, as the case may be, or an Assignment and Acceptance entered into by such Lender, as assignor, and an Eligible Assignee, as assignee, as provided in Section 8.07; (ii) may consult with legal counsel (including counsel for the Borrower), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (iii) makes no warranty or representation to any Lender and shall not be responsible to any Lender for any statements, warranties or representations (whether written or oral) made in or in connection with this Agreement; (iv) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement on the part of the Borrower or to inspect the property (including the books and records) of the Borrower; (v) shall not be responsible to any Lender for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto; and (vi) shall incur no liability under or in respect of this Agreement by acting upon any notice, consent, certificate or other instrument or writing (which may be by telecopier, telegram or telex) believed by it to be genuine and signed or sent by the proper party or parties. SECTION 7.03. Citicorp and Affiliates. With respect to its Commitment, the Advances made by it and the Note issued to it, Citicorp shall have the same rights and powers under this Agreement as any other Lender and may exercise the same as though it were not the Agent; and the term "Lender" or "Lenders" shall, unless otherwise expressly indicated, include Citicorp in its individual capacity. Citicorp and its Affiliates may accept deposits from, lend money to, act as trustee under indentures of, accept investment banking engagements from and generally engage in any kind of business with, the Borrower, any of its Subsidiaries and any Person who may do business with or own securities of the Borrower or any such Subsidiary, all as if Citicorp were not the Agent and without any duty to account therefor to the Lenders. SECTION 7.04. Lender Credit Decision. Each Lender acknowledges that it has, independently and without reliance upon the Agent or any other Lender and based on the financial statements referred to in Section 4.01 and such other 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 deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement. SECTION 7.05. Indemnification. The Lenders agree to indemnify the Agent (to the extent not reimbursed by the Borrower), ratably according to the respective principal amounts of the Revolving Credit Advances then owed to each of them (or if no Revolving Credit Advances are at the time outstanding, ratably according to the respective amounts of their Commitments), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever that may be imposed on, incurred by, or asserted against the Agent in any way relating to or arising out of this Agreement or any action taken or omitted by the Agent under this Agreement (collectively, the "Indemnified Costs"), provided that no Lender shall be liable for any portion of the Indemnified Costs resulting from the Agent's gross negligence or willful misconduct. Without limitation of the foregoing, each Lender agrees to reimburse the Agent promptly upon demand for its ratable share of any out- of-pocket expenses (including reasonable counsel fees) 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, to the extent that the Agent is not reimbursed for such expenses by the Borrower. In the case of any investigation, litigation or proceeding giving rise to any Indemnified Costs, this Section 7.05 applies whether any such investigation, litigation or proceeding is brought by the Agent, any Lender or a third party. SECTION 7.06. Successor Agent. The Agent may resign at any time by giving written notice thereof to the Lenders and the Borrower and 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 Agent with the consent, so long as no Default has occurred and is continuing, of the Borrower (which consent shall not be unreasonably withheld or delayed). If no successor Agent shall have been so appointed by the Required Lenders, and shall have accepted such appointment, within 30 days after the retiring Agent's giving of notice of resignation or the Required Lenders' removal of the retiring Agent, then the retiring Agent may, on behalf of the Lenders, 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 $50,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, discretion, 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 or removal hereunder as Agent, the provisions of this Article VII 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 7.07. Other Agents. Each Lender hereby acknowledges that neither the documentation agent nor any other Lender designated as any "Agent" on the signature pages hereof has any liability hereunder other than in its capacity as a Lender. ARTICLE VIII MISCELLANEOUS SECTION 8.01. Amendments, Etc. No amendment or waiver of any provision of this Agreement or the Revolving Credit Notes, nor consent to any departure by the Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by the Borrower and the Required Lenders, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no amendment, waiver or consent shall, unless in writing and signed by all the Lenders, do any of the following: (a) waive any of the conditions specified in Section 3.01, (b) increase the Commitments of the Lenders or subject the Lenders to any additional obligations, (c) reduce the principal of, or interest on, the Revolving Credit Advances or any fees or other amounts payable hereunder, (d) postpone any date fixed for any payment of principal of, or interest on, the Revolving Credit Advances or any fees or other amounts payable hereunder, (e) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Revolving Credit Advances, or the number of Lenders, that shall be required for the Lenders or any of them to take any action hereunder or (f) amend this Section 8.01; and provided further that no amendment, waiver or consent shall, unless in writing and signed by the Agent in addition to the Lenders required above to take such action, affect the rights or duties of the Agent under this Agreement or any Note. SECTION 8.02. Notices, Etc. All notices and other communications provided for hereunder shall be in writing (including telecopier, telegraphic or telex communication) and mailed, telecopied, telegraphed, telexed or delivered, if to the Borrower, at its address at 3050 Bowers Avenue, Santa Clara, California 95054, Attention: Diane Gale/Randy Webb; if to any Initial Lender, at its Domestic Lending Office specified opposite its name on Schedule I hereto; if to any other Lender, at its Domestic Lending Office specified in the Assumption Agreement or the Assignment and Acceptance pursuant to which it became a Lender; and if to the Agent, at its address at Two Penns Way, New Castle, Delaware 19720, Attention: Bank Loan Syndications Department; or, as to the Borrower or the Agent, at such other address as shall be designated by such party in a written notice to the other parties and, as to each other party, at such other address as shall be designated by such party in a written notice to the Borrower and the Agent. All such notices and communications shall, when mailed, telecopied, telegraphed or telexed, be effective when deposited in the mails, telecopied, delivered to the telegraph company or confirmed by telex answerback, respectively, except that notices and communications to the Agent pursuant to Article II, III or VII shall not be effective until received by the Agent. Delivery by telecopier of an executed counterpart of any amendment or waiver of any provision of this Agreement or the Notes or of any Exhibit hereto to be executed and delivered hereunder shall be effective as delivery of a manually executed counterpart thereof. SECTION 8.03. No Waiver; Remedies. No failure on the part of any Lender or the Agent to exercise, and no delay in exercising, any right hereunder or under any Note shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. SECTION 8.04. Costs and Expenses. (a) The Borrower shall pay (i) all out-of pocket expenses of the Agent, including reasonable fees and disbursements of special counsel for the Agent, in connection with the preparation of this Agreement (subject to any limits agreed upon in writing by the Borrower and the Agent), any waiver or consent hereunder or any amendment hereof or any Default or alleged Default hereunder and (ii) if an Event of Default occurs, all out-of pocket expenses incurred by the Agent and each Lender, including (without duplication) the reasonable fees and disbursements of outside counsel and the allocated cost of inside counsel, in connection with such Event of Default and collection, bankruptcy, insolvency and other enforcement proceedings resulting therefrom. (b) The Borrower agrees to indemnify and hold harmless the Agent and each Lender and each of their Affiliates and their officers, directors, employees, agents and advisors (each, an "Indemnified Party") from and against any and all claims, damages, losses, liabilities and expenses (including, without limitation, reasonable fees and expenses of counsel) that may be incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or by reason of (including, without limitation, in connection with any investigation, litigation or proceeding or preparation of a defense in connection therewith) (i) the Notes, this Agreement, any of the transactions contemplated herein or the actual or proposed use of the proceeds of the Advances or (ii) the actual or alleged presence of Hazardous Substances on any property of the Borrower or any of its Subsidiaries or any Environmental Action relating in any way to the Borrower or any of its Subsidiaries, except to the extent such claim, damage, loss, liability or expense resulted from such Indemnified Party's gross negligence or willful misconduct. In the case of an investigation, litigation or other proceeding to which the indemnity in this Section 8.04(b) applies, such indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by the Borrower, its directors, shareholders or creditors or an Indemnified Party or any other Person or any Indemnified Party is otherwise a party thereto and whether or not the transactions contemplated hereby are consummated. The Borrower also agrees not to assert any claim for special, indirect, consequential or punitive damages against the Agent, any Lender, any of their Affiliates, or any of their respective directors, officers, employees, attorneys and agents, on any theory of liability, arising out of or otherwise relating to the Notes, this Agreement, any of the transactions contemplated herein or the actual or proposed use of the proceeds of the Advances. (c) If any payment of principal with respect to any Eurodollar Rate Advance, LIBO Rate Advance or Adjusted CD Rate Advance, or any such Advance is Converted to a different Type of Advance (pursuant to Section 2.08(d) or (e), 2.10 or 2.12, acceleration of the maturity of the Advances pursuant to Section 6.01 or for any other reason) other than on the last day of the Interest Period for such Advance, or if the Borrower fails to borrow, prepay, Convert or continue any such Advance after notice has been given to any Lender in accordance with Section 2.02(a), 2.03(a), 2.06, 2.09 or 2.10, the Borrower shall reimburse each Lender for any resulting loss or expense (with interest if appropriate) incurred by it or by an existing or prospective assignee or participant in the related Advance, including (without limitation) any loss incurred in obtaining, liquidation or employing deposits from third parties, but excluding loss of margin for the period after any such payment or failure to borrow, prepay, Convert or continue; provided that such Lender shall have delivered to the Borrower a certificate as to the amount of such loss or expense, which certificate shall show in reasonable detail the basis for calculating such amount and shall be conclusive in the absence of manifest error. (d) Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower contained in Sections 2.11, 2.14 and 8.04 shall survive the payment in full of principal, interest and all other amounts payable hereunder and under the Notes. SECTION 8.05. Right of Set-off. Upon (i) the occurrence and during the continuance of any Event of Default and (ii) the making of the request or the granting of the consent specified by Section 6.01 to authorize the Agent to declare the Notes due and payable pursuant to the provisions of Section 6.01, 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 indebtedness at any time owing by such Lender or such Affiliate to or for the credit or the account of the Borrower against any and all of the obligations of the Borrower now or hereafter existing under this Agreement and the Note held by such Lender, without limitation of clauses (i) and (ii) above, whether or not such Lender shall have made any demand under this Agreement or such Note and although such obligations may be unmatured. Each Lender agrees promptly to notify the Borrower after any such set-off and application, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Lender and its Affiliates under this Section are in addition to other rights and remedies (including, without limitation, other rights of set-off) that such Lender and its Affiliates may have. SECTION 8.06. Binding Effect. This Agreement shall become effective (other than Sections 2.01 and 2.03, which shall only become effective upon satisfaction of the conditions precedent set forth in Section 3.01) when it shall have been executed by the Borrower and the Agent and when the Agent shall have been notified by each Initial Lender that such Initial Lender has executed it and thereafter shall be binding upon and inure to the benefit of the Borrower, the Agent and each Lender and their respective successors and assigns, except that the Borrower shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of the Lenders. SECTION 8.07. Assignments and Participations. (a) Each Lender may with the consent of the Agent and the Borrower and, if demanded by the Borrower (following a demand by such Lender pursuant to Section 2.11 or 2.14 and so long as no Default has occurred and is continuing) upon at least five Business Days' notice to such Lender and the Agent, will assign to one or more Persons all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment, the Revolving Credit Advances owing to it and the Revolving Credit Note or Notes held by it); provided, however, that (i) each such assignment shall be of a constant, and not a varying, percentage of all rights and obligations under this Agreement (other than any right to make Competitive Bid Advances, Competitive Bid Advances owing to it and Competitive Bid Notes), (ii) except in the case of an assignment to a Person that, immediately prior to such assignment, was a Lender or an assignment of all of a Lender's rights and obligations under this Agreement, the amount of the Commitment of the assigning Lender being assigned pursuant to each such assignment (determined as of the date of the Assignment and Acceptance with respect to such assignment) shall in no event be less than $10,000,000 or an integral multiple of $1,000,000 in excess thereof, (iii) each such assignment shall be to an Eligible Assignee, (iv) each such assignment made as a result of a demand by the Borrower pursuant to this Section 8.07(a) shall be arranged by the Borrower after consultation with the Agent and shall be either an assignment of all of the rights and obligations of the assigning Lender under this Agreement or an assignment of a portion of such rights and obligations made concurrently with another such assignment or other such assignments that together cover all of the rights and obligations of the assigning Lender under this Agreement, (v) no Lender shall be obligated to make any such assignment as a result of a demand by the Borrower pursuant to this Section 8.07(a) unless and until such Lender shall have received one or more payments from either the Borrower or one or more Eligible Assignees in an aggregate amount at least equal to the aggregate outstanding principal amount of the Advances owing to such Lender, together with accrued interest thereon to the date of payment of such principal amount and all other amounts payable to such Lender under this Agreement, and (vi) the parties to each such assignment shall execute and deliver to the Agent, for its acceptance and recording in the Register, an Assignment and Acceptance, together with any Revolving Credit Note subject to such assignment and a processing and recordation fee of $3,500. Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Assignment and Acceptance, (x) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, have the rights and obligations of a Lender hereunder and (y) the Lender assignor thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under this Agreement (and, 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 Lender shall cease to be a party hereto). (b) By executing and delivering an Assignment and Acceptance, the Lender assignor thereunder and the assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other than as provided in such Assignment and Acceptance, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto; (ii) such assigning Lender makes no 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 this Agreement or any other instrument or document furnished pursuant hereto; (iii) such assignee confirms that it has received a copy of this Agreement, together with copies of the financial statements referred to in Section 4.01 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 assigning Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such assignee confirms that it is an Eligible Assignee; (vi) such assignee appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers and discretion under this Agreement as are delegated to the Agent by the terms hereof, together with such powers and discretion as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all of the obligations that by the terms of this Agreement are required to be performed by it as a Lender. (c) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an assignee representing that it is an Eligible Assignee, together with any Revolving Credit Note or Notes subject to such assignment, the Agent shall, if such Assignment and Acceptance has been completed and is in substantially the form of Exhibit C hereto, (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the Borrower. (d) The Agent shall maintain at its address referred to in Section 8.02 a copy of each Assumption Agreement and each Assignment and Acceptance delivered to and accepted by it and a register for the recordation of the names and addresses of the Lenders and the Commitment of, and principal amount of the Advances owing to, each Lender from time to time (the "Register"). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Borrower, the Agent and the Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice. (e) Each Lender may sell participations to one or more banks or other entities (other than the Borrower or any of its Affiliates) in or to all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment, the Advances owing to it and any Note or Notes held by it); provided, however, that (i) such Lender's obligations under this Agreement (including, without limitation, its Commitment to the Borrower hereunder) shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) such Lender shall remain the holder of any such Note for all purposes of this Agreement, (iv) the Borrower, the Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and (v) no participant under any such participation shall have any right to approve any amendment or waiver of any provision of this Agreement or any Note, 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 Notes or any fees or other amounts payable hereunder, in each case to the extent subject to such participation, or postpone any date fixed for any payment of principal of, or interest on, the Notes or any fees or other amounts payable hereunder, in each case to the extent subject to such participation. (f) Any Lender may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 8.07, disclose to the assignee or participant or proposed assignee or participant, any information relating to the Borrower furnished to such Lender by or on behalf of the Borrower; provided that, prior to any such disclosure, the assignee or participant or proposed assignee or participant shall agree in writing to be bound by the terms of Section 8.08. (g) Notwithstanding any other provision set forth in this Agreement, any Lender may at any time create a security interest in all or any portion of its rights under this Agreement (including, without limitation, the Advances owing to it and any Note or Notes held by it) in favor of any Federal Reserve Bank in accordance with Regulation A of the Board of Governors of the Federal Reserve System. SECTION 8.08. Confidentiality. Each Lender and the Agent agrees (on behalf of itself and each of its Affiliates, directors, employees and representatives) to use reasonable precautions to keep confidential, in accordance with safe and sound banking practices, any non-public information supplied to it by the Borrower pursuant to this Agreement after such information is identified by the Borrower as being confidential, provided that nothing herein shall limit the disclosure of any such information (a) to the extent required by statute, rule, regulation or judicial process, provided that the Borrower is given prompt written notice (to the extent permitted by law) that such disclosure is required, (b) to counsel for any of the Lenders of the Agent, (c) to bank examiners, auditors or accountants, (d) in connection with any litigation to which any one or more of the Lenders is a party, provided that the Borrower has been given prompt prior written notice (to the extent permitted by law) of such proposed disclosure or (e) to any assignee or participant (or prospective assignee or participant) so long as such assignee or participant (or prospective assignee or participant) agrees in writing to be bound by the terms of this Section 8.08. SECTION 8.09. Governing Law. This Agreement and the Notes shall be governed by, and construed in accordance with, the laws of the State of New York. SECTION 8.10. Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by telecopier shall be effective as delivery of a manually executed counterpart of this Agreement. SECTION 8.11. Jurisdiction, Etc. (a) Each of the parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the Notes, 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 any such New York State court or, to the extent permitted by law, in such federal court. The Borrower hereby further irrevocably consents to the service of process in any action or proceeding in such courts by the mailing thereof by any parties hereto by registered or certified mail, postage prepaid, to the Borrower at its address specified pursuant to Section 8.02. 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, provided that this sentence shall not limit the right of any party hereto to appeal any judgment. Nothing in this Agreement shall affect any right that any party may otherwise have to bring any action or proceeding relating to this Agreement or the Notes in the courts of any jurisdiction. (b) Each of the parties hereto irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the Notes in any New York State or federal court. 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. SECTION 8.12. Waiver of Jury Trial. Each of the Borrower, the Agent and the Lenders hereby irrevocably waives all right to trial by jury in any action, proceeding or counterclaim (whether based on contract, tort or otherwise) arising out of or relating to this Agreement or the Notes or the actions of the Agent or any Lender in the negotiation, administration, performance or enforcement thereof. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. APPLIED MATERIALS, INC. By /s/ Nancy H Handel Title: Vice President, Global Finance and Treasurer By /s/ Joseph R. Bronson Title: Senior Vice President, Chief Financial Officer and Chief Administrative Officer CITICORP USA, INC. as Agent By /s/ Laura A. Siracuse Title: Attorney-in-Fact Initial Lenders Commitment Arranger $50,000,000 CITICORP USA, INC. By /s/ Laura A. Siracuse Title: Attorney-in-Fact Co-Agent $35,000,000 BANK OF AMERICA, N.A. By /s/ Kevin McMahon Title: Managing Director Lenders $30,000,000 DEUTSCHE BANK AG NEW YORK AND/OR CAYMAN ISLANDS BRANCHES By /s/ Susan L. Pearson Title: Director By /s/ Alexander Karow Title: Assistant Vice President $30,000,000 MELLON BANK, N.A. By /s/ Lawrence Ivey Title: Vice President $21,000,000 BANK OF NEW YORK By /s/ Elizabeth T. Ying Title: Vice President $21,000,000 BANQUE NATIONALE DE PARIS By /s/ Gavin S. Holles Title: Vice President By /s/ Stuart Darby Title: Assistant Vice President $21,000,000 KEY BANK NATIONAL ASSOCIATION By /s/ Mary K. Young Title: Assistant Vice President $21,000,000 UNION BANK OF CALIFORNIA, N.A. By /s/ Glenn Leyrer Title: Vice President $21,000,000 WELLS FARGO BANK, N.A. By /s/Lee Jensen Title: Vice President By /s/ June P. Hanson Title: Assistant Vice President $250,000,000 Total of the Commitment SCHEDULE I APPLIED MATERIALS, INC. 364-DAY CREDIT AGREEMENT APPLICABLE LENDING OFFICES Name of Initial Domestic Lending Eurodollar Lending CD Lending Lender Office Office Office --------------------------------------------------------------------------------------- Bank of America, 1850 Gateway Blvd. 1850 Gateway Blvd. 1850 Gateway Blvd. N.A. Concord, CA 94520 Concord, CA 94520 Concord, CA 94520 Attn: Karen Lynn Attn: Karen Lynn Attn: Karen Lynn Matthews Matthews Matthews Tel: 925 675-7389 Tel: 925 675-7389 Tel: 925 675-7389 Fax: 925 675-7531 Fax: 925 675-7531 Fax: 925 675-7531 Bank of New York One Wall Street One Wall Street One Wall Street 22nd Floor 22nd Floor 22nd Floor New York, NY 10286 New York, NY 10286 New York, NY 10286 Attn: Sandra Morgan Attn: Sandra Morgan Attn: Sandra Morgan or Dawn Hertling or Dawn Hertling or Dawn Hertling Tel: 212 635-6743/6742 Tel: 212 635-6743/6742 Tel: 212 635-6743/6742 Fax: 212 635-6877/6399 Fax: 212 635-6877/6399 Fax: 212 635-6877/6399 Banque Nationale 180 Montgomery Street 180 Montgomery Street 180 Montgomery Street de Paris San Francisco, CA San Francisco, CA San Francisco, CA 94194 94194 94194 Attn: Donald A. Hart Attn: Donald A. Hart Attn: Donald A. Hart Tel: 415 956-2511 Tel: 415 956-2511 Tel: 415 956-2511 Fax: 415 989-9041 Fax: 415 989-9041 Fax: 415 989-9041 Citicorp USA, Inc.Two Penns Way Two Penns Way Two Penns Way New Castle, DE 19720 New Castle, DE 19720 New Castle, DE 19720 Attn: Lenny Sarcona Attn: Lenny Sarcona Attn: Lenny Sarcona Tel: 302 894-6003 Tel: 302 894-6003 Tel: 302 894-6003 Fax: 302 894-6120 Fax: 302 894-6120 Fax: 302 894-6120 Deutsche Bank AG, New York Branch Cayman Islands Branch New York Branch New York and/or 31 West 52nd Street c/o New York Branch 31 West 52nd Street Cayman Islands New York, NY 10019 31 West 52nd Street New York, NY 10019 Branches Attn: Nancy Zorn New York, NY 10019 Attn: Nancy Zorn Tel: 212 469-4112 Attn: Nancy Zorn Tel: 212 469-4112 Fax: 212 469-4138 Tel: 212 469-4112 Fax: 212 469-4138 Fax: 212 469-4138 Key Bank National 700 5th Avenue 700 5th Avenue 700 5th Avenue Association 46th Floor 46th Floor 46th Floor Seattle, WA 98104 Seattle, WA 98104 Seattle, WA 98104 Attn: Mary K. Young Attn: Mary K. Young Attn: Mary K. Young Tel: 206 684-6085 Tel: 206 684-6085 Tel: 206 684-6085 Fax: 206 684-6035 Fax: 206 684-6035 Fax: 206 684-6035 Mellon Bank, N.A. Three Mellon Bank Three Mellon Bank Three Mellon Bank Center 153-2303 Center 153-2303 Center 153-2303 Pittsburgh, PA 15259 Pittsburgh, PA 15259 Pittsburgh, PA 15259 Attn: Loan Attn: Loan Attn: Loan Administration Administration Administration Tel: 412 234-1870 Tel: 412 234-1870 Tel: 412 234-1870 Fax: 412 209-6122 Fax: 412 209-6122 Fax: 412 209-6122 Union Bank of 1980 Saturn Street 1980 Saturn Street 1980 Saturn Street California, N.A. Monterey Park, CA Monterey Park, CA Monterey Park, CA 91755 91755 91755 Attn: Gohar Karapetyan Attn: Gohar Karapetyan Attn: Gohar Karapetyan Tel: 213 720-2676 Tel: 213 720-2676 Tel: 213 720-2676 Fax: 213 724-6198 Fax: 213 724-6198 Fax: 213 724-6198 Wells Fargo Bank, 420 Montgomery Street 420 Montgomery Street 420 Montgomery Street N.A. 9th Floor 9th Floor 9th Floor San Francisco, CA San Francisco, CA San Francisco, CA 94104 94104 94104 Attn: June Hanson Attn: June Hanson Attn: June Hanson Tel: 415 396-1648 Tel: 415 396-1648 Tel: 415 396-1648 Fax: 415 837-0610 Fax: 415 837-0610 Fax: 415 837-0610 EXHIBIT A-1 - FORM OF REVOLVING CREDIT PROMISSORY NOTE U.S. $_______________ Dated: _________________, 200_ FOR VALUE RECEIVED, the undersigned, APPLIED MATERIALS, INC., a Delaware corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of _________________________ (the "Lender") for the account of its Applicable Lending Office on the later of Termination Date and the date designated pursuant to Section 2.06 of the Credit Agreement (each as defined in the Credit Agreement referred to below) the principal sum of U.S.$[amount of the Lender's Commitment in figures] or, if less, the aggregate principal amount of the Revolving Credit Advances made by the Lender to the Borrower pursuant to the 364-Day Credit Agreement dated as of March 10, 2000 among the Borrower, the Lender and certain other lenders parties thereto, Bank of America, N.A., as Co-Agent, and Citicorp USA, Inc., as Agent for the Lender and such other lenders(as amended or modified from time to time, the "Credit Agreement"; the terms defined therein being used herein as therein defined) outstanding on such date. The Borrower promises to pay interest on the unpaid principal amount of each Revolving Credit Advance from the date of such Revolving Credit Advance until such principal amount is paid in full, at such interest rates, and payable at such times, as are specified in the Credit Agreement. Both principal and interest are payable in lawful money of the United States of America to Citicorp, as Agent, at 399 Park Avenue, New York, New York 10043, in same day funds. Each Revolving Credit Advance owing to the Lender by the Borrower pursuant to the Credit Agreement, and all payments made on account of principal thereof, shall be recorded by the Lender and, prior to any transfer hereof, endorsed on the grid attached hereto which is part of this Promissory Note. This Promissory Note is one of the Revolving Credit Notes referred to in, and is entitled to the benefits of, the Credit Agreement. The Credit Agreement, among other things, (i) provides for the making of Revolving Credit Advances by the Lender to the Borrower from time to time in an aggregate amount not to exceed at any time outstanding the U.S. dollar amount first above mentioned, the indebtedness of the Borrower resulting from each such Revolving Credit Advance being evidenced by this Promissory Note and (ii) contains provisions for acceleration of the maturity hereof upon the happening of certain stated events and also for prepayments on account of principal hereof prior to the maturity hereof upon the terms and conditions therein specified. APPLIED MATERIALS, INC. By Title: ADVANCES AND PAYMENTS OF PRINCIPAL Amount of Amount of Principal Paid Unpaid Principal Notation Date Advance or Prepaid Balance Made By EXHIBIT A-2 - FORM OF COMPETITIVE BID PROMISSORY NOTE U.S.$_______________ Dated: _______________, 200_ FOR VALUE RECEIVED, the undersigned, APPLIED MATERIALS, INC., a Delaware corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of _________________________ (the "Lender") for the account of its Applicable Lending Office (as defined in the 364-Day Credit Agreement dated as of March 10, 2000 among the Borrower, the Lender and certain other lenders parties thereto, Bank of America, N.A., as Co-Agent, and Citicorp USA, Inc., as Agent for the Lender and such other lenders (as amended or modified from time to time, the "Credit Agreement"; the terms defined therein being used herein as therein defined)), on _______________, 200_, the principal amount of U.S.$______________. The Borrower promises to pay interest on the unpaid principal amount hereof from the date hereof until such principal amount is paid in full, at the interest rate and payable on the interest payment date or dates provided below: Interest Rate: _____% per annum (calculated on the basis of a year of _____ days for the actual number of days elapsed). Both principal and interest are payable in lawful money of ________________ to Citicorp, as agent, for the account of the Lender at the office of _________________________, at _________________________ in same day funds. This Promissory Note is one of the Competitive Bid Notes referred to in, and is entitled to the benefits of, the Credit Agreement. The Credit Agreement, among other things, contains provisions for acceleration of the maturity hereof upon the happening of certain stated events. The Borrower hereby waives presentment, demand, protest and notice of any kind. No failure to exercise, and no delay in exercising, any rights hereunder on the part of the holder hereof shall operate as a waiver of such rights. This Promissory Note shall be governed by, and construed in accordance with, the laws of the State of New York. APPLIED MATERIALS, INC. By Title: EXHIBIT B-1 - FORM OF NOTICE OF REVOLVING CREDIT BORROWING Citicorp USA, Inc., as Agent for the Lenders parties to the Credit Agreement referred to below Two Penns Way New Castle, Delaware 19720 [Date] Attention: Bank Loan Syndications Department Ladies and Gentlemen: The undersigned, APPLIED MATERIALS, INC., refers to the 364-Day Credit Agreement, dated as of March 10, 2000 (as amended or modified from time to time, the "Credit Agreement", the terms defined therein being used herein as therein defined), among the undersigned, certain Lenders parties thereto, Bank of America, N.A., as Co-Agent, and Citicorp USA, Inc., as Agent for said Lenders, and hereby gives you notice, irrevocably, pursuant to Section 2.02 of the Credit Agreement that the undersigned hereby requests a Revolving Credit Borrowing under the Credit Agreement, and in that connection sets forth below the information relating to such Revolving Credit Borrowing (the "Proposed Revolving Credit Borrowing") as required by Section 2.02(a) of the Credit Agreement: (i) The Business Day of the Proposed Revolving Credit Borrowing is _______________, 200_. (ii) The Type of Advances comprising the Proposed Revolving Credit Borrowing is [Base Rate Advances] [Eurodollar Rate Advances] [Adjusted CD Rate Advances]. (iii) The aggregate amount of the Proposed Revolving Credit Borrowing is $_______________. [(iv) The initial Interest Period for each [Eurodollar Rate Advance] [Adjusted CD Rate Advance] made as part of the Proposed Revolving Credit Borrowing is _____ month[s].] The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the Proposed Revolving Credit Borrowing: (A) the representations and warranties contained in Section 4.01 of the Credit Agreement (except the representations set forth in subsection (d)(i) thereof and in subsection (e)(i) thereof) are correct, before and after giving effect to the Proposed Revolving Credit Borrowing and to the application of the proceeds therefrom, as though made on and as of such date; and (B) no event has occurred and is continuing, or would result from such Proposed Revolving Credit Borrowing or from the application of the proceeds therefrom, that constitutes a Default. Very truly yours, APPLIED MATERIALS, INC. By Title: EXHIBIT B-2 - FORM OF NOTICE OF COMPETITIVE BID BORROWING Citicorp USA, Inc., as Agent for the Lenders parties to the Credit Agreement referred to below Two Penns Way New Castle, Delaware 19720 [Date] Attention: Bank Loan Syndications Department Ladies and Gentlemen: The undersigned, APPLIED MATERIALS, INC., refers to the 364-Day Credit Agreement, dated as of March 10, 2000 (as amended or modified from time to time, the "Credit Agreement", the terms defined therein being used herein as therein defined), among the undersigned, certain Lenders parties thereto, Bank of America, N.A., as Co-Agent, and Citicorp USA, Inc., as Agent for said Lenders, and hereby gives you notice, irrevocably, pursuant to Section 2.03 of the Credit Agreement that the undersigned hereby requests a Competitive Bid Borrowing under the Credit Agreement, and in that connection sets forth the terms on which such Competitive Bid Borrowing (the "Proposed Competitive Bid Borrowing") is requested to be made: (A) Date of Competitive Bid Borrowing ________________________ (B) Amount of Competitive Bid Borrowing ________________________ (C) [Maturity Date] [Interest Period] ________________________ (D) Interest Rate Basis ________________________ (E) Interest Payment Date(s) ________________________ (F) ___________________ ________________________ (G) ___________________ ________________________ The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the Proposed Competitive Bid Borrowing: (a) the representations and warranties contained in Section 4.01 are correct, before and after giving effect to the Proposed Competitive Bid Borrowing and to the application of the proceeds therefrom, as though made on and as of such date; (b) no event has occurred and is continuing, or would result from the Proposed Competitive Bid Borrowing or from the application of the proceeds therefrom, that constitutes a Default; (c) no event has occurred and no circumstance exists as a result of which the information concerning the undersigned that has been provided to the Agent and each Lender by the undersigned in connection with the Credit Agreement would include an untrue statement of a material fact or omit to state any material fact or any fact necessary to make the statements contained therein, in the light of the circumstances under which they were made, not misleading; and (d) the aggregate amount of the Proposed Competitive Bid Borrowing and all other Borrowings to be made on the same day under the Credit Agreement is within the aggregate amount of the unused Commitments of the Lenders. The undersigned hereby confirms that the Proposed Competitive Bid Borrowing is to be made available to it in accordance with Section 2.03(a)(v) of the Credit Agreement. Very truly yours, APPLIED MATERIALS, INC. By Title: EXHIBIT C - FORM OF ASSIGNMENT AND ACCEPTANCE Reference is made to the 364-Day Credit Agreement dated as of March 10, 2000 (as amended or modified from time to time, the "Credit Agreement") among Applied Materials, Inc., a Delaware corporation (the "Borrower"), the Lenders (as defined in the Credit Agreement), Bank of America, N.A., as Co-Agent, and Citicorp USA, Inc., as agent for the Lenders (the "Agent"). Terms defined in the Credit Agreement are used herein with the same meaning. The "Assignor" and the "Assignee" referred to on Schedule I hereto agree as follows: 1. The Assignor hereby sells and assigns to the Assignee, and the Assignee hereby purchases and assumes from the Assignor, an interest in and to the Assignor's rights and obligations under the Credit Agreement as of the date hereof (other than in respect of Competitive Bid Advances and Competitive Bid Notes) equal to the percentage interest specified on Schedule 1 hereto of all outstanding rights and obligations under the Credit Agreement (other than in respect of Competitive Bid Advances and Competitive Bid Notes). After giving effect to such sale and assignment, the Assignee's Commitment and the amount of the Revolving Credit Advances owing to the Assignee will be as set forth on Schedule 1 hereto. 2. The Assignor (i) represents and warrants that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim; (ii) 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 execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or any other instrument or document furnished pursuant thereto; (iii) makes no 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 or any other instrument or document furnished pursuant thereto; and (iv) attaches the Revolving Credit Note held by the Assignor and requests that the Agent exchange such Revolving Credit Note for a new Revolving Credit Note payable to the order of the Assignee in an amount equal to the Commitment assumed by the Assignee pursuant hereto or new Revolving Credit Notes payable to the order of the Assignee in an amount equal to the Commitment assumed by the Assignee pursuant hereto and the Assignor in an amount equal to the Commitment retained by the Assignor under the Credit Agreement, respectively, as specified on Schedule 1 hereto. 3. The Assignee (i) confirms that it has received a copy of the Credit Agreement, together with copies of the financial statements referred to in Section 4.01 thereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance; (ii) agrees that it will, independently and without reliance upon the Agent, the Assignor or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement; (iii) confirms that it is an Eligible Assignee; (iv) appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers and discretion under the Credit Agreement as are delegated to the Agent by the terms thereof, together with such powers and discretion as are reasonably incidental thereto; (v) agrees that it will perform in accordance with their terms all of the obligations that by the terms of the Credit Agreement are required to be performed by it as a Lender; and (vi) attaches any U.S. Internal Revenue Service forms required under Section 2.14 of the Credit Agreement. 4. Following the execution of this Assignment and Acceptance, it will be delivered to the Agent for acceptance and recording by the Agent. The effective date for this Assignment and Acceptance (the "Effective Date") shall be the date of acceptance hereof by the Agent, unless otherwise specified on Schedule 1 hereto. 5. Upon such acceptance and recording by the Agent, as of 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 Lender 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. 6. Upon such acceptance and recording by the Agent, from and after the Effective Date, the Agent shall make all payments under the Credit Agreement and the Revolving Credit Notes in respect of the interest assigned hereby (including, without limitation, all payments of principal, interest and facility fees with respect thereto) to the Assignee. The Assignor and Assignee shall make all appropriate adjustments in payments under the Credit Agreement and the Revolving Credit Notes for periods prior to the Effective Date directly between themselves. 7. This Assignment and Acceptance shall be governed by, and construed in accordance with, the laws of the State of New York. 8. This Assignment and Acceptance may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of Schedule 1 to this Assignment and Acceptance by telecopier shall be effective as delivery of a manually executed counterpart of this Assignment and Acceptance. IN WITNESS WHEREOF, the Assignor and the Assignee have caused Schedule 1 to this Assignment and Acceptance to be executed by their officers thereunto duly authorized as of the date specified thereon Schedule 1 to Assignment and Acceptance Percentage interest assigned: _____% Assignee's Commitment: $__________ Aggregate outstanding principal amount of Revolving Credit Advances assigned: $__________ Principal amount of Revolving Credit Note payable to Assignee: $__________ Principal amount of Revolving Credit Note payable to Assignor: $__________ Effective Date*: _______________, 200_ [NAME OF ASSIGNOR], as Assignor By Title: Dated: _______________, 200_ [NAME OF ASSIGNEE], as Assignee By Title: Dated: _______________, 200_ Domestic Lending Office: [Address] Eurodollar Lending Office: [Address] Accepted [and Approved]** this __________ day of _______________, 200_ CITICORP USA, INC., as Agent By Title: [Approved this __________ day of _______________, 200_ APPLIED MATERIALS, INC. By ]*** Title: * This date should be no earlier than five Business Days after the delivery of this Assignment and Acceptance to the Agent. ** Required if the Assignee is an Eligible Assignee solely by reason of clause (iii) of the definition of "Eligible Assignee". *** Required if the Assignee is an Eligible Assignee solely by reason of clause (iii) of the definition of "Eligible Assignee" EXHIBIT D - FORM OF OPINION OF COUNSEL FOR THE BORROWER March 10, 2000 To the Lenders and the Agent Referred to Below Citicorp USA., Inc, as Agent 399 Park Avenue New York, New York 10043 Ladies and Gentlemen: Re: 364-Day Credit Agreement I am the Vice President, Legal Affairs of Applied Materials, Inc. (the "Borrower") and have acted as its counsel in connection with the execution and delivery of that certain 364-Day Credit Agreement (the "Credit Agreement") dated as of March 10, 2000 among the Borrower, the Lenders signatory thereto, Bank of America, N.A., as Co-Agent, and Citicorp USA, Inc., as Agent. Except as otherwise defined herein, all terms used herein and defined in the Credit agreement or any agreement delivered thereunder shall have the meanings assigned to them therein. In connection with this opinion, I have examined executed copies of the Credit Agreement and the Notes and such other documents, records, agreements and certificates as I have deemed appropriate. I have also reviewed such matters of law as I have considered relevant for the purpose of this opinion. Based upon the foregoing, I am of the opinion that: 1. The Borrower is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, and has the corporate power and authority to own its assets and to transact the business in which it is now engaged or proposes to be engaged. 2. The execution, delivery and performance by the Borrower of the Credit Agreement and the Notes are within the Borrower's corporate powers, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official and do not contravene, or constitute a default under, any provision of applicable law or regulation or of the certificate of incorporation or by-laws of the Borrower or, to the best of my knowledge, of (i) any judgment, injunction, order or decree, or (ii) any material agreement or other material instrument binding upon the Borrower, or result in the creating or imposition of any Lien on any asset of the Borrower. 3. To the best of my knowledge, except as set forth under the heading "Legal Proceedings" in the Company's 1999 Form 10-K, there are no pending or threatened actions, suits or proceedings against or affecting the Company or any of its Subsidiaries before any court, governmental agency or arbitrator in which there is a reasonable possibility of an adverse determination which would have a Material Adverse Effect, or which in any manner draws into question the validity of the Credit Agreement or the Notes. Certain Assumptions With your permission I have assumed the following: (a) the authenticity of original documents and the genuineness of all signatures; (b) the conformity to the originals of all documents submitted to me as copies and the truth, accuracy, and completeness of the information, representations and warranties contained in the records, documents, instruments and certificates I have reviewed; and (c) the absence of any evidence extrinsic to the provisions of the written agreements between the parties that the parties intended a meaning contrary to that expressed by those provisions. Certain Limitations and Qualifications I express no opinion as to laws other than laws of the State of California, the federal law of the United States of America and the General Corporation Law of the State of Delaware. I am licensed to practice law only in the State of California. The phrase "to the best of my knowledge" is intended to indicate that, during the course of the performance of my duties as Managing Director, Legal Affairs, of the Borrower, no information that would give me current actual knowledge of the inaccuracy of such statement has come to my attention. Use of Opinion This opinion is solely for your benefit (and the benefit of any assignee which becomes a Lender pursuant to Section 8.07 of the Credit Agreement) in connection with the transaction covered by the first paragraph of this letter and may not be relied upon, used, circulated, quoted or referred to, nor may copies hereof be delivered to, any other person without my prior written approval. I disclaim any obligation to update this opinion for events occurring or coming to my attention after the date hereof. Very truly yours, /s/ Barry S. Quan Barry S. Quan Vice President, Legal Affairs EXHIBIT E OPINION OF ORRICK, HERRINGTON & SUTCLIFFE LLP, SPECIAL COUNSEL FOR THE BORROWER To the Lenders and the Agent Referred to Below Citicorp USA, Inc., as Agent 60 Wall Street New York, New York 10043 Re: 364-Day Credit Agreement We have acted as counsel to Applied Materials, Inc., a Delaware corporation (the "Borrower") in connection with that certain 364-Day Credit Agreement (the "Agreement") dated as of March 10, 2000 among the Borrower, the lenders signatory thereto (the "Lenders"), Bank of America, N.A., as Co-Agent, and Citicorp USA, Inc., as Agent. The capitalized terms herein are used as defined in the Credit Agreement. In this regard, we have examined executed originals or copies of the following, copies of which have been delivered to you: (a) The Agreement; and (b) The Notes. Based upon such examination and having regard for legal considerations which we deem relevant, we are of the opinion that the Agreement is and, when delivered under the Agreement, each Note will be, the legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its respective terms. With your permission we have assumed the following: (a) authenticity of original documents and the genuineness of all signatures; (b) the conformity to the originals of all documents submitted to us as copies; (c) the truth, accuracy, and completeness of the information, representations and warranties contained in the records, documents, instruments and certificates we have reviewed; (d) that the documents referred to herein were duly authorized, executed and delivered on behalf of the respective parties thereto and, other than with respect to the Borrower, are legal, valid, and binding obligations of such parties; (e) the compliance by you with any state or federal laws or regulations applicable to you in connection with the transactions described in the Agreement and the Notes; and (f) the absence of any evidence extrinsic to the provisions of the written agreements between the parties that the parties intended a meaning contrary to that expressed by those provisions. We express no opinion as to matters of law in jurisdictions other than the State of New York and the United States. Our opinion that any document is legal, valid, binding, or enforceable in accordance with its term is qualified as to: (a) limitations imposed by bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium, or other laws relating to or affecting the enforcement of creditors' rights generally; (b) general principles of equity, including without limitation concepts of mutuality, reasonableness, good faith and fair dealing, and the possible unavailability of specific performance or injunctive relief, regardless of whether such enforceability is considered in a proceeding in equity or at law; (c) the possibility that certain covenants and provisions for the acceleration of the maturity of the Notes may not be enforceable if enforcement would be unreasonable under the then existing circumstances, but in our opinion acceleration would be available if an event of default occurred as a result of a material breach of a material covenant; (d) the unenforceability under certain circumstances of provisions imposing penalties, forfeiture, late payment charges or an increase in interest rate upon delinquency in payment or the occurrence of any event of default; (e) rights to indemnification and contribution which may be limited by applicable law and equitable principles; and (f) the unenforceability under certain circumstances of provisions expressly or by implication waiving broadly or vaguely stated rights (including, without limitation, waivers of any objection to venue and forum non conveniens and the rights to a jury trial), the benefits of statutory constitutional provisions, unknown future rights, and defenses to obligations or rights granted by law, where such waivers are against public policy or prohibited by law. We note that you are receiving of even date herewith the opinion of Barry Quan, Managing Director, Legal Affairs of the Borrower, as to certain matters relating to the Borrower. We have made no independent examination of such matters. We note for your information that Donald A. Slichter, the Secretary of the Borrower, is a partner in our firm. This opinion is solely for your benefit (and the benefit of the Lenders which become parties to the Agreement as assignees under Section 8.07 of the Agreement) in connection with the transaction covered by the first paragraph of this letter and may not be relied upon, used, circulated, quoted or referred to by, nor may copies hereof be delivered to, any other person without our prior written approval. We disclaim any obligation to update this opinion letter for events occurring or coming to our attention after the date hereof. Very truly yours, /s/ ORRICK, HERRINGTON & SUTCLIFFE LLP ORRICK, HERRINGTON & SUTCLIFFE LLP

Exhibit 10.5.a FMC Corporation Savings and Investment Plan For Bargaining Unit Employees Winston & Strawn Chicago TABLE OF CONTENTS   PAGE -------------------------------------------------------------------------------- ARTICLE I 1 Definitions 1     Account 1     Account Balance 1     Administrator 1     Affiliate 1     After-Tax Contribution 2     After-Tax Contribution Account 2     After-Tax Contribution Election 2     Annuity Contract 2     Annuity Starting Date 2     Beneficiary 2     Board 2     Break in Service 2     Code 2     Committee 2     Company 2     Compensation 2     Direct Rollover 3     Disability 3     Distributee 4     Effective Date 4     Eligible Employee 4     Eligible Retirement Plan 4     Eligible Rollover Distribution 4     Employee 4     Employment Commencement Date 5     ERISA 5     Funding Agent 5     Highly Compensated Employee 5     Hour of Service 5     Investment Fund 7     Nonhighly Compensated Employee 7     Normal Retirement Age 7     Normal Retirement Date 7     Participant 7     Participating Employer 7     Period of Separation 7     Plan 8     Plan Year 8     Pre-Tax Contribution 8     Pre-Tax Contribution Account 8     Pre-Tax Contribution Election 8     Required Beginning Date 8     Rollover Contribution 8     Rollover Contribution Account 8     Stock 8     Stock Fund 8     Surviving Spouse 9     Trust 9     Trust Fund 9     Trustee 9     Valuation Date 9   ARTICLE II 10 Participation 10 --------------------------------------------------------------------------------      2.1 Admission as A Participant 10      2.2 Provision of Information 10      2.3 Termination of Participation 11      2.4 Special Rules Relating to Veterans' Reemployment Rights 11   ARTICLE III 13 Contributions and Account Allocations 13 --------------------------------------------------------------------------------       3.1 Pre-Tax Contributions 13       3.2 After-Tax Contributions 13       3.3 Rules Applicable to Both Pre-Tax and After-Tax Contributions 13       3.4 Rollover Contributions 14       3.5 Establishment of Accounts 14       3.6 Limitation on Annual Additions to Accounts 14       3.7 Reduction of Annual Additions 15       3.8 Combined Plan Fraction 15       3.9 Limitations on Pre-Tax Contributions - Definitions 15     3.10 Maximum Amount of Pre-Tax Contributions 16     3.11 Correction of Excess Pre-Tax Contributions 16     3.12 Actual Deferral Percentage Test 17   ARTICLE IV 19 Vesting 19 --------------------------------------------------------------------------------   ARTICLE V 20 Timing of Distributions to Participants 20 --------------------------------------------------------------------------------     5.1 Separation from Service 20         5.2 Start of Benefit Payments 20     5.3 Additional Distribution Events 22     5.4 Transfers from the Plan for Changes in a Participant's Employment Status 22   ARTICLE VI 23 Forms of Benefit, In-Service Withdrawals and Loans 23 --------------------------------------------------------------------------------       6.1 Cashout of Small Amounts 23     6.2 Medium of Distribution 23     6.3 Forms of Benefit for Participants 23     6.4 Change in Form, Timing or Medium of Benefit Payment 25     6.5 Waiver of Normal Form of Benefit 25     6.6 Direct Rollover of Eligible Rollover Distributions 26     6.7 In-service and Hardship Withdrawals 27     6.8 Loans 29   ARTICLE VII 32 Death Benefits 32 --------------------------------------------------------------------------------       7.1 Payment of Account Balance 32     7.2 Failure to Name a Beneficiary 33     7.3 Waiver of Preretirement Survivor Annuity 33   ARTICLE VIII 35 Fiduciaries 35 --------------------------------------------------------------------------------       8.1 Named Fiduciaries 35     8.2 Employment of Advisers 35     8.3 Multiple Fiduciary Capacities 35     8.4 Payment of Expenses 35     8.5 Indemnification 36   ARTICLE IX 37 Plan Administration 37 --------------------------------------------------------------------------------       9.1 Powers, Duties and Responsibilities of the Administrator and the Committee 37     9.2 Investment Powers, Duties and Responsibilities of the Administrator and the Committee 37     9.3 Investment of Accounts 38     9.4 Valuation of Accounts 38     9.5 The Insurance Company 38     9.6 Compensation 39     9.7 Delegation of Responsibility 39     9.8 Committee Members 39   ARTICLE X 40 Appointment of Trustee 40 --------------------------------------------------------------------------------   ARTICLE XI 41 Plan Amendment or Termination 41     11.1   Plan Amendment or Termination 41     11.2   Limitations on Plan Amendment 41     11.3   Right to Terminate Plan or Discontinue Contributions 41     11.4   Bankruptcy 41   ARTICLE XII 42 Miscellaneous Provisions 42     12.1   Subsequent Changes 42     12.2   Merger or Transfer of Assets 42     12.3   Benefits Not Assignable 42     12.4   Exclusive Benefit of Participants 43     12.5   Benefits Payable to Minors, Incompetents and Others 44     12.6   Plan Not A Contract of Employment 44     12.7   Source of Benefits 44     12.8   Proof of Age and Marriage 44     12.9   Controlling Law 44     12.10  Income Tax Withholding 45     12.11  Claims Procedure 45     12.12  Participation in the Plan by An Affiliate 46     12.13  Action by Participating Employers 46     12.14  Dividends 47   APPENDIX A 49 Bargaining Units Covered 49 BACKGROUND The Company established the FMC Corporation 401(k) Plan for Employees Covered by a Collective Bargaining Agreement (the "Plan") as of April 1, 1987. The Plan was subsequently amended from time to time. The Plan was last amended and restated effective January 1, 1989. This document is an amendment and restatement of the Plan effective, except as and to the extent otherwise provided in this document, as of January 1, 1999, and changes the name of the Plan to the FMC Corporation Savings and Investment Plan for Bargaining Unit Employees, effective January 1, 2000. The Company or its delegate may amend the Plan to meet applicable rules and regulations of the Internal Revenue Service and the United States Department of Labor, or, subject to the terms of any applicable collective bargaining agreements, for other reasons the Company or its delegate deems necessary or desirable. The Plan is intended to be qualified under Code Section 401(a) and its associated trust is intended to be tax exempt under Code Section 501(a). The Plan is intended also to meet the requirements of ERISA, and will be interpreted, wherever possible, to comply with the terms of the Code and ERISA. ARTICLE I Definitions For purposes of this Plan and any amendments to it, the following terms have the meanings ascribed to them below. Account means the Pre-Tax Contribution Account, After-Tax Contribution Account and Rollover Contribution Account, if any, established on behalf of a Participant. Account Balance means the value of an Account determined as of any Valuation Date. Administrator means the Company. The Plan is administered by the Company through the Committee. The Administrator and the Committee have the responsibilities specified in Article IX. Affiliate means any corporation, partnership, or other entity that is:   (a) a member of a controlled group of corporations of which the Company is a member (as described in Code Section 414(b));         (b) a member of any trade or business under common control with the Company (as described in Code Section 414(c))         (c) a member of an affiliated service group that includes the Company (as described in Code Section 414(m));         (d) an entity required to be aggregated with the Company pursuant to regulations promulgated under Code Section 414(o); or         (e) a leasing organization that provides Leased Employees to the Company or an Affiliate (as determined under paragraphs (a) through (d) above), unless: (i) the Leased Employees make up no more than 20% of the nonhighly compensated workforce of the Company and Affiliates (as determined under paragraphs (a) through (d) above); and (ii) the Leased Employees are covered by a plan described in Code Section 414(n)(5). "Leasing organization" has the meaning ascribed to it in the definition of "Leased Employee" below. For purposes of Section 3.6, the 80% thresholds of Code Sections 414(b) and (c) are deemed to be "more than 50%," rather than "at least 80%." After-Tax Contribution means the amount a Participant contributes in accordance with Section 3.2. After-Tax Contribution Account means the Account established for a Participant pursuant to Section 3.5.2. After-Tax Contribution Election means a Participant's election to make After-Tax Contributions in accordance with Section 3.3.1. Annuity Contract means an individual or group annuity contract issued by an insurance company and providing periodic benefits, whether fixed, variable or both, to a Participant or Beneficiary. An Annuity Contract must provide that a Participant or Beneficiary cannot transfer, sell, assign, discount, or pledge (as collateral for a loan or for any other purpose) all or any part of the contract benefits or value to any person other than the issuer. The terms of an Annuity Contract must comply with the requirements of this Plan. Annuity Starting Date means the first day of the first period for which an amount is paid in an annuity or other form of benefit. In the case of a lump sum distribution, the Annuity Starting Date is the date payment is actually made. Beneficiary means any person designated or deemed designated by a Participant to receive any payment of Plan benefits due after the Participant's death. A married Participant may name a primary Beneficiary other than his or her Surviving Spouse only if the Surviving Spouse consents to the election in the time frame and manner required by Section 7.3. Board means the board of directors of the Company. Break in Service means a Period of Separation that lasts for at least 12 consecutive months. Code means the Internal Revenue Code of 1986, as amended from time to time. Reference to a specific provision of the Code includes that provision, any successor to it and any valid regulation promulgated under the provision or successor provision. Committee means the FMC Corporation Employee Welfare Benefits Plan Committee as described in Section 9.8, its authorized delegatee and any successor to the FMC Corporation Employee Welfare Benefits Plan Committee. Company means FMC Corporation and any successor to it. Compensation means the total compensation paid by the Company or a Participating Employer to an 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 completion bonuses, gainsharing bonuses and performance related bonuses); sales incentive bonuses; field premiums; back pay and sick pay; plus the Employee's Pre-Tax Contributions and amounts contributed to a plan described in Code Section 125 or 132;         (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; workers' compensation benefits; state disability benefits; flexible credits (i.e., wellness awards and payments for opting out of benefit coverage); expatriate premiums; grievance or settlement pay; pay in lieu of notice; severance pay; 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); effective January 1, 2000, any gross-up on any amounts paid by a Participating Employer that is Compensation (as defined herein); 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 any gross-up on any amount paid by a Participating Employer that is not Compensation (as defined herein). Notwithstanding anything herein to the contrary, no amounts paid to a Participant more than 30 days after his or her termination of employment with the Company or a Participating Employer will be considered Compensation. 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)). Effective January 1, 1997, the Compensation limit will be applied to each Participant without taking into account the Compensation of any of his or her family members. A Participant's Compensation will be conclusively determined according to the Company's records. Direct Rollover means a payment by the Plan to the Eligible Retirement Plan specified by a Distributee. Disability means a medically determinable physical or mental impairment that makes the Participant unable to engage in any substantial gainful activity, can be expected to result in death or be of long and indefinite duration, or has lasted or can be expected to last for a continuous period of at least 12 months. A Participant will be considered to have a Disability at any time only if he or she is then eligible to receive Social Security disability benefits. Distributee means an Employee or former Employee. In addition, the Employee's or former Employee's Surviving Spouse and the Employee's or former Employee's spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined under Code Section 414(p), are Distributees as to their Plan interests. Effective Date means January 1, 1999. Eligible Employee means an Employee of a Participating Employer who belongs to a bargaining unit covered by a collective bargaining agreement that provides for participation in the Plan. The bargaining units whose members are covered by the Plan, and the effective dates of that coverage, are listed in Appendix A. Eligible Employee does not include a nonresident alien of the United States, a Leased Employee or an individual working for a Participating Employer under a contract that designates him or her as an independent contractor. An individual's status as an Eligible Employee or not will be conclusively determined by the Administrator, subject to the claims review procedure described in Section 12.11. Eligible Retirement Plan means an individual retirement account described in Code Section 408(a), an individual retirement annuity described in Code Section 408(b), an annuity plan described in Code Section 403(a), or a plan described in Code Section 401(a) that accepts the Distributee's Eligible Rollover Distribution. In the case of an Eligible Rollover Distribution paid to a Surviving Spouse, an Eligible Retirement Plan is either an individual retirement account or individual retirement annuity, and does not include an annuity plan or a Code Section 401(a) plan. Eligible Rollover Distribution means any distribution of all or any portion of the balance to the credit of the Distributee, other than (a) a distribution that is one of a series of substantially equal periodic payments made (no less frequently than annually) for the life (or life expectancy) of the Distributee and the Distributee's Beneficiary, or for a specified period of ten years or more; (b) the portion of a distribution that is required to be made under Code Section 401(a)(9); (c) the portion of a distribution that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation for employer securities); or (d) effective January 1, 1999, a withdrawal under Section 6.7.2 on account of an immediate and heavy financial need. Employee means (a) a common law employee of the Company or an Affiliate who is paid as an employee from the payroll of the Company or an Affiliate and treated as an employee, or (b) a Leased Employee. Employment Commencement Date means the date on which the Employee first performs an Hour of Service. ERISA means the Employee Retirement Income Security Act of 1974, as amended from time to time. Reference to a specific provision of ERISA includes the provision, any successor provision and any valid regulation promulgated under the provision or successor provision. Funding Agent means any legal reserve life insurance company or Trustee selected by the Administrator or the Committee to receive Plan contributions and pay Plan benefits. Highly Compensated Employee means, effective January 1, 1997, an Employee who: (a) at any time during the Plan Year or the preceding Plan Year owns (or is considered under Code Section 318 to own) more than five percent of the Company or an Affiliate; or (b) had more than $80,000, as adjusted, in Compensation from the Company and the Affiliates during the preceding Plan Year. A former Employee of the Company or an Affiliate is a Highly Compensated Employee for a given Plan Year if he or she separated from service (or was deemed to have separated) before the Plan Year, performs no service for a Participating Employer during the Plan Year, and was a Highly Compensated Employee for the Plan Year during which he or she separated from service (or was deemed to have separated) or for any Plan Year ending on or after his or her 55th birthday. The Secretary of the Treasury or its delegate will adjust the $80,000 limit from time to time, to reflect increases in the cost of living. Employees who are nonresident aliens and receive no earned income (within the meaning of Code Section 911(d)(2)) from the Company and its Affiliates that constitutes income from sources within the United States (within the meaning of Code Section 861(a)(3)) are not treated as Employees for purposes of this definition. Hour of Service means:   (a) each hour for which:     (1) the Employee is paid, or entitled to payment, for the performance of duties for the Company or an Affiliate;     (2) the Employee is paid, or entitled to payment, by the Company or an Affiliate on account of a period of time during which he or she performs no duties due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, qualified military service, or leave of absence; and       (3) (back pay, irrespective of mitigation of damages, is either awarded or agreed to by the Company or an Affiliate.         (b) Notwithstanding paragraphs (a)(2) and (a)(3) above:             (1) no more than 501 Hours of Service will be credited for any single continuous period described in paragraph (a)(2) above (whether or not such period occurs in a single Plan Year) and no more than 501 Hours of Service will be credited for payments of back pay described in paragraph (a)(3) above, to the extent the back pay is agreed to or awarded for a period of time during which an Employee did not or would not have performed duties;             (2) no Hours of Service will be credited for payments made or due under a plan maintained solely to comply with applicable workmen's compensation, unemployment compensation or disability insurance laws;             (3) no Hours of Service will be credited for payments made solely to reimburse an Employee for medical or medically related expenses incurred by him or her; and             (4) an Hour of Service to be credited under paragraph (a) of this definition will not be credited more than once.           (c) When the Employee is paid or entitled to payment for reasons other than the performance of services the number of Hours of Service to be credited to the Employee and the Plan or Plan Years within which those Hours of Service are to be credited will be determined in accordance with Department of Labor Regulations §§ 2530.200b-2(b) and (c).           (d) If the Company or an Affiliate is unable to determine the actual number of Hours of Service, the Employee will be credited with 45 Hours of Service for each week for which the Employee would be required to be credited with at least one Hour of Service. Solely to determine whether a Break in Service has occurred for purposes of participation and vesting, a Participant who is absent from work for maternity or paternity reasons or on a leave under the Family and Medical Leave Act of 1993 will receive credit for the Hours of Service which would have been credited to him or her but for the absence or, in any case in which those hours cannot be determined, eight Hours of Service per day of the absence. For purposes of this paragraph, an absence from work for maternity or paternity reasons means an absence (i) because of the individual's pregnancy; (ii) because of the birth of a child to the individual; (iii) because of the placement of a child with the individual for adoption; or (iv) to care for the individual's child for a period beginning immediately following its birth or placement. Hours of Service credited under this paragraph will be credited (i) in the Plan Year in which the absence or leave begins, if necessary to prevent a Break in Service in that Plan Year; or (ii) in all other cases, in the following Plan Year. Investment Fund means an investment fund, if any, established or selected by the Administrator pursuant to Section 9.3. Leased Employee means, effective January 1, 1997, an individual who performs services for the Company or an Affiliate on a substantially full-time basis, for a period of at least one year, under the primary direction or control of the Company or Affiliate, and under an agreement between the Company or Affiliate and a leasing organization. The leasing organization can be a third party or the Leased Employee himself or herself. Nonhighly Compensated Employee means an Employee who is not a Highly Compensated Employee. Normal Retirement Age means the date a Participant reaches age 65. Normal Retirement Date means the day a Participant reaches Normal Retirement Age. Participant means an Eligible Employee who has begun but not ended his or her participation in the Plan pursuant to the provisions of Article II. Participating Employer means the Company and each other Affiliate that adopts the Plan with the consent of the Board, as provided in Section 12.12. Period of Separation means a continuous period of time when the Employee is not employed by the Company or an Affiliate. A Period of Separation begins on the date an Employee retires, dies, separates from service due to Disability, quits or is discharged, or, if earlier, on the 12-month anniversary of the date the Employee was otherwise first absent from service. Notwithstanding the foregoing, a Period of Separation does not begin if the Employee is:   (a) on a leave of absence authorized by the Company or an Affiliate in accordance with standard personnel policies applied in a nondiscriminatory manner to all similarly situated Employees, and returns to active employment with the Company or Affiliates as soon as the leave expires;         (b) on a military leave while the Employee's reemployment rights are protected by law, and returns to active employment with the Company or Affiliate within 90 days after his or her discharge or release (or such longer period as may be prescribed by law); or       (c) on a layoff, and returns to work with the Company or an Affiliate within the period of time and in the manner necessary to maintain seniority according to the rules of the Company or Affiliate in effect at the time of the return. Plan means, effective January 1, 2000, the FMC Corporation Savings and Investment Plan for Bargaining Unit Employees. For periods beginning before January 1, 2000, the Plan was known as the FMC Corporation 401(k) Plan for Employees Covered by a Collective Bargaining Agreement. The Plan is a single employer plan. Plan Year means each 12-month period beginning on January 1 and ending on the next December 31. Pre-Tax Contribution means the amount that otherwise would have been paid as Compensation that is converted to a Participating Employer contribution in accordance with Section 3.1. Pre-Tax Contribution Account means the Account established for a Participant pursuant to Section 3.5.1. Pre-Tax Contribution Election means the Participant's election to make Pre-Tax Contributions in accordance with Section 3.3.1. Required Beginning Date is defined in Section 5.2.3. Rollover Contribution means an amount received from a deferred compensation plan that is qualified under Code Section 401 or 403(a), and which is rolled over to the Plan pursuant to Code Section 402(c). A Rollover Contribution can be either a Direct Rollover or an amount distributed to a Participant and then rolled over. In addition, if an Employee had deposited an Eligible Rollover Distribution into an individual retirement account as defined in Code Section 408, he or she may transfer the amount of the distribution plus earnings from the individual retirement account to the Plan, if the rollover amount is deposited with the Trustee within 60 days after receipt from the individual retirement account, and the rollover meets the other requirements of Code Section 408(d)(3)(A)(ii). Rollover Contribution Account means the Account established for a Participant pursuant to Section 3.5.3. Stock means the common stock of the Company. Stock Fund means an Investment Fund established and maintained by the Trustee as part of the Trust Fund to invest in Stock. All Plan contributions placed in or directed to the Stock Fund and all dividends, other earnings and appreciation on those contributions must be invested only in Stock, except as and to the extent it is deemed necessary or advisable to maintain cash and cash equivalents to meet the Stock Fund's liquidity needs. Surviving Spouse means the person legally married to a Participant on the date of his or her death or on his or her Annuity Starting Date, whichever is earlier. Trust means the trust established under the Plan, to which Plan contributions are made and in which Plan assets are held. Trust Fund means the assets of the Trust held by or in the name of the Trustee. Trustee means the institution appointed as Trustee pursuant to Article X of the Plan, and any successor Trustee. Valuation Date means each business day of the Plan Year. ARTICLE II Participation 2.1 Admission as A Participant 2.1.1 An Employee becomes a Participant as of the date he or she satisfies all of the following requirements: (a) the Employee is an Eligible Employee; (b) the Employee either (i) is a permanent full-time Employee, (ii) is a permanent, part-time employee eligible for benefits, or (iii) has completed at least 1,000 Hours of Service in a 12-month period beginning on his or her Employment Commencement Date or an anniversary of his or her Employment Commencement Date; (c) the Employee has filed with the Administrator a form on which he or she makes a Pre-Tax Contribution Election or After-Tax Contribution Election; and (d) the Employee's election has become effective according to uniform and nondiscriminatory rules established by the Administrator.     In place of the form, the Administrator may substitute a telephonic or electronic means of enrollment. 2.1.2 A Participant or Eligible Employee who is rehired as an Eligible Employee after a Period of Separation becomes an active Participant by filing with the Administrator a form on which he or she makes his or her Pre-Tax Contribution Election or After-Tax Contribution Election. When the form becomes effective, the Participant or Eligible Employee will again become an active Participant. In place of the form, the Administrator may substitute a telephonic or electronic means of reenrollment. 2.2 Provision of Information Each Participant must execute the forms or follow the telephonic or electronic procedures required by the Administrator and make available to the Administrator any information it reasonably requests. As a condition of participating in the Plan, an Employee agrees, on his or her own behalf and on behalf of all persons who may have or claim any right by reason of the Employee's participation in the Plan, to be bound by all provisions of the Plan and by any agreement entered into pursuant to it. 2.3 Termination of Participation A Participant ceases to be a Participant when he or she dies or, if earlier, when his or her entire Account Balance has been paid to him or her. 2.4 Special Rules Relating to Veterans' Reemployment Rights Effective December 12, 1994, the following special provisions will apply to an Eligible Employee or Participant who is reemployed in accordance with the reemployment provisions of the Uniformed Services Employment and Reemployment Rights Act ("USERRA") following a period of qualifying military service (as determined under USERRA). 2.4.1 Each period of qualifying military service served by an Eligible Employee or Participant will, upon his or her reemployment as an Eligible Employee, be deemed to constitute service with the Participating Employer for all Plan purposes. 2.4.2 The Participant will be permitted to make up Pre-Tax and/or After-Tax Contributions missed during the period of qualifying military service, so long as he or she does so during the period of time beginning on the date of the Participant's reemployment with the Participating Employer following his or her period of qualifying military service and extending over the lesser of (a) three times the length of the Participant's period of qualifying military service, and (b) five years. 2.4.3 The Participating Employer will not credit earnings to a Participant's Account with respect to any Pre-Tax or After-Tax Contribution before the contribution is actually made. 2.4.4 A reemployed Participant will be entitled to accrued benefits attributable to Pre-Tax or After-Tax Contributions only if they are actually made. 2.4.5 For all Plan purposes, including the Participating Employer's liability for making contributions on behalf of a reemployed Participant as described above, the Participant will be treated as having received Compensation from the Participating Employer based on the rate of Compensation the Participant would have received during the period of qualifying military service, or if that rate is not reasonably certain, on the basis of the Participant's average rate of Compensation during the 12-month period immediately preceding the period of qualifying military service. 2.4.6 If a Participant makes a Pre-Tax or After-Tax Contribution in accordance with the foregoing provisions of this Section 2.4: (a) those contributions will not be subject to any otherwise applicable limitation under Code Section 402(g), 404(a) or 415, and will not be taken into account in applying those limitations to other contributions under the Plan or any other plan, for the year in which the contributions are made; the contributions will be subject to the above-referenced limitations only for the year to which the contributions relate and only in accordance with regulations prescribed by the Internal Revenue Service; and   (b) the Plan will not be treated as failing to meet the requirements of Code Section 401(a)(4), 401(a)(26), 401(k)(3), 410(b) or 416 by reason of the contributions. ARTICLE III Contributions and Account Allocations 3.1 Pre-Tax Contributions The Company will transmit to the Funding Agent the Pre-Tax Contributions for the Participants. To determine the amount it must transmit for each Participant, the Company will multiply the percentage elected by the Participant in his or her Pre-Tax Contribution Election by the Participant's Compensation. 3.2 After-Tax Contributions Effective on and after June 1, 1997, the Company will transmit to the Funding Agent the After-Tax Contributions for the Participants. To determine the amount it must transmit for each Participant, the Company will multiply the percentage elected by the Participant in his or her After-Tax Contribution Election by the Participant's Compensation. 3.3 Rules Applicable to Both Pre-Tax and After-Tax Contributions 3.3.1 In making his or her Salary Deferral Election and After-Tax Contribution Election, a Participant must choose to defer or contribute between 1% and 20% (15% before October 1, 1999) of his or her Compensation, in 1% increments. For periods beginning on or after October 1, 1999, the Participant's Pre-Tax Contribution Election and After-Tax Contribution Election cannot together total more than 20% of his or her Compensation. For periods beginning before October 1, 1999, the Participant's Pre-Tax Contribution Election and After-Tax Contribution Election cannot together total more than 15% of his or her Compensation. The Administrator may reduce the amount of any Pre-Tax Contribution Election, or make such other modifications it deems necessary, so that the Plan complies with the provisions of Code Section 401(k). Pre-Tax and After-Tax Contributions will be made on a payroll deduction basis and in accordance with uniform and nondiscriminatory rules and procedures established by the Administrator. A Participant's Salary Deferral Election will apply only to Compensation paid to the Participant while he or she is an Eligible Employee. 3.3.2 A Participant may change his or her Pre-Tax or After-Tax Contribution Election percentage or discontinue making Pre-Tax Contributions or After-Tax Contributions, as frequently as permitted by the Administrator, by completing the form or following any other election change procedure prescribed by the Administrator. An election change will become effective according to the uniform and nondiscriminatory rules established by the Administrator. 3.3.3 Pre-Tax and After-Tax Contributions will be delivered to the Funding Agent as of the earliest date they are known and can reasonably be segregated from the general assets of the Participating Employer. In no event will that date be later than the 15th business day of the month following the month they would have been paid to the Participant if he or she had not chosen to defer their payment or contribute them to the Plan. 3.3.4 Notwithstanding any other provision of the Plan, the amount contributed by the Participating Employers as Pre-Tax Contributions and by Participants as After-Tax Contributions must not exceed, in the aggregate, 15% of the total Compensation for the Plan Year for those Participants employed by the Participating Employers eligible for an allocation for that Plan Year. In addition, the amount contributed by the Participating Employers to this Plan or any other qualified plan maintained by the Participating Employers pursuant to a Participant's Pre-Tax Contribution Election must not exceed the Code Section 402(g) limit applicable for that calendar year. 3.4 Rollover Contributions With the approval of the Administrator, a Participant or Eligible Employee may make a Rollover Contribution to the Plan. A Participant's Rollover Contribution will be allocated to his or her Rollover Contribution Account no later than the first day of the month following the month in which the contribution is made. A Rollover Contribution must be made in cash. If an Employee makes a contribution that was intended to be a Rollover Contribution and the Funding Agent later discovers it was not a Rollover Contribution, the Funding Agent will distribute the balance of the Participant's Rollover Contribution Account to him or her as soon as practicable. 3.5 Establishment of Accounts 3.5.1 Each Participant to whom Pre-Tax Contributions are allocated will have a Pre-Tax Contribution Account. The Pre-Tax Contribution Account will be credited with the Pre-Tax Contributions allocable to the Participant and the income on those contributions, and will be debited with expenses, losses, withdrawals and distributions chargeable to those contributions. 3.5.2 Each Participant who makes After-Tax Contributions will have an After-Tax Contribution Account. The After-Tax Contribution Account will be credited with the After-Tax Contributions the Participant makes and the income on those contributions, and will be debited with expenses, losses, withdrawals and distributions chargeable to those contributions. 3.5.3 Each Participant who makes a Rollover Contribution to the Plan pursuant to Section 3.4 will have a Rollover Contribution Account. The Rollover Contribution Account will be credited with all Rollover Contributions made by the Participant and the income on those contributions, and will be debited with expenses, losses, withdrawals and distributions chargeable to those contributions. 3.6 Limitation on Annual Additions to Accounts Notwithstanding any provision of the Plan to the contrary, the total annual additions allocated for any Plan Year to the Account of a Participant and to his or her accounts under any other defined contribution plan maintained by the Company or an Affiliate must not exceed $30,000 or 25% of the Participant's Compensation. For purposes of this Section 3.6, "annual additions" include all Pre-Tax Contributions and After-Tax Contributions allocated to the Participant's Account for the Plan Year, except for Excess Pre-Tax Contributions (as described in Section 3.9.5) distributed to the Participant by April 15 following the year for which they were contributed to the Plan. "Annual additions" also include any employer and employee contributions and forfeitures allocated for the Plan Year under other defined contribution plans of the Company and the Affiliates. For Plan Years beginning before January 1, 1998, for purposes of this Section 3.6, a Participant's Compensation was adjusted by subtracting from it any Pre-Tax Contributions made for the Participant for the Plan Year, any Code Section 401(k) contributions made for the Participant to another plan for the Plan Year, and any contributions made on the Participant's behalf under a Code Section 125 cafeteria plan. 3.7 Reduction of Annual Additions If the annual additions allocated to a Participant's Account for the Plan Year exceed the limitation described in Section 3.6, annual additions, with their earnings, will be returned to the Participant in the minimum amount necessary to meet the limitation on annual additions. After-Tax Contributions will be returned first, and if there are not enough to satisfy the limitation on annual additions, Pre-Tax Contributions will be returned. 3.8 Combined Plan Fraction For Plan Years beginning before January 1, 2000, if a Participant was (or had been) a participant in any defined benefit plan (whether or not terminated) maintained by the Company or an Affiliate, the sum of the Participant's defined benefit plan fraction and defined contribution plan fraction could not exceed 1. If the sum exceeded 1, the Participant's defined contribution plan fraction was reduced until the sum equaled 1. The defined benefit plan fraction and defined contribution plan fraction were defined in Code Section 415(e). 3.9 Limitations on Pre-Tax Contributions - Definitions For purposes of Sections 3.9 through 3.12, the terms defined below have the meanings ascribed to them in this Section 3.9. 3.9.1 Actual Deferral Percentage means the amount of Pre-Tax Contributions allocated to the Eligible Participant for the Plan Year, divided by his or her Plan Year Compensation, stated as a percentage. In calculating the Actual Deferral Percentage, Pre-Tax Contributions include Excess Pre-Tax Contributions for Highly Compensated Employees (whether they were made under plans of unrelated employers or plans of the same or related employers) but do not include Excess Pre-Tax Contributions for Nonhighly Compensated Employees. All salary reduction contributions made on behalf of a Highly Compensated Employee under all plans of the Company and its Affiliates will be aggregated to determine the Highly Compensated Employee's Actual Deferral Percentage. The Actual Deferral Percentage of an Eligible Participant who does not make a Pre-Tax Contribution Election is 0.0%. Effective January 1, 1997, the Actual Deferral Percentage of an Eligible Participant will be determined without taking into account any amounts allocated to the accounts of his or her family members. 3.9.2 Average Actual Deferral Percentage means the average of the Actual Deferral Percentages of the Eligible Participants in a group. 3.9.3 Eligible Participant means any Employee who is eligible to make a Pre-Tax Contribution Election anytime during the Plan Year. 3.9.4 Excess Contribution means for any Plan Year, the portion of any Eligible Participant's Pre-Tax Contribution which must be reduced pursuant to this Section. If for any Plan Year the Average Actual Deferral Percentage for Eligible Participants who are Highly Compensated Employees does not satisfy one of the tests in Section 3.12, the Administrator will reduce the Pre-Tax Contributions of some or all of the Eligible Participants who are Highly Compensated Employees until one of the tests is satisfied. The reduction will be made by reducing the Pre-Tax Contributions for the Highly Compensated Employee with the highest dollar amount of Pre-Tax Contributions by the lesser of: (a) the amount necessary for the dollar amount of that Highly Compensated Employee's Pre-Tax Contributions to equal the dollar amount of the Pre-Tax Contributions for the Highly Compensated Employee with the next highest dollar amount of Pre-Tax Contributions, and (b) the amount necessary for the Plan to satisfy the Actual Deferral Percentage Test. The Administrator will repeat this procedure until the Plan satisfies the Actual Deferral Percentage Test set forth in Section 3.12. 3.9.5 Excess Pre-Tax Contribution means the amount of Pre-Tax Contributions for a calendar year that are includible in a Participant's gross income under Code Section 402(g) because the Participant's elective deferrals exceed the dollar limitation under Code Section 402(g) as determined under Sections 3.10 and 3.11. 3.10 Maximum Amount of Pre-Tax Contributions The total amount of Pre-Tax Contributions, 401(k) contributions under another qualified plan, and deferrals under a Code Section 403(b) annuity, a simplified employee pension and/or a simple retirement account allocated to a Participant in any calendar year cannot exceed the dollar limitation in effect under Code Section 402(g) for that year. 3.11 Correction of Excess Pre-Tax Contributions 3.11.1 Excess Pre-Tax Contributions, as adjusted per Section 3.11.2, will be distributed to each Participant on whose behalf they were made no later than the first April 15 following the close of the taxable year of the Participant for which they were allocated. In no event may the amount distributed under this Section 3.11 exceed the Participant's total Pre-Tax Contributions (as adjusted under Section 3.11.2 for income and losses allocable to them) for the taxable year for which he or she had Excess Pre-Tax Contributions. 3.11.2 The Excess Pre-Tax Contributions to be distributed to a Participant will be adjusted for income or losses through the close of the Plan Year for which they were made. Income and losses allocable to a Participant's Excess Pre-Tax Contributions will be determined in a nondiscriminatory manner (within the meaning of Code Sections 401(a)(4)) consistent with the valuation of Participant Account under Section 9.4. 3.11.3 If a Participant has Excess Pre-Tax Contributions, but only when taking into account his or her pre-tax contributions under another plan, in order to receive a distribution of Excess Pre-Tax Contributions, a Participant must make a written claim to the Administrator no later than the March 15 following the taxable year of the Participant for which the contributions were made. The claim must specify the amount of the Participant's Excess Pre-Tax Contributions for the preceding taxable year and be accompanied by the Participant's written statement that if those amounts are not distributed, the Participant's Pre-Tax Contributions, when added to amounts deferred under other plans or arrangements described in Code Section 401(k), 402(h)(1)(B) (a simplified employee pension), 403(b) (an annuity plan) or 408(p)(2)(A)(i) (a simple retirement plan) will exceed the limit imposed on the Participant by Code Section 402(g) for the year in which the deferral occurred. 3.11.4 Excess Pre-Tax Contributions distributed prior to the first April 15 following the close of the Participant's taxable year will not be treated as Annual Additions under Section 3.6 for the preceding Limitation Year. 3.11.5 Any Pre-Tax Contributions that are properly distributed under Section 3.7 as excess Annual Additions are disregarded in determining if there are any Excess Pre-Tax Contributions. 3.12 Actual Deferral Percentage Test 3.12.1 The Average Actual Deferral Percentage for Eligible Participants who are Highly Compensated Employees for the Plan Year may not exceed the greater of:   (a) the Average Actual Deferral Percentage for Eligible Participants who are Nonhighly Compensated Employees for the Plan Year multiplied by 1.25; and           (b) the lesser of:             (i) the Average Actual Deferral Percentage for Eligible Participants who are Nonhighly Compensated Employees for the Plan Year multiplied by two and             (ii) the Average Actual Deferral Percentage for Eligible Participants who are Nonhighly Compensated Employees for the Plan Year plus two percentage points. 3.12.2 The provisions of Code Section 401(k)(3) are incorporated by reference. 3.12.3 If this Plan satisfies the requirements of Code Sections 401(a)(4), 401(k), and 410(b) only if aggregated with one or more other plans, or if one or more other plans satisfy the requirements of those Code sections only if aggregated with this Plan, then this Section 3.12 is applied by determining the Actual Deferral Percentages of Eligible Participants as if all the plans were a single plan. 3.12.4 The Administrator also may treat one or more plans as a single plan with the Plan whether or not the aggregated plans must be aggregated to satisfy Code Sections 401(a)(4) and 410(b). However, those plans must then be treated as one plan under Code Sections 401(a)(4), 401(k), and 410(b). Plans may be aggregated under this Section 3.12.4 only if they have the same plan year. 3.12.5 Pre-Tax Contributions may be considered made for a Plan Year if made no later than the end of the 12-month period beginning on the day after the close of the Plan Year. 3.12.6 The determination and treatment of the Pre-Tax Contributions and Actual Deferral Percentage of any Participant must satisfy such other requirements as the Secretary of the Treasury may prescribe including, without limitation, record retention requirements. ARTICLE IV Vesting A Participant is always 100% vested in the balance of his or her Pre-Tax Contribution Account, After-Tax Contribution Account and Rollover Contribution Account. ARTICLE V Timing of Distributions to Participants 5.1 Separation from Service Upon his or her separation from service with the Company and all Affiliates for any reason, a Participant will be entitled to receive his or her full Account Balance, determined in accordance with the valuation rules established for each Investment Fund. The date as of which the Participant's Account Balance is determined will be the Valuation Date preceding the date of distribution. 5.2 Start of Benefit Payments 5.2.1 Except as provided in Sections 5.2.2 and 5.2.3, unless a Participant otherwise elects, payment of benefits will begin no later than the 60th day after the close of the Plan Year in which the latest of the following events occurs:   (a) the Participant's Normal Retirement Date;         (b) the 10th anniversary of the year in which the Participant commenced participation; and         (c) the Participant's separation from service. If the amount of benefits payable to or in respect of a Participant cannot be determined by the benefit commencement date described in the preceding sentence, or if the Administrator cannot locate the Participant (or, if the Participant has died, his or her Beneficiary) after making a reasonable effort to do so, benefit payments will begin no later than 60 days after the amount of the Participant's benefits can first be determined or the Participant (or his or her Beneficiary) is located, in the amount necessary to bring the payments up to date, as if they had begun on the benefit commencement date described in the preceding sentence. 5.2.2 The Participant's Account Balance will be distributed as soon as practicable after the Participant elected to receive a distribution following the Participant's separation from service. Notwithstanding the foregoing, if (at the time of his or her separation from service) the Participant's total Account Balance exceeds $5,000 (or, for Plan Years beginning before 1998, $3,500), the Participant may elect to defer distribution of his or her Account Balance until a date no later than his or her Required Beginning Date, and the Participant's Account Balance may be distributed before the Participant's Required Beginning Date only if the notice and consent rules of this Sections 5.2.2 are met. At least 30, but no more than 90, days before the Annuity Starting Date, the Administrator will furnish the Participant with a notice containing information regarding his or her right to defer distribution of his or her Account Balance. The Administrator will give the Participant an election period of at least 30 days to decide whether to take distribution. Notwithstanding the foregoing, the election period may end immediately after the Participant makes an affirmative election to take distribution of his or her Account Balance. Notices and elections under this Section 5.2.2 may be made electronically or telephonically. 5.2.3 Notwithstanding any other provision of this Plan, a Participant must begin to receive his or her benefit no later than his or her Required Beginning Date. The amount to be distributed each year will be the minimum amount required to satisfy Code Section 401(a)(9) and the regulations promulgated thereunder, determined with no recalculation of life expectancy. The Required Beginning Date of a Participant who reaches age 70-½ on or after January 1, 2000 is April 1 of the calendar year following the calendar year in which the Participant reaches age 70-½ or, if later, retires. The Required Beginning Date of a Participant who reaches age 70-½ before January 1, 2000 is April 1 of the calendar year following the calendar year in which the Participant reaches age 70-½. Notwithstanding any other provision of this Section 5.2.3, if a Participant is a 5% owner (as defined in Code Section 416) for the Plan Year ending in the calendar year in which he or she reaches age 70-½ his or her Required Beginning Date is April 1 of the following calendar year, and he or she cannot defer distribution until after he or she retires. 5.2.4 Notwithstanding any other provision of this Plan, all Plan distributions will comply with Code Section 401(a)(9), including Department of Treasury Regulation Section 1.401(a)(9)-2. In addition, the benefit payments distributed to any Participant will satisfy the incidental death benefit provisions under Code Section 401(a)(9)(G) and the regulations promulgated under it. 5.2.5 If the Participant dies after beginning distribution of his or her Account Balance, the remainder of the Account Balance will be payable in accordance with Section 7.1. Notwithstanding the foregoing, the Participant's Account Balance must continue to be distributed at least as rapidly as under the method of distribution in effect before the Participant died. 5.2.6 If the Participant dies before beginning distribution of his or her Account Balance, the Participant's Account Balance will be distributed as provided under Section 7.1, but distribution must be completed within five years after the Participant dies. Notwithstanding the foregoing, the Participant's Beneficiary may receive the Account Balance over his or her life or over a period not extending beyond his or her life expectancy, so long as distribution begins within one year after the participant dies, or, if the Beneficiary is the Participant's Surviving Spouse, by the date the Participant would have reached age 70-½. Furthermore, if the Participant's Surviving Spouse is the Beneficiary and dies before distribution begins, the next Beneficiary to take may receive benefits over his or her life or a period not exceeding his or her life expectancy, so long as distribution begins by the date the Surviving Spouse would have reached age 70-½. 5.3 Additional Distribution Events A Participant is eligible to receive a lump sum distribution of his or her Account Balance under any of the sets of circumstances described below. (a) The Plan is terminated and another defined contributions plan is not established in its place. Neither an employee stock ownership plan (as described in Code Section 4975(e) or 409) nor a simplified employee pension plan (as defined in Code Section 408(k)) counts as another defined contribution plan for this purpose. (b) A Participating Employer that is a corporation disposes of substantially all of the assets used in a trade or business to an unrelated corporation, and the Participating Employer continues to maintain this Plan after the disposition. In such a case, only Employees who continue employment with the corporation acquiring the assets may receive a lump sum distribution. (c) A Participating Employer that is a corporation disposes of its interest in a subsidiary to an unrelated entity, and the Participating Employer continues to maintain this Plan. In such a case, only Employees who continue employment with the subsidiary may receive a lump sum distribution. For purposes of this Section 5.3, a lump sum distribution has the meaning given by Code Section 402(d)(4), without regard to Subsections (i), (ii), (iii) and (iv) of Subsections (A), (B), or (F) thereof. 5.4 Transfers from the Plan for Changes in a Participant's Employment Status If, as a result of a change in employment status, a Participant ceases to be a Participant in this Plan but becomes a participant in the FMC Corporation Savings and Investment Plan pursuant to the terms of that plan, his or her Account will be transferred to that plan as soon as reasonably feasible after the date he or she becomes a participant in that plan. ARTICLE VI Forms of Benefit, In-Service Withdrawals and Loans 6.1 Cashout of Small Amounts Notwithstanding any other Plan provision, if a Participant's Account Balance is not larger than $5,000 (or, for Plan Years beginning before 1998, $3,500) the Account Balance will be paid in one lump sum as soon as practicable after the Participant's separation from service, without his or her consent or the consent of his or her spouse. 6.2 Medium of Distribution A Participant's Account Balance will be distributed by check to the Participant or Beneficiary entitled to it (or to his or her designated agent). Alternatively, as to any amount invested in the Stock Fund at the time of distribution, the Participant or, where applicable, his or her Beneficiary, may request a certificate representing the whole shares of Stock held for him or her, and a check representing any fractional share. The Administrator will establish uniform and nondiscriminatory rules governing the timing, content and manner of elections under this Section 6.2. 6.3 Forms of Benefit for Participants 6.3.1 The normal form of benefit is the 50% Joint and Survivor-Ten Year Certain Annuity with the Participant's spouse as the Beneficiary, if the Participant is married on the Annuity Starting Date. If Participant is not married on the Annuity Starting Date, the normal form of benefit is the Life and Ten Year Certain Annuity. If the Participant fails to make an election under Section 6.5, his or her Account Balance will be paid in the normal form of benefit. A Participant who is married on the Annuity Starting Date may elect a benefit other than the normal form of benefit only if his or her spouse consents to the election within the time frame and in the manner required by Section 6.5. 6.3.2 Subject to Sections 6.3.1 and 6.5, and except as otherwise provided herein, a Participant may elect to have his or her benefit under this Plan paid in the form of a lump sum distribution or a fixed dollar annuity purchased on the Participant's behalf. A Plan annuity is a fixed dollar annuity if it provides a stream of monthly payments that do not vary in amount. 6.3.3 If a Participant elects to have a fixed dollar annuity purchased on his or her behalf, he or she may select any of forms of annuity described in this Section 6.3.3.   (a) Life and Ten Year Certain Annuity: This form of annuity pays the Participant a fixed amount each month beginning with the month in which the Annuity Starting Date occurs and ending when the Participant dies. If the Participant dies before 120 monthly payments have been made, payments will continue to the Participant's Beneficiary until 120 monthly payments have been made to the Participant and Beneficiary under the annuity. (b) Joint and Survivor-Ten Year Certain Annuity: This form of annuity pays the Participant a fixed amount each month beginning with the month in which the Annuity Starting Date occurs and ending when the Participant dies. If the Participant's Beneficiary survives the Participant, payments will continue to the Participant's primary Beneficiary until the Beneficiary dies. If the Participant and Beneficiary both die before 120 monthly payments have been made to the Participant and Beneficiary under the annuity, payments will continue to the Participant's contingent Beneficiary until 120 monthly payments in all have been made under the annuity. The monthly payment payable to the primary or contingent Beneficiary before 120 payments have been made under the annuity equals the monthly payment made during the Participant's lifetime. The monthly payment payable to the primary Beneficiary after 120 payments have been made under the annuity equals 100% or 50% of the monthly payment made during the Participant's lifetime, as specified in the Participant's election. Both the primary and contingent Beneficiaries must be named at the time this annuity is elected. (c) Period Certain Annuity: This form of annuity pays the Participant a fixed amount each month beginning with the month in which the Annuity Starting Date occurs and ending when the specified number of monthly payments have been made to the Participant and, if he or she dies before receiving the specified number of payments, to the Participant's Beneficiary. The Participant may specify 60, 120 or 180 monthly payments. The Participant specifies the number of monthly payments and names his or her Beneficiary at the time he or she elects the annuity. (d) Other: This form of payment includes any other alternative form of distribution, including installment distributions, provided for by the Funding Agent. Notwithstanding the foregoing, a Participant may not elect any form of distribution providing only for the payment of interest or income earned on his or her Account.   6.3.4 An annuity under this Plan must provide that payments will be made over a period no longer than the life of the Participant, the lives of the Participant and his or her Beneficiary, the Participant's life expectancy or the life expectancy of the Participant and his or her Beneficiary. A Participant may not elect any form of annuity providing monthly payments to a Beneficiary who is other than his or her spouse, unless the amount distributed each year equals or exceeds the quotient obtained by dividing the Participant's Account Balance by the divisor determined under Department of Treasury Regulation Section 1.401(a)(9)-2. Further, the amount of the monthly payment made to a Beneficiary cannot under any circumstances be larger than the amount of the monthly payment made to the Participant. 6.4 Change in Form, Timing or Medium of Benefit Payment Any former Employee who has chosen to defer payment of his or her Account Balance may request a change in the form, timing or medium in which his or her Account Balance will be paid, so long as the revised election conforms to Sections 6.3 through 6.5. Once benefit payments have begun, no Participant may change the form, timing or medium of payment of his or her Account Balance. 6.5 Waiver of Normal Form of Benefit 6.5.1 The Participant's Account Balance will be distributed in the normal form of benefit, regardless of what form of benefit the Participant chooses, unless the Participant makes an effective waiver under this Section 6.5 and, if the Participant is married on the Annuity Starting Date, unless the Participant's spouse consents to the Participant's choice of another form of benefit in the manner described in this Section 6.5. No sooner than 30, and no more than 90, days before the Annuity Starting Date, the Administrator will provide the Participant with a written explanation of: (a) the terms and conditions of the normal form of benefit; (b) the Participant's right to waive the normal form of benefit and the effect of waiving the normal form of benefit; (c) the right of the Participant's spouse to consent or withhold his or her consent to the Participant's choice of another form of benefit; and (d) the Participant's right to revoke a waiver of the normal form of benefit, and the effect of revoking the waiver. A Participant may revoke his or waiver of the normal form of benefit at any time before the payment begins, without his or her spouse's consent. For purposes of the previous sentence, if the Participant's Account Balance is to be paid in the form of an annuity, payment will be deemed to begin when the annuity has been purchased. 6.5.2 A Participant's waiver of the normal form of benefit will be effective only if: (a) the Participant's spouse consents in writing to the waiver; (b) the waiver includes an election of a form of benefit that cannot be changed without the spouse's consent, or the spouse's consent specifically permits the Participant to make other elections of forms of benefit;       (c) the spouse's consent acknowledges the effect of the waiver; and         (d) the spouse's consent is witnessed by a notary public or the Administrator. Spousal consent to the Participant's waiver of the normal form of benefit is not necessary if the Participant establishes to the satisfaction of a Plan representative that the Participant does not have a spouse, or that the Participant's spouse cannot be located. Spousal consent is also unnecessary if the Participant produces a court order to the effect that the Participant is legally separated from his or her spouse or has been abandoned by the spouse, within the meaning of the law of the Participant's state of residence, unless a qualified domestic relations order requires otherwise. If the Participant's spouse is legally incompetent to give consent, the spouse's legal guardian may give the spouse's consent, even if the legal guardian is the Participant. A spouse's consent will be valid only as to that spouse, and an election deemed effective without the spouse's consent will be valid only as to the spouse designated as to that election. 6.5.3 Notwithstanding the foregoing, the first payment of the Participant's Account Balance may be made as early as seven days after the Participant makes an affirmative election to receive his or her Account Balance in a particular form of payment, even if that means the Participant has fewer than 30 days to decide on a form of payment, if the Annuity Starting Date is after the date of the Participant's affirmative election and, if the Participant is married on the Annuity Starting Date, the Participant's spouse consents to the form of payment in the manner required by Section 6.5.2. 6.5.4 If the Administrator believes that any spouse might, under the law of any jurisdiction, have any interest in any benefit that might become payable to a Participant, the Administrator may, as a condition precedent to the Participant's making any distribution or withdrawal election, require a written release or releases, or other documents that it believes are necessary, desirable, or appropriate to prevent or avoid any conflict or multiplicity of claims regarding payment of any Plan benefits. 6.6 Direct Rollover of Eligible Rollover Distributions 6.6.1 Notwithstanding any provision of the Plan, effective for distributions on or after January 1, 1993, a Distributee may elect, at the time and in the manner prescribed below, to have any portion of an Eligible Rollover Distribution paid in a Direct Rollover to an Eligible Retirement Plan specified by the Distributee. 6.6.2 At least 30, but no more than 90, days before the Annuity Starting Date, the Administrator will furnish the Participant with a notice containing information regarding his or her right to take distribution directly or to elect a Direct Rollover, and some of the federal tax consequences of the alternative types of distribution. The notice must meet the requirements of Code Section 402(f). The Administrator will give the Participant an election period of at least 30 days to decide whether to elect a Direct Rollover. Notwithstanding the foregoing, the election period may end immediately after the Participant makes an affirmative election as to whether to receive the distribution directly or in the form of a Direct Rollover, so long as the Participant is properly informed of his or her right to a full 30-day election period, and waives the remainder of the election period 6.7 In-service and Hardship Withdrawals 6.7.1 An active Participant who has reached age 59-½ may elect to withdraw all or any part of his or her Account. For periods beginning before January 1, 2000, a Participant was permitted to make only one in-service withdrawal during his or her lifetime. The Administrator will establish uniform and nondiscriminatory procedures for requesting, granting and processing in-service withdrawals under this Section 6.7.1, which may include telephonic or electronic procedures, as and to the extent permitted by applicable law or regulation. 6.7.2 An active Participant may make a hardship withdrawal from his or her Pre-Tax Contribution Account if he or she demonstrates to the Administrator that the withdrawal is necessary to satisfy the Participant's immediate and heavy financial need. A hardship withdrawal cannot exceed the total Pre-Tax Contributions made to the Plan on behalf of the Participant by the date of the withdrawal, reduced by the amounts of any previous hardship or other in-service withdrawals. In addition, the minimum hardship withdrawal permitted is $500, or, if less, the total amount of Pre-Tax Contributions, made for the Participant, minus any previous hardship or in-service withdrawals.   (a) A distribution is on account of an immediate and heavy financial need if it is for:             (1) medical expenses as described in Code Section 213(d) incurred by the Participant, his spouse or dependents;             (2) costs directly related to the purchase of a principal residence for the Participant (excluding mortgage payments);             (3) tuition payments, or related education expenses, for the next 12 months of post-secondary education for the Participant or the Participant's spouse or dependents;             (4) payments necessary to prevent the Participant's eviction from his or her principal residence, or foreclosure on the mortgage on the Participant's residence; or             (5) expenses incurred for the funeral of a member of the Participant's immediate family;             (6) legal expenses incurred by the Participant in obtaining a divorce;         (7) expenses incurred by the Participant in remedying an uninsured property loss;             (8) expenses incurred by the Participant in adopting or attempting to adopt a child;             (9) emergency expenses of the Participant in personal bankruptcy; or             (10) other expenses deemed by the Administrator to constitute hardships justifying a hardship withdrawal, and formally adopted under rules of the Administrator as eligible for hardship withdrawal.           (b) A withdrawal will be permitted only if the Participant certifies in writing to the Administrator that the "immediate and heavy financial need" cannot be met from other resources reasonably available to the Participant and the Participant further represents to the Administrator, in such manner and form as the Administrator may require, that the Participant's immediate and heavy financial need cannot be relieved:             (1) through reimbursement or compensation by insurance or otherwise;             (2) by reasonable liquidation of the Participant's assets, to the extent liquidation would not itself cause an immediate and heavy financial need;             (3) by the Participant's ceasing to have Pre-Tax Contributions made for him or her under the Plan; or             (4) by other distributions from plans maintained by a Participating Employer or any other employer, or by borrowing from commercial sources on reasonable commercial terms.           If the Participating Employer or the Administrator knows that the representation required by the preceding sentence would not be true, the hardship withdrawal request will not be granted.           (c) A hardship withdrawal under this Section 6.7.2 cannot exceed the amount required to relieve the financial need, including any amounts necessary to pay any federal, state, or local income taxes or penalties reasonably anticipated to result from the distribution. 6.7.3 The Administrator will establish uniform and nondiscriminatory procedures for requesting, granting and processing hardship withdrawals. 6.8 Loans 6.8.1 Subject to any restrictions imposed by the terms of any group annuity contract held under the Plan, an active Participant may submit an application to the Administrator to borrow from his or her Account (on such on such uniform and nondiscriminatory terms and conditions as the Administrator shall prescribe) an amount, when added to the amount of any then outstanding loan, does not exceed the lesser of:   (a) $50,000, reduced by the excess (if any) of the Participant's highest outstanding Plan loan balance during the one-year period ending on the day before the loan is made over the Participant's outstanding Plan loan balance on the day the loan is made; and         (b) 50% of the Participant's Account as of the Valuation Date coincident with or immediately preceding the date the Administrator receives the application.       In calculating the Participant's loan limit, all loans from qualified plans of the Company and all Affiliates will be aggregated. The Participant's spouse must consent as described in Section 7.3 to any loan from the Participant's Account.       6.8.2 Each loan granted under the Plan will meet the following requirements:         (a) it must be evidenced by a negotiable promissory note;         (b) the rate of interest payable on the unpaid balance of the loan will be reasonable;         (c) the amount of the loan must be at least $1,000;         (d) the loan, by its terms, must require repayment within five years;         (e) the loan will be secured by the Participant's interest in the Account Balance of his or her Account, but not to exceed 50% of such Account; and         (f) the loan must be repaid through payroll deduction, or, if the loan has been outstanding for at least three months, the Participant may make one payment by check or money order of the full amount of principal and interest then outstanding. 6.8.3 If a Participant is granted a loan, a "Loan Account" will be established for the Participant. All Loan Accounts will be held by the Funding Agent, as part of the Trust Fund. The loan amount will be transferred from a Participant's other Accounts according to uniform and nondiscriminatory ordering rules adopted by the Administrator, and will be disbursed from the Loan Account. The promissory note executed by the Participant will be deposited in his or her Loan Account. 6.8.4 Principal and interest payments of a loan will be credited initially to the Loan Account of the Participant, and will be transferred as soon as reasonably practicable thereafter to the other Accounts of the Participant. Any loss caused by nonpayment or other default on a loan obligations will be borne solely by the Loan Account of the Participant. Although a default will constitute a taxable event to the Participant, necessitating certain reporting obligations on the Administrator's part, notwithstanding any other provision of the Plan, if the Participant defaults on his or her loan, the note will not be executed upon until the Participant experiences a distributable event. A Participant's loan repayments will, at his or her request, be suspended during the time he or she is absent as a result of qualifying military service (as determined under USERRA), as permitted under Code Section 414(u)(4). 6.8.5 A Participant may not have more than two loans outstanding at any given time. For periods beginning before January 1, 2000, a Participant could not receive more than one Plan loan in any 12-month period, and could not have more than two loans outstanding at any given time. 6.8.6 Upon termination of Employment, a Participant who has an outstanding loan under the Plan must repay his or her loan in a lump sum or the loan will be in default. Notwithstanding the above, the Committee (or its delegatee) may, in its sole discretion, allow terminated Participants to continue to repay loans under such uniform and nondiscriminatory rules as the Committee (or its delegate) determines, where the Participant has been terminated due to a transaction or a permanent reduction in force. 6.8.7 All fees and expenses incurred in connection with a loan obligation of a Participant will be borne solely by the Participant's Loan Account. 6.8.8 The Administrator will establish uniform and nondiscriminatory procedures for requesting, granting and processing Plan loans. 6.8.9 Pursuant to that certain U.S. Asset Purchase and Framework Agreement (the "Agreement") dated May 4, 1999 by and between the Company and Great Lakes Chemical Corporation ("Great Lakes"), the Company sold and assigned certain assets and liabilities to Great Lakes. As part of that transaction, certain individuals will be offered employment by Great Lakes and will become Transferred Employees, as defined in the Agreement. Each such individual is a " Great Lakes Transferred Employee" for purposes of this Section 6.8.9. Any Plan loan that is outstanding on the Closing Date to a Great Lakes Transferred Employee will remain outstanding under this Plan, notwithstanding the Great Lakes Transferred Employee's termination of employment with the Company and all Affiliates, as if the Great Lakes Transferred Employee were still employed by the Company, until the earliest of:   (a) the date the Great Lakes Transferred Employee fully repays the loan;     (b) the date the Great Lakes Transferred Employee defaults on the loan;         (c) the date the Great Lakes Transferred Employee fails to repay the loan in full after separating from service with Great Lakes and its affiliates under Code Sections 414(b), (c), (m) and (o) and being given the opportunity to repay the loan;         (d) the date that is no later than ninety days after the date Great Lakes ceases to facilitate loan repayments for Great Lakes Transferred Employees by payroll deduction; and         (e) the date the loan is transferred with the rest of the Great Lakes Transferred Employee's Account to a defined contribution plan of Great Lakes or a Great Lakes affiliate under Code Section 414(b), (c), (m) or (o) .         ARTICLE VII Death Benefits 7.1 Payment of Account Balance 7.1.1 If a Participant dies before payment of his or her Account Balance has begun, his or her Account Balance will be paid to the Participant's Beneficiary in one lump sum within 90 days after the Administrator receives notice of the Participant's death. The Beneficiary of a Participant who is married on the date of his or her death will be the Participant's Surviving Spouse, unless the Participant has designated another Beneficiary and the Surviving Spouse consented to the designation, both as provided in Section 7.3. 7.1.2 If a Participant dies before payment of his or her Account Balance has begun, 50% of the Participant's Account Balance will be paid to his or her Surviving Spouse in the form of a life annuity, and the remainder will be paid to any Beneficiary chosen by the Participant (including the Participant's Surviving Spouse).   (a) The Participant may choose a form of benefit other than the life annuity for the 50% of his or her Account Balance that will be paid to the Surviving Spouse, so long as the Participant's election meets the requirements of Section 7.3 and his or her Spouse consents in the time and manner required by Section 7.3. The Participant may also designate a Beneficiary other than his or her Surviving Spouse as the primary Beneficiary to receive some or all of his or her Account Balance, so long as the Surviving Spouse consents to the designation in the time and manner required by Section 7.3.         (b) Unless the Participant has chosen a form of benefit for his or her Beneficiary or Surviving Spouse, the Beneficiary or Surviving Spouse may choose to have any amounts payable to him or her paid in any of the forms of benefit described under Section 6.3 other than the Joint and Survivor-Ten Year Certain Annuity. Payments to a Surviving Spouse must begin no later than the April 1 following the year in which the Participant would have reached age 70-½, and payments to a Beneficiary who is not the Surviving Spouse must begin no later than one year after the Participant's death. Amounts payable to a Beneficiary or Surviving Spouse must be made within five years after the Participant's death, or over a period not exceeding the life or life expectancy of the Surviving Spouse. A Participant's Surviving Spouse who chooses to waive his or her right to receive 50% of the Participant's Account Balance in the form of a life annuity must waive the right in the time and manner described in Section 7.3.   (c) Notwithstanding Subsection (b) above, if at the time the Participant dies his or her Account Balance does not exceed $5,000 (or, for Plan Years beginning before January 1, 1998, $3,500) the Account will be distributed in the form of a single sum payment. In addition, if more than one Beneficiary is concurrently entitled to receive annuity payments, or if the monthly annuity payment to any Beneficiary would be less than $50 (or another amount established from time to time by the Administrator), the Administrator may choose to pay the value of the annuity in a single sum, so long as the single sum would not exceed the dollar limit of the previous sentence. 7.2 Failure to Name a Beneficiary If a Participant fails to name a Beneficiary and dies before payment of his or her Account Balance begins, or if no designated Beneficiary survives the Participant, the Administrator will pay any amounts due after the Participant's death to the Participant's Surviving Spouse or, if there is no Surviving Spouse, to the Participant's surviving children in equal shares. If the Participant leaves behind no Surviving Spouse or surviving children, the Administrator will pay any amounts then due to the Participant's estate. 7.3 Waiver of Preretirement Survivor Annuity 7.3.1 A Participant may designate someone other than his or her Surviving Spouse as a primary Beneficiary to receive any portion of his or her Account Balance payable after his or her death, or the Participant or his or her Surviving Spouse may choose a form of benefit other than the life annuity for the 50% of the Account Balance that will automatically be paid to the Surviving Spouse as a life annuity only if the designation or election meets the requirements of this Section 7.3 outlined below. 7.3.2 The Administrator will provide each Participant with a written explanation of: (a) the 50% preretirement life annuity payable to the Participant's Surviving Spouse; (b) the Participant's right to waive that annuity and the effect of such a waiver; (c) the right of the Participant's spouse to the 50% preretirement life annuity and the effect of waiving that right; and (d) the Participant's right to revoke a previous waiver and the effect of such a revocation.     The Administrator will provide the above explanation to the Participant during the period that begins on the first day of the Plan Year in which the Participant reaches age 32 and ends on the last day of the Plan Year in which the Participant reaches age 34. If a Participant first becomes a Participant after the start of that period, the Administrator will provide the explanation no later than the end of the second Plan Year after the Participant first becomes a Participant . 7.3.3 The election of a form of benefit other than the 50% preretirement life annuity will be effective only if it is made in writing and consented to by the Participant's spouse, with the spouse's consent witnessed by a notary public or the Administrator. Moreover, the election must be made during the period that begins on the first day of the Plan Year in which the Participant reaches age 35 (or, if earlier, the date the Participant separates from service) and ends on the date of the Participant's death. Any subsequent change of Beneficiary to an individual who is not the Participant's Surviving Spouse must also be in writing and consented to by the Participant's spouse, with the spouse's consent witnessed by a notary public or the Administrator. Spousal consent is not necessary if the Participant establishes to the satisfaction of a Plan representative that the Participant does not have a spouse, or that the Participant's spouse cannot be located. Spousal consent is also unnecessary if the Participant produces a court order to the effect that the Participant is legally separated from his or her spouse or has been abandoned by the spouse, within the meaning of the law of the Participant's state of residence, unless a qualified domestic relations order requires otherwise. If the Participant's spouse is legally incompetent to give consent, the spouse's legal guardian may give the spouse's consent, even if the legal guardian is the Participant. A spouse's consent will be valid only as to that spouse, and an election deemed effective without the spouse's consent will be valid only as to the spouse designated as to that election. A Participant may revoke a prior waiver of the 50% preretirement life annuity or a prior designation of someone other than the Surviving Spouse as a primary Beneficiary without the consent of his or her spouse, and may revoke such a waiver or designation an unlimited number of times. 7.3.4 A Participant's former spouse will be treated as the spouse or Surviving Spouse only to the extent provided under a qualified domestic relations order as described in Code Section 414(p). ARTICLE VIII Fiduciaries 8.1 Named Fiduciaries 8.1.1 The Company is the Plan sponsor and a "named fiduciary," as that term is defined in ERISA Section on 402(a)(2), with respect to control over and management of the Plan's assets only to the extent that it (a) appoints the members of the Committee which administers the Plan at the Administrator's direction; (b) delegates its authorities and duties as "plan administrator" (as defined under ERISA) to the Committee; and (c) continually monitors the performance of the Committee. 8.1.2 The Company, as Administrator, and the Committee, which administers the Plan at the Administrator's direction, are "named fiduciaries" of the Plan, as that term is defined in ERISA Section 402(a)(2), with authority to control and manage the operation and administration of the Plan. The Administrator is also the "administrator" and "plan administrator" of the Plan, as those terms are defined in ERISA Section 3(16)(A) and Code Section 414(g), respectively. 8.1.3 The Trustee is a "named fiduciary" of the Plan, as that term is defined in ERISA Section 402(a)(2), with authority to manage and control all Trust assets, except to the extent that authority is allocated under the Plan and Trust to the Administrator or is delegated to an Investment Manager, an insurance company, or the Plan Participants at the direction of the Administrator or the Committee 8.1.4 The Company, Committee, Administrator and Trustee are the only named fiduciaries of the Plan. 8.2 Employment of Advisers A named fiduciary, and any fiduciary appointed by a named fiduciary, may employ one or more persons to render advice regarding any of the named fiduciary's or fiduciary's responsibilities under the Plan. 8.3 Multiple Fiduciary Capacities Any named fiduciary and any other fiduciary may serve in more than one fiduciary capacity with respect to the Plan. 8.4 Payment of Expenses All Plan expenses, including expenses of the Administrator, the Committee, the Trustee, any Investment Manager and any insurance company, will be paid by the Trust Fund, unless a Participating Employer elects to pay some or all of those expenses. All or a portion of the recordkeeping costs or charges imposed or incurred (if any) in maintaining the Plan will be charged on a per capita basis to the Account of each Participant. In addition, all charges imposed or incurred (if any) for an Investment Fund or a transfer between Investment Funds will be charged to the Account of the Participant directing that investment. In addition, all charges imposed or incurred for a Participant loan will be charged to the Account of the Participant requesting the loan. 8.5 Indemnification To the extent not prohibited by state or federal law, each Participating Employer agrees to, and will indemnify and save harmless the Administrator, any past, present, additional or replacement member of the Committee, and any other Employee, officer or director of that Participating Employer, from all claims for liability, loss, damage (including payment of expenses to defend against any such claim) fees, fines, taxes, interest, penalties and expenses which result from any exercise or failure to exercise any responsibilities with respect to the Plan, other than willful misconduct or willful failure to act. ARTICLE IX Plan Administration 9.1 Powers, Duties and Responsibilities of the Administrator and the Committee 9.1.1 The Administrator and the Committee have full discretion and power to construe the Plan and to determine all questions of fact or interpretation that may arise under it. An interpretation of the Plan or determination of questions of fact regarding the Plan by the Administrator or Committee will be conclusively binding on all persons interested in the Plan. 9.1.2 The Administrator and the Committee have the power to promulgate such rules and procedures, to maintain or cause to be maintained such records and to issue such forms as they deem necessary or proper to administer the Plan. 9.1.3 Subject to the terms of the Plan, the Administrator and/or Committee will determine the time and manner in which all elections authorized by the Plan must be made or revoked. 9.1.4 The Administrator and the Committee have all the rights, powers, duties and obligations granted or imposed upon them elsewhere in the Plan. 9.1.5 The Administrator and the Committee have the power to do all other acts in the judgment of the Administrator or Committee necessary or desirable for the proper and advantageous administration of the Plan. 9.1.6 The Administrator and the Committee will exercise all of their responsibilities in a uniform and nondiscriminatory manner. 9.2 Investment Powers, Duties and Responsibilities of the Administrator and the Committee 9.2.1 The Administrator and the Committee have the power to make and deal with any investment of the Trust in any manner it deems advisable and which is consistent with the Plan. Notwithstanding the foregoing, the power to make and deal with Trust investments does not extend to any assets subject to the direction and control of Plan Participants as described in Section 9.3.2. 9.2.2 The Administrator and/or the Committee will establish and carry out a funding policy and method consistent with the objectives of the Plan and the requirements of ERISA. 9.2.3 The Administrator and the Committee have the power to direct that assets of the Trust be held in a master trust consisting of assets of plans maintained by a Participating Employer which are qualified under Code Section 401(a). 9.2.4 The Administrator and the Committee the power to select Annuity Contracts. 9.3 Investment of Accounts 9.3.1 The Administrator or, as delegated by the Administrator, the Committee may establish such different Investment Funds as it from time to time determines to be necessary or advisable for the investment of Participants' Account, including Investment Funds pursuant to which Accounts can be invested in "qualifying employer securities", as defined in Part 4 of Title I of ERISA. Each Investment Fund will have the investment objective or objectives established by the Administrator or Committee. Except to the extent investment responsibility is expressly reserved in another person, the Administrator or the Committee, in its sole discretion, will determine what percentage of the Plan assets is to be invested in qualifying employer securities. The percentage designated by the Administrator can exceed ten percent of the Plan's assets, up to a maximum of 100% of the Plan's assets. 9.3.2 The Administrator or, as delegated by the Administrator, the Committee, may in its sole discretion permit Participants to determine the portion of their Accounts that will be invested in each Investment Fund. The frequency with which a Participant may change his or her investment election concerning future Pre-Tax Contributions or his or her existing Account shall be governed by uniform and nondiscriminatory rules established by the Administrator or Committee. The Plan is intended to comply with and be governed by Section 404(c) of ERISA. 9.4 Valuation of Accounts A Participant's Account will be revalued at fair market value on each Valuation Date. On each Valuation Date, the earnings and losses of the Trust will be allocated to each Participant's Account in the ratio that his or her total Account Balance bears to all Account Balances. Notwithstanding the foregoing, if the Administrator or Committee established Investment Funds pursuant to Section 9.3, the earnings and losses of the particular Investment Funds will be allocated in the ratio that the portion of each Participant's Account Balance invested in a particular Investment Fund bears to the total amount invested in that fund. If and to the extent the rules of any Investment Fund require a different method of valuation, those rules will be followed. 9.5 The Insurance Company The Administrator or the Committee may appoint one or more insurance companies as Funding Agents, and may purchase insurance contracts, Annuity Contracts or policies from one or more insurance companies with Plan assets. Neither the Administrator nor the Committee, nor any other Plan fiduciary, will be liable for any act or omission of an insurance company with respect to any duties delegated to any insurance company. 9.6 Compensation Each person providing services to the Plan will be paid such reasonable compensation as is from time to time agreed upon between the Company and that service provider, and will have his, her or its expenses reimbursed. Notwithstanding the foregoing, no person who is an Employee will be paid any compensation for his or her services to the Plan. 9.7 Delegation of Responsibility The Administrator and the Committee may designate by written instrument one or more actuaries, accountants or consultants as fiduciaries to carry out, where appropriate, their administrative responsibilities, including their fiduciary duties. The Committee may from time to time allocate or delegate to any subcommittee, member of the Committee and others, not necessarily employees of the Company, any of its duties relative to compliance with ERISA, administration of the Plan and other related matters, including those involving the exercise of discretion. The Company's duties and responsibilities under the Plan will be carried out by its directors, officers and employees, acting on behalf of and in the name of the Company in their capacities as directors, officers and employees, and not as individual fiduciaries. No director, officer or employee of the Company will be a fiduciary with respect to the Plan unless he or she is specifically so designated and expressly accepts such designation. 9.8 Committee Members The Committee will consist of at least three people, who need not be directors, and will be appointed by the Chief Executive Officer of the Company. Any Committee member may resign and the Chief Executive Officer may remove any Committee member, with or without cause, at any time. A majority of the members of the Committee will constitute a quorum for the transaction of business, and the act of a majority of the Committee members present at a meeting at which a quorum is present will be an act of the Committee. The Committee can act by written consent signed by all of its members. Any member of the Committee who is an Employee cannot receive compensation for his or her services for the Committee. No Committee member will be entitled to act on or decide any matter relating solely to his or her status as a Participant. ARTICLE X Appointment of Trustee The Committee or its authorized delegatee will appoint the Trustee and either may remove it. The Trustee accepts its appointment by executing the trust agreement. A Trustee will be subject to direction by the Committee or its authorized delegatee or, to the extent specified by the Company, by an Investment Manager or other Funding Agent, and will have the degree of discretion to manage and control Plan assets specified in the trust agreement. Neither the Administrator nor the Committee, nor any other Plan fiduciary will be liable for any act or omission to act of a Trustee, as to duties delegated to the Trustee. Any Trustee appointed under this Article X will be an institution. ARTICLE XI Plan Amendment or Termination 11.1 Plan Amendment or Termination The Company may amend, modify or terminate this Plan at any time by resolution of its Board or by resolution of or other action recorded in the minutes of the Administrator or the Committee. Execution and delivery by the Chairman of the Board, the President, any Vice President of the Company or the Committee of an amendment to the Plan is conclusive evidence of the amendment, modification or termination. 11.2 Limitations on Plan Amendment   No Plan amendment can:   (a) authorize any part of the Trust Fund to be used for, or diverted to, purposes other than the exclusive benefit of Participants or their Beneficiaries;   (b) decrease the accrued benefits of any Participant or his or her Beneficiary under the Plan; or   (c) except to the extent permitted by law, eliminate or reduce an early retirement benefit or retirement-type subsidy (as defined in Code Section 411) or an optional form of benefit with respect to service prior to the date the amendment is adopted or effective, whichever is later. 11.3 Right to Terminate Plan or Discontinue Contributions The Participating Employers intend and expect to continue this Plan in effect and to make the contributions provided for in this Plan. However, the Company reserves the right to terminate the Plan at any time in the manner set forth in Section 11.1. In addition, each Participating Employer reserves the right to completely discontinue contributions to the Plan for its Employees at any time. Upon termination of the Plan, the Trust will continue until the Trust Fund has been distributed. 11.4 Bankruptcy If the Company is ever judicially declared bankrupt or insolvent, and no provisions to continue the Plan are made in the bankruptcy or insolvency proceeding, the Plan will to the extent permissible under federal bankruptcy law, be completely terminated. ARTICLE XII Miscellaneous Provisions 12.1 Subsequent Changes All benefits to which any Participant, Surviving Spouse or Beneficiary may be entitled hereunder will be determined under the Plan as in effect when the Participant ceases to be an Eligible Employee, and will not be affected by any subsequent changes in the provisions of the Plan, unless the Participant again becomes an Eligible Employee or the subsequent change expressly applies to the Participant. 12.2 Merger or Transfer of Assets 12.2.1 Neither the merger or consolidation of a Participating Employer with any other person, nor the transfer of the assets of a Participating Employer to any other person, nor the merger of the Plan with any other plan will constitute a termination of the Plan. 12.2.2 The Plan may not merge or consolidate with, or transfer any assets or liabilities to, any other plan, unless each Participant would (if the Plan then terminated) receive a benefit immediately after the merger, consolidation or transfer which is equal to or greater than the benefit he or she would have been entitled to receive immediately before the merger, consolidation or transfer (if the Plan had then terminated). 12.3 Benefits Not Assignable 12.3.1 A Participant's Account Balance may not be assigned or alienated either voluntarily or involuntarily. 12.3.2 Notwithstanding the foregoing, a Participant may pledge his or her Pre-Tax Account as security for a loan under Section 6.8. In addition, the Administrator or Committee will comply with the terms of any qualified domestic relations order, as defined in Code Section 414(p). Notwithstanding any other provision of the Plan, the Funding Agent has all powers that would otherwise be assigned to the Administrator, regarding the interpretation of and compliance with qualified domestic relations orders, including the power make and enforce rules regarding segregations of or holds on a Participant's Account to comply with a qualified domestic relations order, or when a domestic relations order is reasonably expected, or is under examination of its status. 12.3.3 In addition, effective August 5, 1997, the prohibition of Section 12.3.1 will not apply to any offset of a Participant's Account Balance against an amount the Participant is ordered or required to pay to the Plan under a judgment, order, decree or settlement agreement that meets the requirements of this Section 12.3.3. The requirement to pay must arise under a judgment of conviction for a crime involving the Plan, under a civil judgment (including a consent order or decree) entered by a court in an action brought in connection with a violation (or alleged violation) of part 4 of subtitle B of title I of ERISA, or pursuant to a settlement agreement between the Secretary of Labor and the Participant in connection with a violation (or alleged violation) of that part 4. In addition, the judgment, order, decree or settlement agreement must expressly provide for the offset of all or part of the amount that must be paid to the Plan against the Participant's Account Balance. Moreover as to a Participant who has a spouse at the time the offset is to be made, the Participant's spouse must consent in writing to the offset, and his or her consent must be witnessed by a notary public or Plan representative. If the spouse has properly waived either the Joint and Survivor Ten-Year Certain Annuity or the 50% preretirement life annuity, or circumstances that would negate the need for spousal consent under Section 6.5 or 7.3 exist, the spouse's consent will not be necessary. Similarly, spousal consent is not necessary if the judgment, order, decree or settlement agreement orders the spouse to pay an amount to the Plan in connection with a violation of part 4 of subtitle B of title I of ERISA, or if the judgment, order, decree or settlement does not impinge on the spouse's right to the Joint and Survivor Ten-Year Certain Annuity or the 50% preretirement life annuity. 12.4 Exclusive Benefit of Participants Notwithstanding any other provision of the Plan, no part of the Trust Fund must ever be used for, or diverted to, any purpose other than the exclusive providing benefits to Participants and their Beneficiaries and defraying the reasonable expenses of the Plan, except that, upon the direction of the Administrator: (a) any contribution made by a Participating Employer by a mistake of fact will be returned within one year after payment of the contribution; (b) any contribution made by a Participating Employer that was conditioned upon its deductibility shall be returned to the extent disallowed as a deduction under Code Section 404 within one year after the deduction is disallowed; and (c) any contribution that was initially conditioned on the Plan's satisfying the requirements of Code Section 401(a) will be returned to the Participating Employer who made it, if the Plan is initially determined not to satisfy the requirements of Code Section 401(a). Any amount a Participating Employer seeks to recover under paragraph (a) or (b) will be reduced by the amount of any losses attributable to it, but will not be increased by the amount of any earnings attributable to it. 12.5 Benefits Payable to Minors, Incompetents and Others If any benefit is payable to a minor, an incompetent, or a person otherwise under a legal disability, or to a person the Administrator reasonably believes to be physically or mentally incapable of handling and disposing of his or her property, whether because of his or her advanced age, illness, or other physical or mental impairment, the Administrator has the power to apply all or any part of the benefit directly to the care, comfort, maintenance, support, education, or use of the person, or to pay all or any part of the benefit to the person's parent, guardian, committee, conservator, or other legal representative, wherever appointed, to the individual with whom the person is living or to any other individual or entity having the care and control of the person. The Plan, the Administrator and any other Plan fiduciary will have fully discharged their responsibilities to the Participant, Surviving Spouse or Beneficiary entitled to a payment by making payment under the preceding sentence. 12.6 Plan Not A Contract of Employment The Plan is not a contract of Employment, and the terms of Employment of any Employee will not be affected in any way by the Plan or any related instruments, except as specifically provided in the Plan or related instruments. 12.7 Source of Benefits Plan benefits will be paid or provided for solely from the Trust or applicable insurance or Annuity Contracts, and the Participating Employers assume no liability for Plan benefits. 12.8 Proof of Age and Marriage Participants, Surviving Spouses and Beneficiaries must furnish proof of age and marital status satisfactory to the Administrator or Committee when and if the Administrator or Committee reasonably requests it. The Administrator or Committee may delay the payment of any benefits under the Plan until all pertinent information regarding age and marital status has been presented to it, and then, if appropriate, make payment retroactively. 12.9 Controlling Law The Plan is intended to qualify under Code Section 401(a) and to comply with ERISA, and its terms will be interpreted accordingly. If any Plan provision is subject to more than one construction, the ambiguity will be resolved in favor of the interpretation or construction consistent with that intent. Similarly, if there is a conflict between any Plan provisions, or between any Plan provision and any Plan administrative form submitted to the Administrator, the Plan provisions necessary to retain qualified status under Code Section 401(a) will govern. Otherwise, to the extent not preempted by ERISA or as expressly provided herein, the laws of the State of Illinois (other than its conflict of laws provisions) will control the interpretation and performance of the Plan. 12.10 Income Tax Withholding The Administrator or Committee may direct that any amounts necessary to comply with applicable employment tax law be withheld from any payment due under this Plan. 12.11 Claims Procedure 12.11.1 Any application for benefits under the Plan and all inquiries concerning the Plan shall be submitted to the Company at such address as may be announced to Participants from time to time. Applications for benefits shall be in writing on the form prescribed by the Company and shall be signed by the Participant or, in the case of a benefit payable after the death of the Participant, by the Participant's surviving spouse or Beneficiary, as the case may be. 12.11.2 The Company shall give written notice of its decision on any application to the applicant within 90 days. If special circumstances require a longer period of time the Company shall so notify the applicant within 90 days, and give written notice of its decision to the applicant within 180 days after receiving the application. In the event any application for benefits is denied in whole or in part, the Company shall notify the applicant in writing of the right to a review of the denial. Such written notice shall set forth, in a manner calculated to be understood by the applicant, specific reasons for the denial, specific references to the Plan provisions on which the denial is based, a description of any information or material necessary to perfect the application, an explanation of why such material is necessary and an explanation of the Plan's review procedure. 12.11.3 The Company shall appoint a "Review Panel," which shall consist of three or more individuals who may (but need not) be employees of the Company. The Review Panel shall be the named fiduciary which has the authority to act with respect to any appeal from a denial of benefits under the Plan. 12.11.4 Any person (or his authorized representative) whose application for benefits is denied in whole or in part may appeal the denial by submitting to the Review Panel a request for a review of the application within 60 days after receiving written notice of the denial. The Company shall give the applicant or such representative an opportunity to review, by written request, pertinent materials (other than legally privileged documents) in preparing such request for review. The request for review shall be in writing and addressed as follows: "Review Panel of the Employee Welfare Benefits Plan Committee, 200 East Randolph Drive, Chicago, Illinois 60601." The request for review shall set forth all of the grounds on which it is based, all facts in support of the request and any other matters which the applicant deems pertinent. The Review Panel may require the applicant to submit such additional facts, documents or other material as it may deem necessary or appropriate in making its review. 12.11.5 The Review Panel shall act upon each request for review within 60 days after receipt thereof. If special circumstances require a longer period of time the Review Panel shall so notify the applicant within 60 days, and give written notice of its decision to the applicant within 120 days after receiving the request for review. The Review Panel shall give notice of its decision to the Company and to the applicant in writing. In the event the Review Panel confirms the denial of the application for benefits in whole or in part, such notice shall set forth in a manner calculated to be understood by the applicant, the specific reasons for such denial and specific references to the Plan provisions on which the decision is based. 12.11.6 The Review Panel shall establish such rules and procedures, consistent with ERISA and the Plan, as it may deem necessary or appropriate in carrying out its responsibilities under this Section 12.11. 12.11.7 No legal or equitable action for benefits under the Plan shall be brought unless and until the claimant (a) has submitted a written application for benefits in accordance with Section 12.10.1, (b) has been notified by the Company that the application is denied, (c) has filed a written request for a review of the application in accordance with Section 12.10.4 and (d) has been notified in writing that the Review Panel has affirmed the denial of the application; provided that legal action may be brought after the Review Panel has failed to take any action on the claim within the time prescribed in Section 12.11.5. A claimant may not bring an action for benefits in accordance with this Section 12.11.7 later than 90 days after the Review Panel denies the claimant's application for benefits. 12.12 Participation in the Plan by An Affiliate 12.12.1 With the consent of the Board, any Affiliate, by appropriate action of its board of directors, a general partner or the sole proprietor, as the case may be, may adopt the Plan. Each Affiliate will determine the classes of its bargaining unit that will be Eligible Employees and the amount of its contribution to the Plan on behalf of its Eligible Employees. 12.12.2 With the consent of the Board, a Participating Employer, by appropriate action, may terminate its participation in the Plan. 12.12.3 With the consent of the Board, a Participating Employer, by appropriate action, may withdraw from the Plan and the Trust. A Participating Employer's withdrawal will be deemed to be an adoption by that Participating Employer of a plan and trust identical to the Plan and the Trust, except that all references to the Company will be deemed to refer to that Participating Employer. At such time and in such manner as the Administrator directs, the assets of the Trust allocable to Employees of the Participating Employer will be transferred to the trust deemed adopted by the Participating Employer. 12.12.4 A Participating Employer will have no power with respect to the Plan except as specifically provided herein. 12.13 Action by Participating Employers Any action required to be taken by the Company pursuant to any Plan provisions will be evidenced in the manner set forth in Section 11.1. Any action required to be taken by a Participating Employer will be evidenced by a resolution of the Participating Employer's board of directors (or an authorized committee of that board). Participating Employer action may also be evidenced by a written instrument executed by any person or persons authorized to take the action by the Participating Employer's board of directors, any authorized committee of that board, or the stockholders. A copy of any written instrument evidencing the action by the Company or Participating Employer must be delivered to the secretary or assistant secretary of the Company or Participating Employer. 12.14 Dividends Any dividends credited to a group Annuity Contract between the Participating Employer and the Funding Agent will be used to provide additional benefits under the Plan. To record the amendment and restatement of the Plan to read as set forth herein, the Company has caused its authorized member of the Committee to execute the same this 22nd day of December, 1999, but to be effective as of January 1, 1999, except as otherwise expressly provided herein.   FMC CORPORATION       By_/s/ J. Paul McGrath_________________          Member, Employee Welfare Benefits      Plan Committee     Appendix A Bargaining Units Covered Until otherwise negotiated, the bargaining units whose members are or were covered by the Plan are listed below. As to each bargaining unit, this Appendix lists its current status under the Plan. Effective from June 1, 1997, all bargaining units were covered under the Plan are covered under the same terms, as reflected in the foregoing pages. Name of Bargaining Unit Current Status under Plan       Alkali Chemical Division, Green River, Wyoming,   Covered under this Plan, United Steel Workers, Local 33-13214   effective August 1, 1988.       Phosphorus Chemicals Division, Newark,     California, International Chemical Workers   Covered under this Plan, Union, Local 62   effective August 1, 1988.       Phosphorus Chemicals Division, Nitro, West   Covered under this Plan, Virginia, United Steel Workers, Local 23-12757   effective September 1, 1988;     sold July 31, 1999; account     balances maintained under Plan,     same as account balances of     any terminated employees.       Peroxygen Chemicals Division Steam Plant,     South Charleston, West Virginia, United Steel   Covered under this Plan, Workers, Local 23-12625   effective July 1, 1989.       Pharmaceutical Division, Newark, Delaware,   Covered under this Plan, United Steel Workers, Local 7-13028   effective August 1, 1989.       Packaging Systems Division, Green Bay,   Covered under this Plan, Wisconsin, United Steel Workers, Local 32-6050   effective October 1, 1989;     sold July 17, 1998; account     balances maintained under Plan,     same as account balances of     any terminated employees.       Agricultural Chemical Group, Baltimore,   Covered under this Plan, Maryland, United Steel Workers, Local 8-12517   effective January 1, 1990.       Jetway Systems, Ogden, Utah, United Steel   Covered under this Plan, Workers, Local 6162   effective January 1, 1995. Peroxygen Chemicals Division, Buffalo, New     York, International Chemical Workers Union,   Transferred to Salaried Thrift Plan, Local 706C   July 1, 1997.       Phosphorus Chemicals Division, Pocatello, Idaho,     International Association of Machinists and     Aerospace Workers, AFL-CIO, Gate City   Transferred to Salaried Thrift Plan, Mechanics, Local 1933   July 1, 1998.       Kemmerer Coke Plant, Kemmerer, Wyoming,     District No. 22, United Mine Workers of America,   Transferred to Salaried Thrift Plan, in behalf of Local Union No. 1316, UMWA   August 1, 1998.       Agricultural Chemicals Division, Lawrence,     Kansas, International Chemical Workers   Transferred to Salaried Thrift Plan, Union, Local 605   September 15, 1998.       Phosphorus Chemicals Division, Carteret,     New Jersey, International Chemical Workers   Transferred to Salaried Thrift Plan, Union, Local 144   October 15, 1998.       Agricultural Chemicals Division, Middleport,     New York, International Association of Machinists,   Transferred to Salaried Thrift Plan, Local 1180   January 1, 1999.       Bargaining Employees at     UDLP, Armament Systems Division,   Transferred to UDLP Plan, Louisville, Kentucky   October 6, 1997.       Bargaining Employees at     UDLP, Armament Systems Division,   Transferred to UDLP Plan, Minneapolis, Minnesota   October 6, 1997.      

Exhibit 10.1 AMENDMENT TO THE INTEGRATED DEVICE TECHNOLOGY, INC. 1994 STOCK OPTION PLAN     Integrated Device Technology, Inc., a corporation organized under the laws of State of Delaware (the "Company"), hereby adopts this Amendment to the Integrated Device Technology, Inc. 1994 Stock Option Plan (the "Plan").     WHEREAS, the Company has adopted the Plan which, among other things, provides in Section 16 thereof that the date of the Plan's termination is ten years from the date of the Plan's adoption, or May 3, 2004; and     WHEREAS, the Company's Board of Directors has determined that it is in the best interests of the Company to amend the Plan to extend the date of the Plan's termination to ten years from the date hereof, or July 26, 2010, subject to stockholder approval of such amendment.     NOW, THEREFORE, the Plan is hereby amended as follows:     Amendment to Section 16.  Section 16 of the Plan is hereby deleted and replaced to read in its entirety as follows:     16. TERM OF PLAN. The Plan will terminate on July 26, 2010, unless such date of termination is amended pursuant to Section 17 hereof.     I hereby certify that the foregoing Amendment to the Plan was duly adopted by the Board of Directors of Integrated Device Technology, Inc., effective as of July 26, 2000.     Executed on this 26th day of July, 2000.     -------------------------------------------------------------------------------- Secretary     I hereby certify that the foregoing Amendment to the Plan was duly approved by the stockholders of Integrated Device Technology, Inc., effective as of September 22, 2000.     Executed on this 22nd day of September, 2000.     -------------------------------------------------------------------------------- Secretary --------------------------------------------------------------------------------

EXHIBIT 10.3   EMPLOYMENT AGREEMENT         THIS AGREEMENT ("Agreement") is made and entered into as of this 30th day of August, 2000, by and between DAVID L. ELLIN, 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 and Chief Operating Officer 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 Seventy-Five Thousand Dollars ($175,000) 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)     Car Allowance. Employee shall receive a car allowance of One Thousand Five Hundred Dollars ($1,500) per month.           (d)      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.           (e)      Expenses. Employer shall reimburse Employee for all reasonable and necessary expenses incurred by Employee at the request of and on behalf of Employer.           (f)     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 reduction 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.            (iv)     Other Benefits. For a period of 18 months following the date of Employee's termination of Employment, the Employee shall continue to receive a car allowance as provided in Section 3.1(c) of this Agreement.           (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 (iv) 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), (ii) and (iv).         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 threatened 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 Officer                     Telephone No.: (770) 717-2000                     Employee                      Mr. David L. Ellin                      135 Fox Grape Lane                      Alpharetta, GA 30022 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/ David L. Ellin                                       David L. Ellin

Exhibit 10-36   Energy East Corporation 2000 Stock Option Plan I.     Plan Objective The objective of the 2000 Stock Option Plan (the "Plan") is to provide executives and certain other key employees of Energy East Corporation (hereinafter referred to as the "Company") and its Affiliates with options to purchase shares of the Company's Common Stock. The Plan also provides for the granting by the Company of stock appreciation rights to these employees. These options and stock appreciation rights are intended to more closely align the financial interests of management with those of the Company's stockholders by providing long-term incentives to those individuals who can significantly affect the future growth and success of the Company. In addition, the Plan will enhance the Company's ability to attract and retain executives and other key individuals of superior ability. II.    Definitions "Affiliate" shall mean any company which qualifies as a "subsidiary corporation" or "parent corporation" of the Company under Section 424 of the Code, or any successor provision, or any other entity in which the Company owns, directly or indirectly, fifty percent (50%) or more of the equity. "Award" shall mean an Option granted to a Participant pursuant to Article VI hereof, a Stock Appreciation Right granted to a Participant pursuant to Article VII hereof or any other award established by the Committee which is consistent with the purposes of the Plan. "Award Agreement" shall mean a written agreement (including any amendment or supplement thereto) between the Company and a Participant which specifies the terms and conditions of an Award granted to such Participant. "Board" shall mean the Board of Directors of Energy East Corporation. "Cashless Exercise" shall mean the exercise of an Option by a Participant through the use of a brokerage firm to make payment to the Company of the exercise price either from the proceeds of a loan to the Participant from the brokerage firm or from the proceeds of the sale of the Company's Common Stock issued pursuant to the exercise of the Option, and whereby, upon receipt of such payment, the Company delivers the exercised shares to the brokerage firm. "Chairman" shall mean the Chairman of Energy East Corporation.   "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. "Fair Market Value" shall mean, with respect to any given date, the closing price of the Company's Common Stock on the New York Stock Exchange on the last trading day prior to that date, as reported by such responsible reporting service as the Committee may select. "Incentive Stock Option" shall mean a stock option granted under Article VI hereof which is intended to qualify as an incentive stock option under Section 422 of the Code. "Key Employee" shall mean an officer or other employee whose efforts and initiative have significantly contributed or are expected to significantly contribute to the future growth and success of the Company or its Affiliates. "Non-Statutory Stock Option" shall mean a stock option granted under Article VI hereof which is not intended to qualify as an incentive stock option under Section 422 of the Code. "Option" shall mean an Incentive Stock Option or a Non-Statutory Stock Option. "Participant" shall mean an individual who is selected pursuant to Article IV hereof to receive an Award under the Plan. "Rule 16b-3" shall mean Rule 16b-3 under Section 16(b) of the Exchange Act, or any successor provision, as amended from time to time. "Section 162(m)" shall mean Section 162(m) of the Code, or any successor provision, as amended from time to time, and any regulations thereunder. "Section 422" shall mean Section 422 of the Code, or any successor provision, as amended from time to time, and any regulations thereunder. "Stock Appreciation Right" shall mean (i) in the case of a Stock Appreciation Right issued in tandem with an Option pursuant to Article VII hereof, the right to receive 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 of the Stock Appreciation Right) over the exercise price of the related Option or (ii) in the case of a freestanding Stock Appreciation Right issued pursuant to Article VII hereof, the right to receive 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 of the Stock Appreciation Right) over the Fair Market Value of a share of the Company's Common Stock determined on the date of the grant of the Stock Appreciation Right. III.    Administration The Plan shall be administered by the Executive Compensation and Succession Committee of the Board or such successor committee as may be appointed by the Board to administer the Plan (the "Committee"). The Committee shall be composed of at least two non-employee members of the Board who shall be qualified to administer the Plan as contemplated by both Rule 16b-3 and Section 162(m). The Committee shall have the authority to exercise all of the powers and authorities specifically granted to it under the Plan or necessary or desirable in the administration of the Plan, including, without limitation, the authority to select the employees to be granted Awards, the authority to determine the size and terms of the Awards to be granted to each employee and the authority to prescribe the form of Award Agreement embodying the Awards granted under the Plan. The Committee shall have the authority to interpret the Plan, to establish and revise rules and regulations relating to the Plan, and to make any other determinations that it believes necessary or advisable for the administration of the Plan. Decisions and determinations by the Committee shall be final and binding upon all parties. IV.    Eligibility and Participation Awards may be granted to such Key Employees of the Company as the Committee may from time to time select. In determining the individuals to whom Awards are to be granted and the number of such Awards, the Committee shall take into consideration the individual's present and potential contribution to the growth and success of the Company and such other factors as the Committee may deem proper and relevant. The Committee may request recommendations for individual Awards from the Chairman. The Committee may delegate to the Chairman the authority to make Awards to any employees of the Company who are not executive officers subject to Section 16 of the Exchange Act, subject to a fixed maximum Award amount for such a group and a fixed maximum Award amount for any one Participant, as determined by the Committee. Determinations as to Awards made to executive officers who are subject to Section 16 of the Exchange Act shall be made solely by the Committee. For purposes of participation in the Plan, the term "Company" includes the Company and its Affiliates. V.     Shares Available for Awards A.  Amount of Stock Subject to adjustment as provided in Section C. of this Article V., the aggregate number of shares of the Company's Common Stock with respect to which Awards may be granted is 10,000,000 shares, less the total number of shares related to i) options and stock appreciation rights (including replacement awards) which have been granted under the Company's 1997 Stock Option Plan on or before the Effective Date (as defined in Article XI.) and which have not been forfeited, and ii) replacement awards granted under the 1997 Stock Option Plan after the Effective Date. Any shares which relate to awards under the 1997 Stock Option Plan which after the Effective Date terminate by expiration, forfeiture, cancellation or otherwise without the delivery of shares, or are settled in cash in lieu of the Company's Common Stock, will no longer be available for distribution under the 1997 Stock Option Plan, but will be available for distribution under the Plan. Shares of Common Stock delivered by the Company pursuant to the Plan may be either authorized but unissued Common Stock or previously issued shares of Common Stock reacquired by the Company, including shares purchased by the Company in the open market and held as treasury shares, or both. Awards may be made under the Plan in any combination of Incentive Stock Options, Non-Statutory Stock Options, Stock Appreciation Rights, or any other awards established by the Committee which are consistent with the purposes of the Plan. For purposes of this Section A., shares of the Company's Common Stock that relate to (i) a Stock Appreciation Right which is exercised, or (ii) any Award which terminates by expiration, forfeiture, cancellation or otherwise without the delivery of shares, or is settled in cash in lieu of the Company's Common Stock, shall thereafter again be available for grant pursuant to the Plan. B.  Individual Limitations Subject to adjustment as provided in Section C. of this Article V., no individual may be granted, during any one calendar year of the Plan, Awards, other than replacement awards, that relate in total to more than 400,000 shares of the Company's Common Stock. C.  Dilution and Other Adjustments 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, if the Committee shall determine, in its sole discretion, that such change requires an adjustment in the number and kind of shares that may be issued under the Plan, or to any individual under the Plan, including the number and kind of shares which are subject to outstanding Options, or any other Award established by the Committee, or in the exercise price with respect to any of the foregoing, such adjustments shall be made by the Committee and shall be conclusive and binding for all purposes of the Plan. If deemed appropriate by the Committee, provision may be made for the cash payment to a Participant who has an outstanding Option or other Award; provided, however, that the number of shares subject to any Option or other Award shall always be a whole number. VI.    Terms and Conditions of Options A.  Grant of Options Subject to the other provisions of the Plan, the Committee shall have sole authority to determine the employees to whom Options shall be granted, the time or times when Options shall be granted, the number of shares to be covered by each Option, the terms of each Option, the Option Price (as defined in Section B. of this Article VI.) therefor, and the conditions and limitations applicable to the exercise of each Option. The Committee shall have the authority to grant Incentive Stock Options, or to grant Non-Statutory Stock Options, or to grant both types of Options. In the case of Incentive Stock Options, the terms and conditions of such grants shall be subject to and comply with such rules as may be prescribed by Section 422. B.  Option Price The Committee shall, in its sole discretion, establish the exercise price per share of the Company's Common Stock covered by an Option ("Option Price") at the time each Option is granted, which exercise price shall not be less than 100% of the Fair Market Value of the Company's Common Stock determined on the date of grant. C.  Exercise of Options and Grant of Replacement Options Each Option shall be exercisable at such time or times, upon such events, and subject to such terms and conditions as the Committee may, in its sole discretion, specify in the applicable Award Agreement; provided, however, that in no event may any Option granted hereunder be exercisable after the expiration of ten years from the date of such grant. The Committee may impose such conditions with respect to the exercise of Options, including without limitation, any conditions relating to the application of federal or state securities laws, as it may deem necessary or advisable. Unless otherwise provided by the Committee, Options shall be exercised by the delivery of a written notice from the Participant to the Secretary of the Company in the form prescribed by the Committee which sets forth the number of shares with respect to which the Option is exercised and which is accompanied by full payment for the shares. Unless otherwise provided by the Committee, no shares shall be delivered pursuant to any exercise of an Option until payment in full of the Option Price therefor is received by the Company. Such payment may be made in cash, or its equivalent, or, if and to the extent permitted by the Committee, by tendering (either actually or by attestation) shares of the Company's Common Stock owned by the holder of the Option (which are not subject to any pledge or other security interest), or by combination of the foregoing, provided that the combined value of all cash and cash equivalents and the Fair Market Value of any such Common Stock so tendered to the Company, valued as of the date of such tender, is at least equal to the Option Price times the number of shares with respect to which the Option is being exercised. In addition, at the request of the Participant, and subject to applicable laws and regulations, the Company may (but shall not be required to) cooperate in a "Cashless Exercise" of the Option. As soon as practicable after receipt of the written notice and payment, the Company shall deliver to the Participant stock certificates based upon the number of shares with respect to which the Option is exercised and which are issued in the Participant's name. A Participant shall have the rights of a stockholder only with respect to shares for which such stock certificates have been issued to such Participant. Unless otherwise provided by the Committee, to the extent that all or any portion of the Option Price, or taxes incurred in connection with the exercise of an Option, are paid by delivery of the common shares of the Company (or, in the case of the payment of taxes, by the withholding of shares) then, concurrently with such delivery or withholding, the Participant shall be granted, as additional Awards, replacement Options, subject to the other provisions of the Plan. The replacement Options, to the extent permissible, shall cover the number of common shares surrendered to pay the Option Price plus the number of shares surrendered or withheld to satisfy the Participant's tax liability, shall have an exercise price equal to 100% of the Fair Market Value of such common shares determined on the date such replacement Option is granted, shall first be exercisable no earlier than six months from the date of the grant of the replacement Option, shall have an expiration date equal to the expiration date of the original Option and shall contain such other terms and conditions as determined by the Committee. A replacement Option shall be granted in connection with the exercise of an Option which is itself a replacement Option. The Committee, in its sole discretion, may, in lieu of delivering shares covered by an exercised Option, settle the exercise of the Option by means of a cash payment to the Participant equal to the difference between the Fair Market Value of the Company's Common Stock determined on the exercise date and the Option Price. At the same time, the Committee shall return to the Participant the Participant's payment, if any, for the shares covered by the Option. With the consent of the Committee, and subject to compliance with applicable laws and regulations, the Company, in its sole discretion, may lend money to a Participant, guarantee a loan to a Participant or otherwise assist a Participant to obtain the cash necessary to exercise all or any portion of an Option granted under the Plan, including the payment by a Participant of any or all applicable taxes due in connection with the exercise of an Option granted under the Plan. VII.   Stock Appreciation Rights The Committee may, with sole and complete authority, grant Stock Appreciation Rights which are in tandem with an Option or which are freestanding and unrelated to an Option. A Stock Appreciation Right granted in tandem with an Option shall be granted at the same time as the Option is granted. Stock Appreciation Rights shall be exercisable, in whole or in part, at such time or times, and subject to such other terms and conditions, as shall be prescribed by the Committee, provided that Stock Appreciation Rights shall not be exercisable after the expiration of ten years from the date of grant. Stock Appreciation Rights granted in tandem with Options shall entitle a Participant to receive from the Company, upon exercise of the right, 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 of the right, over the exercise price of the related Option. A freestanding Stock Appreciation Right shall entitle a Participant to receive from the Company, upon exercise of the right, 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 of the right, over the Fair Market Value of a share of the Company's Common Stock, determined on the date of the grant of the Stock Appreciation Right. The exercise of a Stock Appreciation Right granted in tandem with an Option shall result in a corresponding cancellation of the related Option to the extent of the number of shares of the Company's Common Stock as to which the Stock Appreciation Right is exercised. In such case, the number of shares subject to such exercised Stock Appreciation Right and related cancelled Option shall become available for grant under Article V. Section A. hereof. The exercise of an Option associated with a tandem Stock Appreciation Right shall result in a cancellation of the related Stock Appreciation Right to the extent of the number of shares of the Company's Common Stock as to which the Option is exercised. Notwithstanding such cancellation, the number of shares subject to any such exercised Option and related Stock Appreciation Right shall not become available for grant under Article V. Section A. hereof. VIII. Amendments and Termination The Committee may, in its sole discretion, at any time terminate the Plan and from time to time modify or amend the Plan, or any part hereof, for any reason; provided, however: (i) the Plan shall not be amended or modified without shareholder approval if and to the extent shareholder approval is required under the applicable regulations under Section 162(m) or Section 422; (ii) the Plan shall not be amended or modified without shareholder approval so as to increase the number of shares which may be issued under the Plan or to amend the provisions of Article X. Section D. hereof; and (iii) the termination, modification or amendment of the Plan shall not, without the consent of a Participant, adversely affect any rights under any Award previously granted to such Participant. No Awards shall be granted pursuant to this Plan after May 18, 2010. IX.   Withholding Taxes A.  Whenever the Company is to issue or transfer shares of Common Stock under the Plan, the Company shall have the right to require the Participant to remit to the Company an amount sufficient to satisfy any federal, state and local withholding tax requirements prior to the delivery of any certificates for such shares. B.  Whenever payments under the Plan are to be made in cash, such payments shall be net of an amount sufficient to satisfy any federal, state and local withholding tax requirements. C.  The Committee, in its sole discretion, may provide that a Participant may satisfy, totally or in part, the Participant's obligations pursuant to Section A. hereof by electing to have shares withheld, to redeliver shares acquired under an Award, or to deliver previously owned shares having a Fair Market Value equal to the amount required to be withheld, provided that the election is made in writing on or prior to the date of exercise of the Option. The Fair Market Value of any shares of Common Stock to be withheld or delivered shall be determined as of the date that the taxes are required to be withheld. X.     Miscellaneous Provisions A.  Each Award hereunder shall be evidenced in writing by an Award Agreement. The Committee shall provide in the Award Agreement the terms and conditions applicable to an Award in the event of the Participant's termination of employment by reason of retirement, death, disability or any other reason and the effect thereon, if any, of a change in control (as determined by the Committee) of the Company. B.  Nothing in the Plan or in any Award Agreement entered into pursuant to the Plan shall confer upon any Participant the right to continue in the employment of the Company or affect any right which the Company may have to terminate the employment of such Participant. C.  No Award shall be assignable or transferable otherwise than by will or the laws of descent and distribution, except that the Committee may provide in an Award Agreement for the transferability of an Award: (a)  by gift to (i) a spouse or other family member, or (ii) a trust or an estate in which the original Participant or the Participant's spouse or other family member has a substantial interest; and (b)  pursuant to a domestic relations order as defined in Section 414 of the Code, or any successor provision; provided, however, that any Award so transferred shall continue to be subject to all terms and conditions contained in the Award Agreement. If so permitted by the Committee, a Participant may designate a beneficiary or beneficiaries to exercise the rights of the Participant under the Plan upon the death of the Participant. No right or interest of any Participant shall be subject to any lien, obligation or liability of the Participant.   D.  Except for adjustments as provided in Section C. of Article V. hereof, the Option Price for any outstanding Option granted hereunder may not be decreased after its date of grant, nor may an outstanding Option granted under the Plan be surrendered to the Company as consideration for the grant of a new Option with a lower Option Price. E.  The Plan shall be submitted to the common stockholders of the Company for approval. Options may not be granted, and Shares may not be delivered, under the Plan unless and until such time as such approval and authorization has been received. The common stockholders of the Company shall be deemed to have approved the Plan only if it is approved at a meeting of the common stockholders duly held by vote taken in the manner required by law. F.  Notwithstanding anything to the contrary contained in the Plan or any Award 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. G.  The Plan and all Award Agreements entered into pursuant to Award grants 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 any Award Agreement, the terms of the Plan shall govern. H.  It is the intent of the Company that this Plan comply in all respects with Rule 16b-3 in connection with any Award granted to a person who is subject to Section 16 of the Exchange Act. Accordingly, if any provision of this Plan or any Award Agreement does not comply with the requirements of Rule 16b-3 as then applicable to any such person, such provision shall be construed or deemed amended to the extent necessary to conform to such requirements with respect to such person. XI.   Effective Date Subject to the approval of the common stockholders, the Plan shall be effective as of May 19, 2000 ("Effective Date"). XII.  Change in Control In order to preserve a Participant's rights under an Award in the event of a change in control (as determined by the Committee) of the Company, the Committee in its discretion may, at the time an Award is made or any time thereafter, take one or more of the following actions: (i) provide for the acceleration of any time period relating to the exercise of the Award, (ii) provide for the purchase of the Award upon the Participant's request for an amount of cash or other property that could have been received upon the exercise or realization of the Award had the Award been currently exercisable or payable, (iii) adjust the terms of the Award in a manner determined by the Committee to reflect the change in control, or (iv) make such other provision as the Committee may consider equitable and in the best interests of the Company.

Office\Office\html.dot" AGREEMENT   AGREEMENT by and between C. R. BARD, INC., a New Jersey corporation (the "Corporation"), and Susan Alpert, Ph.D., M.D. (the "Executive"), dated as of the 10th day of October, 2000. WHEREAS, the Corporation, on behalf of itself and its shareholders, wishes to assure that the Corporation will have the continued dedication of the Executive, notwithstanding the possibility, threat, or occurrence of a Change of Control (as defined below) of the Corporation. The Board of Directors of the Corporation (the "Board") believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change of Control, to encourage his attention and dedication to his assigned duties currently and in the event of any threatened or pending Change of Control, and to provide the Executive with competitive compensation arrangements; therefore, the Board has caused the Corporation to enter into this Agreement (i) to ensure the Executive of individual financial security in the event of a Change of Control, and (ii) to provide such protection in a manner which is competitive with that of other corporations. NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS: 1. Certain Definitions. (a) The "Effective Date" shall be the first date during the "Change of Control Period" (as defined in Section l(b)) on which a Change of Control occurs. Anything in this Agreement to the contrary notwithstanding, if the Executive's employment with the Corporation is terminated prior to the date on which a Change of Control occurs, and the Executive can reasonably demonstrate that such termination (1) was at the request of a third party who has taken steps reasonably calculated to effect a Change of Control or (2) otherwise arose in connection with or anticipation of a Change of Control, then for all purposes of this Agreement the "Effective Date" shall mean the date immediately prior to the date of such termination. (b) The "Change of Control Period" is the period commencing on the date hereof and ending on the earlier to occur of (i) the third anniversary of such date or (ii) the first day of the month next following the Executive's normal retirement date ("Normal Retirement Date") under the Corporation's retirement plan; provided, however, that commencing on the date one year after the date hereof, and on each annual anniversary of such date (such date and each annual anniversary thereof is hereinafter referred to as the "Renewal Date"), the Change of Control Period shall be automatically extended so as to terminate on the earlier of (x) two years from such Renewal Date or (y) the first day of the month coinciding with or next following the Executive's Normal Retirement Date, unless at least 60 days prior to the Renewal Date the Corporation shall give notice that the Change of Control Period shall not be so extended. 2. Change of Control. (a) For purposes of this Agreement, a "Change of Control" shall be deemed to have occurred if a change of control of the nature that would be required to be reported in response to Item 1(a) of the Current Report on Form 8-K as in effect on the date hereof pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act") occurs, provided that, without limitation, a "Change of Control" shall be deemed to have occurred if (i) the beneficial ownership at any time hereafter by any person, as defined herein, of capital stock of the Corporation, constitutes 20 percent or more of the general voting power of all of the Corporation's outstanding capital or (ii) individuals who, as of the date hereof, constitute the Board (as of the date hereof, the "Incumbent Board") cease for any reason to constitute at least a majority of the Board, provided that any person becoming a Director subsequent to the date hereof whose election, or nomination for election by the Corporation's shareholders, was approved by a vote of at least three-quarters of the Directors comprising the Incumbent Board (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the Directors of the Corporation, as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) shall be, for purposes of this Agreement, considered as though such person were a member of the Incumbent Board. No sale to underwriters or private placement of its capital stock by the Corporation, nor any acquisition initiated by the Corporation, through merger, purchase of assets or otherwise, effected in whole or in part by issuance or reissuance of shares of its capital stock, shall constitute a Change of Control. (b) For purposes of the definition of "Change of Control", the following definitions shall be applicable: (i) The term "person" shall mean any individual, corporation or other entity and any group as such term is used in Section 13(d)(3) or 14(d)(2) of the Exchange Act. (ii) Any person shall be deemed to be the beneficial owner of any shares of capital stock of the Corporation: A. which that person owns directly, whether or not of record, or B. which that person has the right to acquire pursuant to any agreement or understanding or upon exercise of conversion rights, warrants, or options, or otherwise, or C. which are beneficially owned, directly or indirectly (including shares deemed owned through application of clause (B) above), by an "affiliate" or "associate" (as defined in the rules of the Securities and Exchange Commission under the Securities Act of 1933, as amended) of that person, or D. which are beneficially owned, directly or indirectly (including shares deemed owned through application of clause (B) above), by any other person with which that person or his "affiliate" or "associate" (defined as aforesaid) has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of capital stock of the Corporation. (iii) The outstanding shares of capital stock of the Corporation shall include shares deemed owned through application of clauses (ii) (B), (C) and (D), above, but shall not include any other shares which may be issuable pursuant to any agreement or upon exercise of conversion rights, warrants or options, or otherwise, but which are not actually outstanding. (iv) Shares of capital stock, if any, held by The Chase Manhattan Bank N.A. under the Indenture and the Escrow Agreement dated as of November 1, 1971 between International Paper Corporation and said bank shall not be deemed owned by International Paper Corporation or by said bank for purposes of this definition, so long as they are held by said bank under said Escrow Agreement, but said shares shall be deemed outstanding for the purpose of determining the aggregate number of outstanding shares of capital stock of the Corporation. 3. Employment Period. The Corporation hereby agrees to continue the Executive in its employ, and the Executive hereby agrees to remain in the employ of the Corporation, for the period commencing on the Effective Date and ending on the earlier to occur of (a) the third anniversary of such date or (b) the first day of the month coinciding with or next following the Executive's Normal Retirement Date (the "Employment Period"). 4. Terms of Employment. (a) Position and Duties. (i) During the Employment Period, (A) the Executive's position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the 90-day period immediately preceding the Effective Date and (B) the Executive's services shall be performed at the location where the Executive was employed immediately preceding the Effective Date or any office or location less than thirty-five (35) miles from such location. (ii) During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Corporation and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, to use the Executive's reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Period it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions and (C) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive's responsibilities as an employee of the Corporation in accordance with this Agreement. It is expressly understood and agreed that to the extent that any such activities have been conducted by the Executive prior to the Effective Date, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the Effective Date shall not thereafter be deemed to interfere with the performance of the Executive's responsibilities to the Corporation. (b) Compensation. (i) Base Salary. During the Employment Period, the Executive shall receive a base salary ("Base Salary") at a monthly rate at least equal to the highest monthly base salary paid to the Executive by the Corporation during the twelve-month period immediately preceding the month in which the Effective Date occurs. During the Employment Period, the Base Salary shall be reviewed at least annually and shall be increased at any time and from time to time as shall be consistent with increases in base salary awarded in the ordinary course of business to other key executives of the Corporation. Any increase in Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. Base Salary shall not be reduced after any such increase. (ii) Annual Bonus. In addition to Base Salary, the Executive shall be awarded, for each fiscal year during the Employment Period, an annual bonus (an "Annual Bonus") in cash at least equal to (x) the sum of the annual bonuses paid, or payable to the extent deferred, to the Executive in respect of each of the three fiscal years immediately preceding the fiscal year in which the Effective Date occurs, divided by (y) the number of such years that the Executive was eligible to earn an annual bonus from the Corporation (the ARecent Bonus@). In the event that the date first above written and the Effective Date occur in the same fiscal year, the Recent Bonus shall be equal to your target bonus under the applicable annual bonus. (iii) Incentive, Savings and Retirement Plans. In addition to Base Salary and Annual Bonus payable as hereinabove provided, the Executive shall be entitled to participate during the Employment Period in all incentive, savings and retirement plans and programs, whether qualified or non-qualified, then applicable to other key executives of the Corporation and its affiliates (including the Corporation's 1981 Stock Option Plan, the Long-Term Performance Incentive Plan, the 1986 Stock Award Plan, the 1981 Employee Stock Appreciation Rights Plan, the Employees' Stock Ownership Plan and the Employees' Retirement Savings Plan, in each case to the extent then in effect or as subsequently amended); provided, however, that such plans and programs, in the aggregate, shall provide the Executive with compensation, benefits and reward opportunities at least as favorable as the most favorable such compensation benefits and reward opportunities provided by the Corporation for the Executive under such plans and programs as in effect at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, as provided at any time thereafter with respect to other key executives. (iv) Welfare Benefit Plans. During the Employment Period, the Executive and/or the Executive's family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans provided by the Corporation (including, without limitation, medical, prescription, dental, disability, salary continuance, executive life, group life, accidental death and travel accident insurance plans and programs), at least comparable to those in effect at any time during the 90-day period immediately preceding the Effective Date which would be most favorable to the Executive or, if more favorable to the Executive, as in effect at any time thereafter with respect to other key executives. (v) Expenses. During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in accordance with the most favorable policies and procedures of the Corporation and its affiliates in effect at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect at any time thereafter with respect to other key executives. (vi) Fringe Benefits. During the Employment Period, the Executive shall be entitled to fringe benefits, in accordance with the most favorable policies of the Corporation and its affiliates in effect at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect at any time thereafter with respect to other key executives. (vii) Office and Support Staff. During the Employment Period, the Executive shall be entitled to an office or offices of a size and with furnishings and other appointments, and to secretarial and other assistance, at least equal to those provided to the Executive at any time during the 90-day period immediately preceding the Effective Date which would be most favorable to the Executive or, if more favorable to the Executive, as provided at any time thereafter with respect to other key executives. (viii) Vacation. During the Employment Period, the Executive shall be entitled to paid vacation in accordance with the most favorable policies of the Corporation and its affiliates as in effect at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect at any time thereafter with respect to other key executives. 5. Termination. (a) Death or Disability. This Agreement shall terminate automatically upon the Executive's death. The Corporation may terminate this Agreement, after having established the Executive's Disability (pursuant to the definition of "Disability" set forth below), by giving to the Executive written notice of its intention to terminate the Executive's employment. In such a case, the Executive's employment with the Corporation shall terminate effective on the 180th day after receipt of such notice (the "Disability Effective Date"), provided that, within 180 days after such receipt, the Executive shall not have returned to full-time performance of the Executive's duties. For purposes of this Agreement, "Disability" means disability which, at least 26 weeks after its commencement, is determined to be total and permanent by a physician selected by the Corporation or its insurers and acceptable to the Executive or the Executive's legal representative (such agreement as to acceptability not to be withheld unreasonably). (b) Cause. The Corporation may terminate the Executive's employment for "Cause." For purposes of this Agreement, "Cause" means (i) an act or acts of dishonesty taken by the Executive and intended to result in substantial personal enrichment of the Executive at the expense of the Corporation, (ii) repeated violations by the Executive of the Executive's obligations under Section 4(a) of this Agreement which are demonstrably willful and deliberate on the Executive's part and which are not remedied after the receipt of notice from the Corporation or (iii) the conviction of the Executive of a felony. (c) Termination by Executive for Good Reason. The Executive's employment may be terminated by the Executive for Good Reason. For purposes of this Agreement, "Good Reason" means (i) (A) the assignment to the Executive of any duties inconsistent in any respect with the Executive's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 4(a) of this Agreement, or (B) any other action by the Corporation which results in a diminution in such position, authority, duties or responsibilities, other than an insubstantial and inadvertent action which is remedied by the Corporation promptly after receipt of notice thereof given by the Executive; (ii) any failure by the Corporation to comply with any of the provisions of Section 4(b) of this Agreement, other than an insubstantial and inadvertent failure which is remedied by the Corporation promptly after receipt of notice thereof given by the Executive; (iii) the Corporation's requiring the Executive to be based at any office or location other than that described in Section 4(a)(i)(B) hereof, except for travel reasonably required in the performance of the Executive's responsibilities; (iv) any purported termination by the Corporation of the Executive's employment otherwise than as permitted by this Agreement; or (v) any failure by the Corporation to comply with and satisfy Section 11(c) of this Agreement.   Anything in this Agreement to the contrary notwithstanding, any termination by the Executive for any reason whatsoever during the six month period immediately following the first anniversary of the date of a Change of Control shall be a termination for "Good Reason". For purposes of this Section 5(c), any good faith determination of "Good Reason" made by the Executive shall be conclusive. (d) Notice of Termination. Any termination by the Corporation for Cause or by the Executive for Good Reason shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 12(b) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated and (iii) if the termination date is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than fifteen (15) days after the giving of such notice). (e) Date of Termination. "Date of Termination" means the date of receipt of the Notice of Termination or any later date specified therein, as the case may be. If the Executive's employment is terminated by the Corporation other than for Cause or Disability, the Date of Termination shall be the date on which the Corporation notifies the Executive of such termination. 6. Obligations of the Corporation upon Termination. (a) Death. If the Executive's employment is terminated by reason of the Executive's death, this Agreement shall terminate without further obligations to the Executive's legal representatives under this Agreement, other than those obligations accrued or earned by the Executive hereunder at the date of the Executive's death. Anything in this Agreement to the contrary notwithstanding, the Executive's family shall be entitled to receive benefits at least equal to the most favorable benefits provided by the Corporation to surviving families of executives of the Corporation under such plans, programs and policies relating to family death benefits, if any, as in effect at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive and/or the Executive's family, as in effect on the date of the Executive's death with respect to other key executives and their families. (b) Disability. If the Executive's employment is terminated by reason of the Executive's Disability, this Agreement shall terminate without further obligations to the Executive, other than those obligations accrued or earned by the Executive hereunder as of the Disability Effective Date. Anything in this Agreement to the contrary notwithstanding, the Executive shall be entitled after the Disability Effective Date to receive disability and other benefits at least equal to the most favorable of those provided by the Corporation to disabled employees and/or their families in accordance with such plans, programs and policies relating to disability, if any, as in effect at any time during the 90- day period immediately preceding the Effective Date or, if more favorable to the Executive and/or the Executive's family, as in effect at any time thereafter with respect to other key executives and their families. (c) Cause; Other than for Good Reason. If the Executive's employment shall be terminated for Cause or the Executive terminates his employment other than for Good Reason, the Corporation shall pay the Executive his full Base Salary through the Date of Termination at the rate in effect at the time Notice of Termination is given and shall have no further obligations to the Executive under this Agreement. (d) Termination by Executive for Good Reason; Termination by Corporation Other Than for Cause or Disability. If, during the Employment Period, the Corporation shall terminate the Executive's employment other than for Cause or Disability, or the employment of the Executive shall be terminated by the Executive for Good Reason: (i) the Corporation shall pay to the Executive in a lump sum in cash within 10 days after the Date of Termination (the "Payment Date") the aggregate of the following amounts: A. to the extent not theretofore paid, the Executive's Base Salary through the Date of Termination at the rate in effect on the Date of Termination or, if higher, at the highest rate in effect at any time within the three year period preceding the Effective Date (the "Highest Base Salary"); and B. the product of (x) the Recent Bonus and (y) the fraction obtained by dividing (i) the number of days between the Date of Termination and the last day of the last full fiscal year and (ii) 365; and C. the product of (x) three and (y) the sum of the Highest Base Salary and (ii) the Recent Bonus; and D. in the case of compensation previously deferred by the Executive, all amounts previously deferred and not yet paid by the Corporation; and (ii) for one year after the Date of Termination, the Corporation shall continue benefits to the Executive and/or the Executive's family at least equal to those which would have been provided to them in accordance with the plans, programs and policies described in Section 4(b)(iv) of this Agreement if the Executive's employment had not been terminated, including health insurance and life insurance, if and as in effect at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect at any time thereafter with respect to other key executives and their families and for purposes of eligibility for retiree benefits pursuant to such plans, programs and policies, the Executive shall be considered to have remained employed until the end of the Employment Period and to have retired on the last day of such period. Anything herein to the contrary notwithstanding, the Executive may elect in his Notice of Termination to receive the payment provided for pursuant to Section 6(d)(i)(C) hereof (the "Severance Payment") in installments. If the Executive elects the installment method, one-quarter of the Severance Payment shall be paid to the Executive on the Payment Date and one-quarter of the severance payment shall be paid to the Executive on each of the next three anniversaries thereof and, in the case of the latter three payments, the amounts to be paid shall include interests from the Payment Date on the remaining unpaid balance of the Severance Payment calculated at the Morgan Guaranty Trust Company prime rate as in effect from time to time. 7. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any benefit, bonus, incentive or other plan or program provided by the Corporation or any of its affiliated companies and for which the Executive may qualify, nor shall anything herein limit or otherwise affect such rights as the Executive may have under any stock option or other agreements with the Corporation or any of its affiliated companies. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan or program of the Corporation or any of its affiliated companies at or subsequent to the Date of Termination shall be payable in accordance with such plan or program. 8. Full Settlement. The Corporation's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Corporation may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement. The Corporation agrees to pay, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Corporation or others of the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof or as a result of any contest by the Executive about the amount of any payment pursuant to Section 9 of this Agreement, plus in each case interest at the Federal Rate (as defined below). 9. Gross-up. (a) In the event it shall be determined that any payment, benefit or distribution (or combination thereof) by the Corporation 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") 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 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, without limitation, any income taxes (including any interest and penalties imposed with respect to such taxes) 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 and payable by the Executive, to the extent necessary to put the Executive in the same after-tax position as if no such Excise Tax had been imposed upon the Payments. (b) Subject to the provisions of Section 9(c), all determinations required to be made under this Section 9, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by Arthur Andersen & Co. (the "Accounting Firm") which shall provide detailed supporting calculations both to the Corporation and Executive within fifteen (15) business days of the receipt of notice from Executive that there has been a Payment, or such earlier time as is requested by the Corporation. In the event that the Accounting Firm is serving as accountant or auditor for an individual, entity or group effecting the change in ownership or effective control (within the meaning of Section 280G of the Code), Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Corporation. Any Gross-Up Payment, as determined pursuant to this Section 9, shall be paid by the Corporation to Executive within five (5) days after the receipt of the Accounting Firm's determination. 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 Corporation and Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Corporation should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Corporation exhausts its remedies pursuant to Section 9(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 Corporation to or for the benefit of Executive. (c) Executive shall notify the Corporation in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Corporation of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten (10) business days after Executive is informed in writing of such claim and shall apprise the Corporation 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 (30) day period following the date on which it gives such notice to the Corporation (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Corporation notifies Executive in writing prior to the expiration of such period that it desires to contest such claim, Executive shall: (i) give the Corporation any information reasonably requested by the Corporation relating to such claim; (ii) take such action in connection with contesting such claim as the Corporation 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 Corporation; (iii) cooperate with the Corporation in good faith in order to effectively contest such claim; and (iv) permit the Corporation to participate in any proceedings relating to such claim; provided , however, that the Corporation 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 (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 9(c), the Corporation 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 Corporation shall determine; provided, however, that if the Corporation directs Executive to pay such claim and sue for a refund, the Corporation 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 (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and provided, further, that if Executive is required to extend the statute of limitations to enable the Corporation to contest such claim, Executive may limit this extension solely to such contested amount. (d) If, after the receipt by Executive of an amount advanced by the Corporation pursuant to Section 9(c), Executive becomes entitled to receive any refund with respect to such claim, Executive shall (subject to the Corporation's complying with the requirements of Section 9(c)) promptly pay to the Corporation the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by Executive of an amount advanced by the Corporation pursuant to Section 9(c), a determination is made that Executive shall not be entitled to any refund with respect to such claim and the Corporation does not notify Executive in writing of its intent to contest such denial of refund prior to the expiration of thirty (30) days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 10. Confidential Information. The Executive shall hold in a fiduciary capacity for the benefit of the Corporation all secret or confidential information, knowledge or data relating to the Corporation or any of its affiliated companies, and their respective businesses, which shall have been obtained by the Executive during the Executive's employment by the Corporation or any of its affiliated companies and which shall not be public knowledge (other than by acts by the Executive or his representatives in violation of this Agreement). After termination of the Executive's employment with the Corporation, the Executive shall not, without the prior written consent of the Corporation, communicate or divulge any such information, knowledge or data to anyone other than the Corporation and those designated by it. In no event shall an asserted violation of the provisions of this Section 10 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement. 11. Successors. (a) This Agreement is personal to the Executive and without the prior written consent of the Corporation shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon the Corporation and its successors. (c) The Corporation 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 Corporation to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Corporation would be required to perform it if no such succession had taken place. As used in this Agreement, "Corporation" shall mean the Corporation as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. 12. Miscellaneous. (a) This Agreement shall be governed by and construed in accordance with the laws of the State of New Jersey, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. (b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Executive : Susan Alpert, Ph.D., M.D. 91 Sage Court Bedminster, NJ 07921 If to the Corporation : C. R. BARD, INC. 730 Central Avenue Murray Hill, New Jersey 07974 Attention: General Counsel or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. (c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (d) The Corporation may withhold from any amounts payable under this Agreement such Federal, state or local taxes as shall be required to be withheld pursuant to any applicable law or regulation. (e) The Executive's failure to insist upon strict compliance with any provision hereof shall not be deemed to be a waiver of such provision or any other provision thereof. (f) This Agreement contains the entire understanding of the Corporation and the Executive with respect to the subject matter hereof. (g) The Executive and the Corporation acknowledge that the employment of the Executive by the Corporation is "at will", and, prior to the Effective Date, may be terminated by either the Executive or the Corporation at any time. Upon a termination of the Executive's employment or upon the Executive's ceasing to be an officer of the Corporation, in each case, prior to the Effective Date, there shall be no further rights under this Agreement. IN WITNESS WHEREOF, the Executive has hereunto set his hand and, pursuant to the authorization from its Board of Directors, the Corporation has caused these presents to be executed in its name on its behalf, all as of the day and year first above written .   Susan Alpert, Ph.D., M.D. /s/ (Executive) Susan Alpert, Ph.D., M.D.   C. R. BARD, INC.   By: William H. Longfield /s/ William H. Longfield Chairman and Chief Executive Officer   Attest: Jean Miller /s/ Assistant Secretary        

FIRST AMENDMENT TO POST-CONFIRMATION LOAN AND SECURITY AGREEMENT        THIS FIRST AMENDMENT TO POST-CONFIRMATION LOAN AND SECURITY AGREEMENT (the "Agreement") is made and entered into as of this ___ day of September, 2000, among THE CIT GROUP/BUSINESS CREDIT, INC., a New York corporation in its capacity as Agent and Lender ("Agent"), TRISM, INC., a Delaware corporation ("Trism"), TRISM SECURED TRANSPORTATION, INC., a Delaware corporation ("Trism Secured"), TRI-STATE MOTOR TRANSIT CO., a Delaware corporation ("TSMT"), DIABLO SYSTEMS INCORPORATED D/B/A DIABLO TRANSPORTATION, INC., a California corporation ("Diablo"), TRISM EASTERN, INC. D/B/A C.I. WHITTEN TRANSFER, a Delaware corporation ("CI Whitten "), TRISM HEAVY HAUL, INC., a Delaware corporation ("Heavy Haul"), TRISM SPECIALIZED CARRIERS, INC., a Georgia corporation ("Specialized"), TRISM SPECIAL SERVICES, INC., a Georgia corporation ("Special Services"), TRISM LOGISTICS, INC., a Delaware corporation ("Logistics"), TRISM EQUIPMENT, INC., a Delaware corporation ("TEI") (each of Trism, Trism Secured, TSMT, Diablo, CI Whitten, Heavy Haul, Specialized, Special Services, Logistics and TEI is herein referred to individually as a "Borrower" and collectively as the "Borrowers"), and the other lenders party to the Loan Agreement (as defined below). W I T N E S S E T H:      WHEREAS, Borrowers, Agent and the lenders signatory thereto from time to time (the "Lenders") are party to that certain Post-Confirmation Loan and Security Agreement, dated as of February 9, 2000 (as the same may be amended from time to time, the "Loan Agreement;" all capitalized terms used herein and not otherwise expressly defined herein shall have the respective meanings given to such terms in the Loan Agreement); and      WHEREAS, Agent, Lenders and Borrowers desire to amend the Loan Agreement as set forth herein.      NOW, THEREFORE, in consideration of the foregoing premises, and other good and valuable consideration, the receipt and legal sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:           1.     Amendments to the Loan Agreement. The Loan Agreement is hereby amended as follows: >      (a)     Section 1.1 of Article 1 of the Loan Agreement is hereby amended > by deleting the definition of "Availability Shortfall" therefrom in its > entirety and inserting the following in lieu thereof: > > >      "Availability Shortfall" shall mean a condition which occurs, at any > > time and from time to time, when the Borrowers' Borrowing Base Availability > > has remained below $3,000,000 for a period of three (3) consecutive Business > > Days during the term thereof. > >     (b)     Section 1.1 of Article 1 of the Loan Agreement is hereby further > amended by deleting therefrom the definition of "Borrowing Base B" in its > entirety and inserting the following in lieu thereof: > > >      "Borrowing Base B" means at any time an amount equal to the lesser of: > > > >       (a)     $15,000,000 less an amount equal to (i) $150,000 multiplied by > > (ii) the number of whole months which have elapsed since the earlier to > > occur of (A) November 1, 2000 or (B) the Borrowing Base B Triggering Event > > Date; or > > > >       (b)     an amount equal to the sum of (i) (A) eighty percent (80%) of > > the Appraised Orderly Liquidation Value of the Trailers, less (B) the most > > recently determined Appraised Orderly Liquidation Value of all Trailers > > lost, damaged, destroyed or otherwise unfit for service in the ordinary > > course since the date of the most recently performed appraisal thereof or > > not subject to a first priority perfect security interest in favor of Agent > > for the benefit of Lenders) plus (ii) seventy percent (70%) of the Appraised > > Orderly Liquidation Value of the Mortgaged Real Estate. > >      (c)     Section 1.1 of Article 1 of the Loan Agreement is hereby further > amended by adding the following new definition of "Borrowing Base B Triggering > Event Date" immediately following the definition of "Borrowing Base B": > > >       "Borrowing Base B Triggering Event Date" means the date on which the > > amount described in clause (b) of the definition of "Borrowing Base B" falls > > below $15,000,000. > > > >      (d)     Section 1.1 of Article 1 of the Loan Agreement is hereby > > further amended by deleting from the definition of "Revolving Credit > > Facility Cap" the number "$42,500,000" and inserting in lieu thereof the > > number "$45,000,000." > > > >      (e)     Section 1.1 of Article 1 of the Loan Agreement is hereby > > further amended by deleting from the definition of "Total Commitment" the > > number "$42,500,000" and inserting in lieu thereof the number "$45,000,000." > > > >      (f)     Section 4.1(a) of Article 4 of the Loan Agreement is hereby > > amended by deleting from the seventh line thereof the phrase and > > parenthetical "two and one quarter percent (2.25%)" and inserting in lieu > > thereof the phrase and parenthetical "two and one-half percent (2.50%)." > > > >      (g)     Section 4.1(a) of Article 4 of the Loan Agreement is hereby > > further amended by deleting from the seventh line thereof the phrase and > > parenthetical "two and one quarter percent (2.25%)" and inserting in lieu > > thereof the phrase and parenthetical "two and one-half percent (2.50%)." > > > >      (h)     Section 4.2(b) of Article 4 of the Loan Agreement is hereby > > amended by deleting such subsection in its entirety and inserting the > > following in lieu thereof: > > > > >       (b)     Administration Fee. As additional consideration for the > > > Agent's ongoing costs and expenses of administration of this Agreement, > > > the Borrowers, from and after the effective date of the First Amendment to > > > Post-Confirmation Loan and Security Agreement, agree, jointly and > > > severally, to pay to the Agent commencing on August 1, 2001 and annually > > > on the same date thereafter during the term hereof or any extension > > > thereof, an administration fee in the amount of $25,000 per year (the > > > "Administration Fee") for the Agent's own account, which Administration > > > Fee shall be deemed fully earned and non-refundable when paid. > > > >      (i)     Section 4.2(d) of Article 4 of the Loan Agreement is hereby > > amended by deleting from the last line thereof the phrase and parenthetical > > "one and one-half percent (1.5%)" and inserting in lieu thereof the phrase > > and parenthetical "one and three-quarters percent (1.75%)." > > > >      (j)     Article 11 of the Loan Agreement is hereby amended by adding > > the following new Section 11.1(d) thereto immediately following the end of > > Section 11.1(c) thereof: > > > > >       (d)   Minimum EBITDA. The Borrowers shall have an EBITDA for each of > > > the following respective periods of a least the amounts set forth below > > > opposite such periods, as follows: Period Minimum EBITDA Eight months ended 8/31/00 $12,500,000 Nine months ended 9/30/00 $13,500,000 Ten months ended 10/31/00 $15,000,000 Eleven months ended 11/30/00 $15,500,000 Twelve months ended 12/31/00 and on a trailing twelve month basis for each month thereafter $16,000,000 > >      (k)     Article 11 of the Loan Agreement is hereby further amended by > > adding the following new Section 11.18 following the end of Section 11.17 > > thereof: > > > > >      SECTION 11.18 Minimum Borrowing Base Availability. Allow Borrowing > > > Base Availability to be less than $3,000,000 for more than three (3) > > > consecutive Business Days during the Term hereof. > > > >      (l)     The Loan Agreement is hereby further amended by deleting > > Schedule 6.1(g) therefrom and inserting the Schedule 6.1(g) attached hereto > > in lieu thereof.           2.     Representations, Warranties, Covenants and Acknowledgments. To induce Agent and Lenders to enter into this Agreement:                (a)     Each Borrower does hereby represent and warrant that (i) as of the date hereof, all of the representations and warranties made or deemed to be made under the Loan Documents are true and correct, except such representations and warranties which, by their express terms, are applicable only to the Effective Date, (ii) as of the date hereof, after giving effect to the terms hereof, there exists no Default or Event of Default under the Loan Agreement or any of the Loan Documents, (iii) such Borrower has the power and is duly authorized to enter into, deliver and perform this Agreement, and (iv) this Agreement and each of the Loan Documents is the legal, valid and binding obligation of the such Borrower enforceable against it in accordance with its terms; and                (b)     Each Borrower does hereby reaffirm each of the agreements, covenants, and undertakings set forth in the Loan Agreement and each and every other Loan Document executed in connection therewith or pursuant thereto as if such Borrower were making said agreements, covenants and undertakings on the date hereof; and                (c)     Each Borrower does hereby acknowledge and agree that no right of offset, defense, counterclaim, claim, causes of action or objection in favor of any Borrower against Agent or any Lender exists arising out of or with respect to (i) the Secured Obligations, this Agreement, the Loan Agreement or any of the other Loan Documents, (ii) any other documents now or heretofore evidencing, securing or in any way relating to the foregoing or (iii) the administration or funding of the Revolving Credit Loans.           3.     Releases; Indemnities.                (a)     In further consideration of Agent's and each Lender's execution of this Agreement, each Borrower, individually and on behalf of its successors (including, without limitation, any trustees acting on behalf of such Borrower and any debtor-in-possession with respect to such Borrower), assigns, subsidiaries and Affiliates, hereby forever releases Agent and each Lender and their respective successors, assigns, parents, subsidiaries, Affiliates, officers, employees, directors, agents and attorneys (collectively, the "Releasees") from any and all debts, claims, demands, liabilities, responsibilities, disputes, causes, damages, actions and causes of actions (whether at law or in equity) and obligations of every nature whatsoever, whether liquidated or unliquidated, whether known or unknown, matured or unmatured, fixed or contingent (collectively, "Claims") that such Borrower may have against the Releasees which arise from or relate to any actions which the Releasees may have taken or omitted to take in connection with the Loan Agreement prior to the date this Agreement was executed including without limitation with respect to the Secured Obligations, any Collateral, the Loan Agreement, any other Loan Document and any third parties liable in whole or in part for the Secured Obligations. This provision shall survive and continue in full force and effect whether or not such Borrower shall satisfy all other provisions of this Agreement, the Loan Documents or the Loan Agreement including payment in full of all Secured Obligations.                (b)     Each Borrower hereby agrees that its obligation to indemnify and hold the Releasees harmless as set forth in Section 3(a) above shall include an obligation to indemnify and hold the Releasees harmless with respect to any and all liabilities, obligations, losses, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever incurred by the Releasees, or any of them, whether direct, indirect or consequential, as a result of or arising from or relating to any proceeding by, or on behalf of any Person, including, without limitation, officers, directors, agents, trustees, creditors, partners or shareholders of such Borrower or any subsidiary or Affiliate of such Borrower, whether threatened or initiated, asserting any claim for legal or equitable remedy under any statutes, regulation or common law principle arising from or in connection with the negotiation, preparation, execution, delivery, performance, administration and enforcement of this Agreement or any other document executed in connection herewith. The foregoing indemnity shall survive the payment in full of the Secured Obligations and the termination of this Agreement, the Loan Agreement and the other Loan Documents           4.     Conditions Precedent. The effectiveness of this Agreement is subject to the following conditions precedent:                (a)     Delivery of Documents. Borrowers shall have delivered to Agent, on behalf of Lenders, all in form and substance acceptable to Agent in its sole discretion, (i) executed counterpart originals of this Agreement, (ii) an Acknowledgment and Consent of Guarantor, in form and substance satisfactory to Agent, (iii) an Amended and Restated Revolving Credit Note in favor of The CIT Group/Business Credit, Inc., in form and substance satisfactory to Agent in its sole discretion, and (iv) such other documentation as Agent may reasonably require in connection herewith; and                (b)     Accuracy of Representations and Warranties. All of the representations and warranties made or deemed to be made in this Agreement and under the Loan Documents shall be true and correct as of the date of this Agreement, except such representations and warranties which, by their terms, are applicable to a prior specific date or period; and                (d)     Expenses. Borrowers shall have agreed to jointly and severally pay to Agent the costs and expenses referred to in Section 6 hereof; and                (e)     Fees. Borrowers shall have paid to Agent (i) for the ratable benefit of Lenders, an amendment fee in an amount equal to $25,000.00, and (ii) for the sole benefit of Agent, an administrative fee in the amount equal to $25,000, which in each case, shall be deemed fully earned as of the date hereof.           5.     Effect of this Agreement; Relationship of Parties. As expressly amended hereby, the Loan Agreement shall be and remain in full force and effect as originally written, and shall constitute the legal, valid, binding and enforceable obligations of Borrowers to Agent and Lenders. The relationship of Agent and Lenders, on the one hand, and Borrowers, on the other hand, has been and shall continue to be, at all times, that of creditor and debtor and not as joint venturers or partners. Nothing contained in this Agreement, any instrument, document or agreement delivered in connection herewith or in the Loan Agreement or any of the other Loan Documents shall be deemed or construed to create a fiduciary relationship between or among the parties.           6.     Expenses. Borrowers agree to jointly and severally pay on demand all reasonable costs and expenses of Agent and Lenders in connection with the preparation, execution, delivery and enforcement of this Agreement and all other documents and any other transactions contemplated hereby, including, without limitation, the reasonable fees and out-of-pocket expenses of legal counsel to Agent and Lenders. Borrowers authorize Agent to charge the foregoing expenses to the Borrowers' loan account by increasing the principal amount of the Revolving Credit Loans by the amount of such expenses owed by Borrowers in connection herewith.           7.   Miscellaneous. Borrowers agree to take such further action as Agent or any Lender shall reasonably request in connection herewith to evidence the amendments herein contained to the Loan Agreement. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which, when so executed and delivered, shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same instrument. This Agreement shall be binding upon and inure to the benefit of the successors and permitted assigns of the parties hereto. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Georgia. This Agreement embodies the entire agreement and understanding between the parties hereto with respect to the subject matter hereof and supersedes all prior oral or written negotiations, agreements and understandings of the parties with respect to the subject matter hereof, except the agreements embodied in the Loan Agreement and the other Loan documents (as modified herein). Time is of the essence of this Agreement and of the Loan Agreement.      IN WITNESS WHEREOF, Borrowers, Lenders and Agent have caused this Agreement to be duly executed as of the date first above written.   TRISM, INC.           By:                                                            Name: James G. Overley     Title:  Senior Vice President and Chief Financial Officer           TRISM SECURED TRANSPORTATION, INC.               By:                                                          Name: James G. Overley     Title: Senior Vice President and Chief Financial Officer           TRI-STATE MOTOR TRANSIT CO.           By:                                                          Name: James G. Overley     Title: Senior Vice President and Chief Financial Officer           DIABLO SYSTEMS INCORPORATED, D/B/A DIABLO TRANSPORTATION, INC.           By:                                                          Name: James G. Overley     Title: Senior Vice President and Chief Financial Officer           TRISM EASTERN, INC., D/B/A C. I.     WHITTEN TRANSFER           By:                                                          Name: James G. Overley     Title: Senior Vice President and Chief Financial Officer           TRISM HEAVY HAUL, INC.           By:                                                          Name: James G. Overley     Title: Senior Vice President and Chief Financial Officer           TRISM SPECIALIZED CARRIERS, INC.           By:                                                          Name: James G. Overley     Title: Senior Vice President and Chief Financial Officer           TRISM SPECIAL SERVICES, INC.           By:                                                          Name: James G. Overley     Title: Senior Vice President and Chief Financial Officer           TRISM LOGISTICS, INC.           By:                                                          Name: James G. Overley     Title: Senior Vice President and Chief Financial Officer           TRISM EQUIPMENT, INC.           By:                                                          Name: James G. Overley     Title: Senior Vice President and Chief Financial Officer           THE CIT GROUP/BUSINESS CREDIT,     INC. , as Agent and Lender         Commitment Percentage By:                                                        (Following execution and delivery of this Agreement): _____% Name: Jerrold Brown Title: Vice President                     FLEET FINANCIAL CORPORATION , as Lender         Commitment Percentage By:                                                         (Following execution and delivery of this Agreement): _____% Name:                                                      Title:                                                                           SCHEDULE 6.1(g)     Trailers     See Attached.             ACKNOWLEDGMENT AND AGREEMENT        Each of the undersigned hereby acknowledges and agrees to the foregoing First Amendment to Post-Confirmation Loan and Security Agreement.        IN WITNESS WHEREOF, the undersigned have hereunto set their hands and seals this ___ day of September, 2000.         AERO BODY AND TRUCK EQUIPMENT, INC.           By:______________________________ __     Name:                                                           Its:                                                                E. L. POWELL & SONS TRUCKING CO., INC.           By:_______________________________ _     Name:                                                           Its:_________________________________           TRISM TRANSPORT, INC.           By:_________________________________     Name:                                                           Its:_________________________________           TRISM TRANSPORT SERVICES, INC.           By                                                          Name:                                                           Its:_________________________________        

QuickLinks -- Click here to rapidly navigate through this document NASH-FINCH COMPANY PROFIT SHARING PLAN 1994 REVISION Sixth Declaration of Amendment     Pursuant to the retained power of amendment contained in Section 11.2 of the instrument entitled "Nash-Finch Company Profit Sharing Plan—1994 Revision," the undersigned hereby amends the said instrument in the manner described below. 1.Section 3.3(A) of the Plan is amended to read as follows:     3.3   Rollovers and Transfers.     (A) A Participant who is a Qualified Employee may, with the prior consent of the Administrator, contribute to the Trust, within 60 days of receipt,     (1) the balance of an individual retirement account to which the only contributions have been one or more "eligible rollover distributions," within the meaning of Code section 402(c)(4), from a plan qualified under Code section 401(a), or     (2) an eligible rollover distribution from such a qualified plan. 2.Section 8.1 of the Plan is amended to read as follows:     8.1   Form and Time of Distribution.     (A) Following a Participant's termination of employment, the Trustee will distribute to the Participant or, if the Participant has died, to his or her Beneficiary, the balance of the Participant's Accounts. The amount of any distribution made in the form of a lump sum payment will be equal to the aggregate balance of the Participant's Accounts on the day before the distribution date. Subject to the remaining subsections of this Section 8.1 and Sections 8.7 and 8.8, distributions will be made in accordance with the following provisions.     (1) If the aggregate balance of the Participant's Accounts at the time of the distribution is not more than $5000, distribution to the Participant will be made, in the form of a lump sum cash payment, as soon as administratively practicable following the Participant's termination of employment. This clause will not apply, however, if the Participant's Account balance exceeded $5000 at the time of any previous distribution.     (2) If clause (1) does not apply, distribution to the Participant will be made or commence, in the form of a lump sum cash payment or installment cash payments, according to the Participant's election, on or as soon as administratively practicable after a date specified by the Participant. If the Participant terminates employment before attaining age 62, distribution to the Participant must be made or commence not later than the date on which the Participant attains age 65. If the Participant had attained age 62 when he or she terminated employment, distribution to the Participant must be made or commence not later than the sixtieth day after the close of the Plan Year during which the Participant terminates employment or attains age 65, whichever is later, unless the Participant elects to defer the distribution in the manner described in Subsection (B).     (3) If the aggregate balance of a Participant's Accounts at the time of his or her death is not more than $5000, distribution to the Participant's Beneficiary will be made, in the form of a lump sum cash payment, as soon as administratively practicable following the Administrator's receipt of notice of the Participant's death. If the foregoing sentence does not apply, distribution to the Participant's Beneficiary will be made at such time or times and in such manner as the Beneficiary elects in accordance with Subsection (E). --------------------------------------------------------------------------------     (B) Subject to the provisions of the other subsections of this Section 8.1, a Participant described in clause (2) of Subsection (A) who has attained age 62 when he or she terminates employment may elect to defer commencement of his or her distribution under the Plan by providing to the Administrator, by a date determined in accordance with Plan Rules, a written, signed statement describing whether the benefit is to be distributed in the form of a lump sum payment or installment payments and specifying the date on which the payment is to be made or commence; provided, that distribution to the Participant must be made or commence not later than the April 1 of the calendar year following the calendar year during which the Participant attains age 701/2. Plan Rules may permit a Participant to modify any election in any manner determined by the Administrator to be consistent with Code section 401(a)(14) and Treasury Regulations thereunder and the other provisions of this Section 8.1.     (C) Notwithstanding Subsection (A)—     (1) Distribution to any Participant who is a "5-percent owner," within the meaning of the Code section 416, must begin not later than April 1 of the calendar year after the Participant attains age 701/2, whether or not the Participant has terminated employment, as if he or she had terminated employment on the last day of the Plan Year during which he or she attained age 701/2. Once distributions have begun to a 5-percent owner under this subsection (C)(1), distributions must continue even if the Participant ceases to be a 5-percent owner in a subsequent year.     (2) Distribution to any other Participant who has attained age 701/2 after December 31, 1999 may, at the election of the Participant, begin not later than April 1 of the calendar year after the Participant attains age 701/2 even though the Participant has not terminated employment, as if he or she terminated employment on the last day of the Plan Year during which he or she attained age 701/2. The Participant's election must be made in accordance with and is subject to Plan Rules. The election is irrevocable after it is received by the Administrator.     (3) A Participant who attained age 701/2 before January 1, 2000, and is not a 5-percent owner may, while he or she is an Employee, elect to stop distributions. The election must be made in accordance with and is subject to Plan Rules, must be received by the Administrator not later than a date specified in Plan Rules, and will become effective as soon as administratively practicable after it is received by the Administrator. The election is irrevocable after it is received by the Administrator. If distributions to a Participant are stopped pursuant to this clause, the Participant's prior elections pursuant to this section will cease to be effective and his or her benefit will recommence in accordance with the other subsections of this Section 8.1 without regard to such prior elections following his or her subsequent termination of employment.     (D) If a distribution is to be made in installments, such installments will be substantially equal in amount and paid on a quarterly, semi-annual or annual basis, for a period not extending beyond either the Participant's life expectancy or the life expectancy of the Participant and the Participant's Beneficiary; and, if the Participant's Beneficiary is not the Participant's spouse, the period over which such payments are to be made will be determined by reference to the applicable table of joint life expectancies set forth in Treasury Regulation section 1.401(a)(9)-2. Notwithstanding the foregoing, not more than once each Plan Year, a Participant who is receiving installment payments may elect, in accordance with Plan Rules, to either increase the amount of the installment payments or to receive a lump sum payment of all or a portion of his or her remaining Account balances. Prior to the Participant's "required beginning date," within the meaning of Code section 401(a)(9), the Participant may elect, in writing to the Administrator, whether the life expectancies for the Participant and the Participant's spouse are to be recalculated 2 -------------------------------------------------------------------------------- on an annual basis for purposes of determining the amount of each installment payment. Any such election will become irrevocable as of the date specified above. If no such election is made, the life expectancies of the Participant and the Participant's spouse will not be recalculated on an annual basis.     (E) If a Participant dies before receiving the full amount to which he or she is entitled, the amount remaining will be distributed to the Participant's Beneficiary at such time or times and in such manner as the Beneficiary elects, subject, however to the following rules—     (1) If the Participant dies after April 1 of the calendar year following the calendar year during which he or she has both attained age 701/2 and terminated employment, the distribution will be made to the Beneficiary at a rate that would result in the benefit being distributed at least as rapidly as if distribution were made at the same rate as was in effect immediately prior to the Participant's death.     (2) If the Participant dies before April 1 of the calendar year following the calendar year during which he or she has both attained age 701/2 and terminated employment, the distribution will, at the Beneficiary's election, be made either—     (a) in its entirety no later than December 31 of the calendar year which contains the fifth anniversary of the date of the Participant's death, or     (b) in installments, commencing no later than December 31 of the calendar year immediately following the calendar year in which the Participant died (unless the Beneficiary is the Participant's spouse, in which case payments will begin no later than the later of the date specified above or December 31 of the calendar year in which the Participant would have attained age 701/2 had he or she lived), and being paid over a period not exceeding the Beneficiary's remaining life expectancy (as determined on the basis of the Beneficiary's age as of the date on which payments are required to commence under this clause (2) and, if the Beneficiary is the Participant's spouse, as redetermined on an annual basis). For purposes of this clause (2), if a Participant is a "5-percent owner" within the meaning of Code section 416, then he or she will be deemed to have terminated employment upon attaining age 701/2.     (3) A Beneficiary's election with respect to the time and manner in which any amount remaining at the Participant's death will be distributed must be made no later than the earlier of the dates set forth in clause (2)(a) and (2)(b) above, and is irrevocable following such date. If the Beneficiary fails to make an election under clause (2), distribution will be made in the manner set forth at clause (2)(a). If the Participant's spouse is the Beneficiary and dies after the Participant's death but before distributions to such spouse have commenced, the foregoing rules will be applied as if the surviving spouse were the Participant, including the substitution of the surviving spouse's date of death for the Participant's date of death; provided that the alternative commencement date in clause (2)(b) relating to the date on which the Participant would have attained age 701/2 had he or she lived will not be available.     (F) Notwithstanding any other provision of the Plan to the contrary, distributions will be made in accordance with Treasury Regulations issued under Code section 401(a)(9), including Treasury Regulation section 1.401(a)(9)-2, and any provisions of the Plan reflecting Code section 401(a)(9) take precedence over any distribution options that are inconsistent with Code section 401(a)(9).     The amendment set forth at item 1 above is effective as of January 1, 1998 and applies to all Participants, including those who terminated employment before January 1, 1998. The amendment set 3 -------------------------------------------------------------------------------- forth at item 2 above is effective as of April 2, 2000; provided, first that the provisions of Section 8.1(D) and 8.1(E), as amended to reflect section 1404 of the Small Business Job Protection Act of 1996, are effective as of January 1, 1997; and, second, that the provisions of Section 8.1(C)(2) are effective as November 1, 2000.     IN WITNESS WHEREOF, the undersigned has caused this instrument to be executed by its duly authorized officers this 24th day of October, 2000.       NASH FINCH COMPANY   Attest:   /s/ NORMAN R. SOLAND    -------------------------------------------------------------------------------- Secretary       By:   /s/ RON MARSHALL    -------------------------------------------------------------------------------- President 4 -------------------------------------------------------------------------------- QUICKLINKS NASH-FINCH COMPANY PROFIT SHARING PLAN 1994 REVISION Sixth Declaration of Amendment

QuickLinks -- Click here to rapidly navigate through this document Exhibit 10.6 SECURITY AGREEMENT     THIS SECURITY AGREEMENT, dated as of October 10, 2000, is made and given by REUTER MANUFACTURING, INC., a corporation organized under the laws of the State of Minnesota (the "Grantor"), to U.S. BANK NATIONAL ASSOCIATION, a national banking association (the "Secured Party"). RECITALS     A.  The Grantor and the Secured Party have entered into an Amended and Restated Credit Agreement dated as of the date of this Agreement (as the same may hereafter be amended, supplemented, extended, restated, or otherwise modified from time to time, the "Credit Agreement") pursuant to which the Secured Party has agreed to extend to the Grantor certain credit accommodations on the terms and conditions set forth in the Credit Agreement.     B.  It is a condition precedent to the extension of any credit accommodations pursuant to the terms of the Credit Agreement that this Agreement be executed and delivered by the Grantor.     C.  The Grantor finds it advantageous, desirable and in its best interests to comply with the requirement that it execute and deliver this Security Agreement to the Secured Party.     NOW, THEREFORE, in consideration of the premises and in order to induce the Secured Party to enter into the Credit Agreement and to extend credit accommodations to the Grantor thereunder, the Grantor hereby agrees with the Secured Party for the Secured Party's benefit as follows:     Section 1.  Defined Terms.      1(a) As used in this Agreement, the following terms shall have the meanings indicated:     "Accounts" shall mean each and every right to payment of Grantor, whether such right to payment arises out of a sale or lease of goods by Grantor, or other disposition of goods or other property of Grantor, out of a rendering of services by Grantor, out of a loan by Grantor, out of damage to or loss of goods in the possession of a railroad or other carrier or any other bailee, out of overpayment of taxes or other liabilities of Grantor, or which otherwise arises under any contract or agreement, or from any other cause, whether such right to payment now exists or hereafter arises and whether such right to payment is or is not yet earned by performance and howsoever such right to payment may be evidenced, together with all other rights and interest (including all liens and security interests) which Grantor may at any time have by law or agreement against any account debtor (as defined in the Uniform Commercial Code in effect in the State of Minnesota) or other obligor obligated to make any such payment or against any of the property of such account debtor or other obligor; specifically (but without limitation), the term includes all present and future instruments, documents, chattel papers, accounts and contract rights of Grantor.     "Account Debtor" shall mean a Person who is obligated on or under any Account, Chattel Paper, Instrument or General Intangible.     "Chattel Paper" shall mean a writing or writings which evidence both a monetary obligation and a security interest in or lease of specific goods; when a transaction is evidenced by both a security agreement or a lease and by an Instrument or a series of Instruments, the group of writings taken together constitutes Chattel Paper.     "Collateral" shall mean all property and rights in property now owned or hereafter at any time acquired by the Grantor in or upon which a Security Interest is granted to the Secured Party by the Grantor under this Agreement.     "Document" shall mean any bill of lading, dock warrant, dock receipt, warehouse receipt or order for the delivery of goods, together with any other document or receipt which in the regular course of -------------------------------------------------------------------------------- business or financing is treated as adequately evidencing that the Person in possession of it is entitled to receive, hold and dispose of the document and the goods it covers.     "Equipment" shall mean all machinery, equipment, furniture, furnishings and fixtures, including all accessions, accessories and attachments thereto, and any guaranties, warranties, indemnities and other agreements of manufacturers, vendors and others with respect to such Equipment.     "Event of Default" shall have the meaning given to such term in Section 20 hereof.     "Financing Statement" shall have the meaning given to such term in Section 4 hereof.     "General Intangibles" shall mean any personal property (other than goods, Accounts, Chattel Paper, Documents, Instruments and money) including choses in action, causes of action, contract rights, corporate and other business records, inventions, designs, patents, patent applications, service marks, trademarks, trademark applications, tradenames, trade secrets, engineering drawings, good will, registrations, copyrights, licenses, franchises, customer lists, tax refund claims, royalties, licensing and product rights, rights to the retrieval from third parties of electronically processed and recorded data and all rights to payment resulting from an order of any court.     "Instrument" shall mean a draft, check, certificate of deposit, note, bill of exchange, security or any other writing which evidences a right to the payment of money and is not itself a security agreement or lease and is of a type which is transferred in the ordinary course of business by delivery with any necessary endorsement or assignment.     "Inventory" shall mean any and all of the Grantor's goods, including, without limitation, goods in transit, wherever located which are or may at any time be leased by the Grantor to a lessee, held for sale or lease, furnished under any contract of service or held as raw materials, work in process, or supplies or materials used or consumed in the Grantor's business, or which are held for use in connection with the manufacture, packing, shipping, advertising, selling or finishing of such goods, and all goods, the sale or other disposition of which has given rise to a Receivable, which are returned to and/or repossessed and/or stopped in transit by the Grantor or the Secured Party, or at any time hereafter in the possession or under the control of the Grantor or the Secured Party, or any agent or bailee of either thereof, and all documents of title or other documents representing the same.     "Lien" shall mean any security interest, mortgage, pledge, lien, charge, encumbrance, title retention agreement or analogous instrument or device (including the interest of the lessors under capitalized leases), in, of or on any assets or properties of the Person referred to.     "Obligations" shall mean (a) all indebtedness, liabilities and obligations of the Grantor to the Secured Party of every kind, nature or description under the Credit Agreement, including the Grantor's obligation on any promissory note or notes under the Credit Agreement and any note or notes hereafter issued in substitution or replacement thereof, (b) all liabilities of the Grantor under this Agreement, and (c) any and all other liabilities and obligations of the Grantor to the Secured Party of every kind, nature and description, whether direct or indirect or hereafter acquired by the Secured Party from any Person, absolute or contingent, regardless of how such liabilities arise or by what agreement or instrument they may be evidenced, and in all of the foregoing cases whether due or to become due, and whether now existing or hereafter arising or incurred.     "Person" shall mean any individual, corporation, partnership, limited partnership, limited liability company, 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.     "Security Interest" shall have the meaning given such term in Section 2 hereof. 2 --------------------------------------------------------------------------------    1(b) All other terms used in this Agreement which are not specifically defined herein shall have the meaning assigned to such terms in the Uniform Commercial Code in effect in the State of Minnesota as of the date of this Agreement to the extent such other terms are defined therein.    1(c) Unless the context of this Agreement otherwise clearly requires, references to the plural include the singular, the singular, the plural and "or" has the inclusive meaning represented by the phrase "and/or." The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation." The words "hereof," "herein," "hereunder," and similar terms in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement. References to Sections are references to Sections in this Security Agreement unless otherwise provided.     Section 2.  Grant of Security Interest.  As security for the payment and performance of all of the Obligations, the Grantor hereby grants to the Secured Party a security interest (the "Security Interest") in all of the Grantor's right, title, and interest in and to the following, whether now or hereafter owned, existing, arising or acquired and wherever located:    2(a) All Accounts.    2(b) All Chattel Paper.    2(c) All Documents.    2(d) All Equipment.    2(e) All General Intangibles.     2(f) All Instruments.    2(g) All Inventory.    2(h) To the extent not otherwise included in the foregoing, (i) all other rights to the payment of money, including rents and other sums payable to the Grantor under leases, rental agreements and other Chattel Paper and insurance proceeds; (ii) all books, correspondence, credit files, records, invoices, bills of lading, and other documents relating to any of the foregoing, including, without limitation, all tapes, cards, disks, computer software, computer runs, and other papers and documents in the possession or control of the Grantor or any computer bureau from time to time acting for the Grantor; (iii) all rights in, to and under all policies insuring the life of any officer, director, stockholder or employee of the Grantor, the proceeds of which are payable to the Grantor; and (iv) all accessions and additions to, parts and appurtenances of, substitutions for and replacements of any of the foregoing.     2(i) To the extent not otherwise included, all proceeds and products of any and all of the foregoing.     Section 3.  Grantor Remains Liable.  Anything herein to the contrary notwithstanding, (a) the Grantor shall remain liable under the Accounts, Chattel Paper, General Intangibles and other items included in the Collateral to the extent set forth therein to perform all of its duties and obligations thereunder to the same extent as if this Agreement had not been executed, (b) the exercise by the Secured Party of any of the rights hereunder shall not release the Grantor from any of its duties or obligations under any items included in the Collateral, and (c) the Secured Party shall have no obligation or liability under Accounts, Chattel Paper, General Intangibles and other items included in the Collateral by reason of this Agreement, nor shall the Secured Party be obligated to perform any of the obligations or duties of the Grantor thereunder or to take any action to collect or enforce any claim for payment assigned hereunder. 3 --------------------------------------------------------------------------------     Section 4.  Title to Collateral.  The Grantor has (or will have at the time it acquires rights in Collateral hereafter acquired or arising) and will maintain so long as the Security Interest may remain outstanding, title to each item of Collateral (including the proceeds and products thereof), free and clear of all Liens except the Security Interest and except Liens permitted by the Credit Agreement. The Grantor will defend the Collateral against all claims or demands of all Persons (other than the Secured Party) claiming the Collateral or any interest therein. As of the date of execution of this Security Agreement, no effective financing statement or other similar document used to perfect and preserve a security interest under the laws of any jurisdiction (a "Financing Statement") covering all or any part of the Collateral is on file in any recording office, except such as may have been filed (a) in favor of the Secured Party relating to this Agreement, or (b) to perfect Liens permitted by the Credit Agreement.     Section 5.  Lock Box, Collateral Account.  The Grantor will direct each of its Account Debtors or other obligors to make payments due under any Collateral directly to a special lock box to be established and maintained by Secured Party (the "Lockbox"). The Grantor hereby authorizes and directs Secured Party to deposit into a special collateral account to be established and maintained by Secured Party (the "Collateral Account") all checks, drafts and cash payments received in said Lockbox. All deposits from the Lockbox to the Collateral Account shall constitute proceeds of Collateral and shall not constitute payment of any Obligation. The Grantor agrees that it will promptly deliver to Secured Party, for deposit into said Collateral Account, all payments on Accounts and Chattel Paper received by it. All such payments shall be delivered to Secured Party in the form received (except for the Grantor's endorsement where necessary). Until so delivered, all payments on Accounts and Chattel Paper received by the Grantor shall be held in trust by the Grantor for and as the property of Secured Party and shall not be commingled with any funds or property of the Grantor.     Section 6.  Collection Rights of Secured Party.  Notwithstanding Secured Party's rights under Section 5 with respect to any and all Instruments, Chattel Paper, Accounts and other rights to payment constituting Collateral (including proceeds), Secured Party may, at any time (both before and after the occurrence of an Event of Default) notify any Account Debtor, or any other person obligated to pay any amount due, that such Chattel Paper, Account, or other right to payment has been assigned or transferred to Secured Party for security and shall be paid directly to Secured Party. If Secured Party so requests at any time, the Grantor will so notify such Account Debtors and other obligors in writing and will indicate on all invoices to such Account Debtors or other obligors that the amount due is payable directly to Secured Party. At any time after Secured Party or the Grantor gives such notice to an account debtor or other obligor, Secured Party may (but need not), in its own name or in the Grantor's name, demand, sue for, collect or receive any money or property at any time payable or receivable on account of, or securing, any such chattel paper, account, or other right to payment, or grant any extension to, make any compromise or settlement with or otherwise agree to waive, notify, amend or change the obligations (including collateral obligations) of any such account debtor or other obligor. The Grantor hereby irrevocably makes, constitutes and appoints the Secured Party or any person whom the Secured Party may designate, the Grantor's true and lawful attorney with power to receive, open and dispose of all mail addressed to the Grantor; to endorse the Grantor's name on any notes, acceptances, checks, drafts, money orders or other means of payment that may come into the Secured Party's possession as payment of or upon Accounts, Chattel Paper or other Collateral; to endorse the Grantor's name on any invoice, freight or express bill or bill of lading relating to any Collateral; to sign the Borrower's name to drafts against Account Debtors, to assignments and verification of accounts and notices thereof to Account Debtors, and to documents of title covering any Collateral, and to do all other things necessary or proper to carry out the intent of this Agreement.     Section 7.  Disposition of Collateral.  The Grantor will not sell, lease or otherwise dispose of, or discount or factor with or without recourse, any Collateral, except sales of items of Inventory in the ordinary course of business. 4 --------------------------------------------------------------------------------     Section 8.  Names, Offices, Locations.  The Grantor does business solely under its own name and the trade names and styles, if any, set forth on Schedule II hereto. Except as noted on said Schedule, no such trade names or styles and no trademarks or other similar marks owned by the Grantor are registered with any governmental unit. The chief place of business and chief executive office and the office where it keeps its books and records concerning the Accounts and General Intangibles and the originals of all Chattel Paper, Documents and Instruments are located at its address set forth on the signature page hereof. All items of Equipment and Inventory existing on the date of this Agreement are located at the places specified on Schedule I hereto. The Grantor will immediately notify the Secured Party of any additional state in which any item of Inventory or Equipment is hereafter located. The Grantor will from time to time at the request of the Secured Party provide the Secured Party with current lists as to the locations of the Equipment and Inventory. The Grantor will not permit any Inventory, Equipment, Chattel Paper or Documents or any records pertaining to Accounts and General Intangibles to be located in any state or area in which, in the event of such location, a financing statement covering such Collateral would be required to be, but has not in fact been, filed in order to perfect the Security Interest. The Grantor will not change its name or the location of its chief place of business and chief executive office unless the Secured Party has been given at least 30 days' prior written notice thereof and the Grantor has executed and delivered to the Secured Party such Financing Statements and other instruments required or appropriate to continue the perfection of the Security Interest.     Section 9.  Rights to Payment.  Except as the Grantor may otherwise advise the Secured Party in writing, each Account, Chattel Paper, Document, General Intangible and Instrument constituting or evidencing Collateral is (or, in the case of all future Collateral, will be when arising or issued) the valid, genuine and legally enforceable obligation of the Account Debtor or other obligor named therein or in the Grantor's records pertaining thereto as being obligated to pay or perform such obligation. The Grantor will perform and comply in all material respects with all its obligations under any items included in the Collateral and exercise promptly and diligently its rights thereunder.     Section 10.  Further Assurances.     10(a) The Grantor agrees that from time to time, at its expense, it will promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or that the Secured Party may reasonably request, in order to perfect and protect the Security Interest granted or purported to be granted hereby or to enable the Secured Party to exercise and enforce its rights and remedies hereunder with respect to any Collateral (but any failure to request or assure that the Grantor execute and deliver such instrument or documents or to take such action shall not affect or impair the validity, sufficiency or enforceability of this Agreement and the Security Interest, regardless of whether any such item was or was not executed and delivered or action taken in a similar context or on a prior occasion). Without limiting the generality of the foregoing, the Grantor will, promptly and from time to time at the request of the Secured Party: (i) mark, or permit the Secured Party to mark, conspicuously its books, records, and accounts showing or dealing with the Collateral, and each item of Chattel Paper included in the Collateral, with a legend, in form and substance satisfactory to the Secured Party, indicating that each such item of Collateral and each such item of Chattel Paper is subject to the Security Interest granted hereby; (ii) deliver and pledge to the Secured Party, all Instruments and Documents, duly indorsed or accompanied by duly executed instruments of transfer or assignment, with full recourse to the Grantor, all in form and substance satisfactory to the Secured Party; (iii) execute and file such Financing Statements or continuation statements in respect thereof, or amendments thereto, and such other instruments or notices (including fixture filings with any necessary legal descriptions as to any goods included in the Collateral which the Secured Party determines might be deemed to be fixtures, and instruments and notices with respect to vehicle titles), as may be necessary or desirable, or as the Secured Party may request, in order to perfect, preserve, and enhance the Security Interest granted or purported to be granted hereby; and (iv) obtain waivers, 5 -------------------------------------------------------------------------------- in form satisfactory to the Secured Party, of any claim to any Collateral from any landlords or mortgagees of any property where any Inventory or Equipment is located.   10(b) The Grantor hereby authorizes the Secured Party to file one or more Financing Statements or continuation statements in respect thereof, and amendments thereto, relating to all or any part of the Collateral without the signature of the Grantor where permitted by law. A photocopy or other reproduction of this Agreement or any Financing Statement covering the Collateral or any part thereof shall be sufficient as a Financing Statement where permitted by law.   10(c) The Grantor will furnish to the Secured Party from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as the Secured Party may reasonably request, all in reasonable detail and in form and substance reasonably satisfactory to the Secured Party.     Section 11.  Taxes and Claims.  The Grantor will promptly pay all taxes and other governmental charges levied or assessed upon or against any Collateral or upon or against the creation, perfection or continuance of the Security Interest, as well as all other claims of any kind (including claims for labor, material and supplies) against or with respect to the Collateral, except to the extent (a) such taxes, charges or claims are being contested in good faith by appropriate proceedings, (b) such proceedings do not involve any material danger of the sale, forfeiture or loss of any of the Collateral or any interest therein and (c) such taxes, charges or claims are adequately reserved against on the Grantor's books in accordance with generally accepted accounting principles.     Section 12.  Books and Records.  The Grantor will keep and maintain at its own cost and expense satisfactory and complete records of the Collateral, including a record of all payments received and credits granted with respect to all Accounts, Chattel Paper and other items included in the Collateral.     Section 13.  Inspection, Reports, Verifications.  The Grantor will at all reasonable times permit the Secured Party or its representatives to examine or inspect any Collateral, any evidence of Collateral and the Grantor's books and records concerning the Collateral, wherever located. The Grantor will from time to time when requested by the Secured Party furnish to the Secured Party a report on its Accounts, Chattel Paper, General Intangibles and Instruments, naming the Account Debtors or other obligors thereon, the amount due and the aging thereof. The Secured Party or its designee is authorized to contact Account Debtors and other Persons obligated on any such Collateral from time to time to verify the existence, amount and/or terms of such Collateral.     Section 14.  Notice of Loss.  The Grantor will promptly notify the Secured Party of any loss of or material damage to any material item of Collateral or of any substantial adverse change, known to Grantor, in any material item of Collateral or the prospect of payment or performance thereof.     Section 15.  Insurance.  The Grantor will keep the Equipment and Inventory insured against "all risks" for the full replacement cost thereof subject to a deductible in an amount, and with an insurance company or companies, satisfactory to the Secured Party, the policies to protect the Secured Party as its interests may appear with Lender to be named as Lender Loss Payee ("Accord 27"), with such policies or certificates with respect thereto to be delivered to the Secured Party at its request. Each such policy or the certificate with respect thereto shall provide that such policy shall not be cancelled or allowed to lapse unless at least 30 days prior written notice is given to the Secured Party.     Section 16.  Lawful Use; Fair Labor Standards Act.  The Grantor will use and keep the Collateral, and will require that others use and keep the Collateral, only for lawful purposes, without violation of any federal, state or local law, statute or ordinance. All Inventory of the Grantor as of the date of this Agreement that was produced by the Grantor or with respect to which the Grantor performed any manufacturing or assembly process was produced by the Grantor (or such manufacturing or assembly process was conducted) in compliance in all material respects with all requirements of the Fair Labor 6 -------------------------------------------------------------------------------- Standards Act, and all Inventory produced, manufactured or assembled by the Grantor after the date of this Agreement will be so produced, manufactured or assembled, as the case may be.     Section 17.  Action by the Secured Party.  If the Grantor at any time fails to perform or observe any of the foregoing agreements, the Secured Party shall have (and the Grantor hereby grants to the Secured Party) the right, power and authority (but not the duty) to perform or observe such agreement on behalf and in the name, place and stead of the Grantor (or, at the Secured Party's option, in the Secured Party's name) and to take any and all other actions which the Secured Party may reasonably deem necessary to cure or correct such failure (including, without limitation, the payment of taxes, the satisfaction of Liens, the procurement and maintenance of insurance, the execution of assignments, security agreements and Financing Statements, and the indorsement of Instruments); and the Grantor shall thereupon pay to the Secured Party on demand the amount of all monies expended and all costs and expenses (including reasonable attorneys' fees and legal expenses) incurred by the Secured Party in connection with or as a result of the performance or observance of such agreements or the taking of such action by the Secured Party, together with interest thereon from the date expended or incurred at the highest lawful rate then applicable to any of the Obligations, and all such monies expended, costs and expenses and interest thereon shall be part of the Obligations secured by the Security Interest.     Section 18.  Insurance Claims.  As additional security for the payment and performance of the Obligations, the Grantor hereby assigns to the Secured Party any and all monies (including proceeds of insurance and refunds of unearned premiums) due or to become due under, and all other rights of the Grantor with respect to, any and all policies of insurance now or at any time hereafter covering the Collateral or any evidence thereof or any business records or valuable papers pertaining thereto. At any time, whether before or after the occurrence of any Event of Default, the Secured Party may (but need not), in the Secured Party's name or in Grantor's name, execute and deliver proofs of claim, receive all such monies, indorse checks and other instruments representing payment of such monies, and adjust, litigate, compromise or release any claim against the issuer of any such policy. Notwithstanding any of the foregoing, so long as no Event of Default exists the Grantor shall be entitled to all insurance proceeds with respect to Equipment or Inventory provided that such proceeds are applied to the cost of replacement Equipment or Inventory.     Section 19.  The Secured Party's Duties.  The powers conferred on the Secured Party hereunder are solely to protect its interest in the Collateral and shall not impose any duty upon it to exercise any such powers. The Secured Party shall be deemed to have exercised reasonable care in the safekeeping of any Collateral in its possession if such Collateral is accorded treatment substantially equal to the safekeeping which the Secured Party accords its own property of like kind. Except for the safekeeping of any Collateral in its possession and the accounting for monies and for other properties actually received by it hereunder, the Secured Party shall have no duty, as to any Collateral, as to ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relative to any Collateral, whether or not the Secured Party has or is deemed to have knowledge of such matters, or as to the taking of any necessary steps to preserve rights against any Persons or any other rights pertaining to any Collateral. The Secured Party will take action in the nature of exchanges, conversions, redemptions, tenders and the like requested in writing by the Grantor with respect to the Collateral in the Secured Party's possession if the Secured Party in its reasonable judgment determines that such action will not impair the Security Interest or the value of the Collateral, but a failure of the Secured Party to comply with any such request shall not of itself be deemed a failure to exercise reasonable care.     Section 20.  Events of Default.  The occurrence of any one or more of the following events shall constitute an Event of Default under this Agreement:   20(a) The Grantor shall fail to make payment when due, whether upon demand, or at a scheduled due date, or otherwise, any principal of or interest on its obligations under the Credit Agreement or any other obligations of the Grantor to the Secured Party. 7 --------------------------------------------------------------------------------   20(b) Any representation or warranty made by or on behalf of the Grantor in this Agreement or the Credit Agreement or by or on behalf of the Grantor in any certificate, statement, report or document herewith or hereafter furnished to the Secured Party pursuant to this Agreement or the Credit Agreement 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.   20(c) The Grantor shall fail to perform any agreement of Grantor contained herein.   20(d) Any Event of Default shall occur under the Credit Agreement.   20(e) Any default or event of default (however denominated or defined) shall occur with respect to any indebtedness of the Grantor (other than the Obligations) permitted under the Credit Agreement.     Section 21.  Remedies on Default.  Upon the occurrence of an Event of Default and at any time thereafter:   21(a) The Secured Party may exercise and enforce any and all rights and remedies available upon default to a secured party under the Uniform Commercial Code.   21(b) The Secured Party shall have the right to enter upon and into and take possession of all or such part or parts of the properties of the Grantor, including lands, plants, buildings, Equipment, Inventory and other property as may be necessary or appropriate in the judgment of the Secured Party to permit or enable the Secured Party to manufacture, produce, process, store or sell or complete the manufacture, production, processing, storing or sale of all or any part of the Collateral, as the Secured Party may elect, and to use and operate said properties for said purposes and for such length of time as the Secured Party may deem necessary or appropriate for said purposes without the payment of any compensation to Grantor therefor. The Secured Party may require the Grantor to, and the Grantor hereby agrees that it will, at its expense and upon request of the Secured Party forthwith, assemble all or part of the Collateral as directed by the Secured Party and make it available to the Secured Party at a place or places to be designated by the Secured Party.   21(c) Any sale of Collateral may be in one or more parcels at public or private sale, at any of the Secured Party's offices or elsewhere, for cash, on credit, or for future delivery, and upon such other terms as the Secured Party may reasonably believe are commercially reasonable. The Secured Party shall not be obligated to make any sale of Collateral regardless of notice of sale having been given, and the Secured Party may adjourn any public or private sale from time to time by announcement made at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned.   21(d) The Secured Party is hereby granted a license or other right to use, without charge, all of the Grantor's property, including, without limitation, all of the Grantor's labels, trademarks, copyrights, patents and advertising matter, or any property of a similar nature, as it pertains to the Collateral, in completing production of, advertising for sale and selling any Collateral, and the Grantor's rights under all licenses and all franchise agreements shall inure to the Secured Party's benefit until the Obligations are paid in full.   21(e) If notice to the Grantor of any intended disposition of Collateral or any other intended action is required by law in a particular instance, such notice shall be deemed commercially reasonable if given in the manner specified for the giving of notice in Section 25 hereof at least ten calendar days prior to the date of intended disposition or other action, and the Secured Party may exercise or enforce any and all other rights or remedies available by law or agreement against the Collateral, against the Grantor, or against any other Person or property.     Section 22.  Application of Proceeds.  All cash proceeds received by the Secured Party in respect of any sale of, collection from, or other realization upon all or any part of the Collateral may, in the discretion 8 -------------------------------------------------------------------------------- of the Secured Party, be held by the Secured Party as collateral for, or then or at any time thereafter be applied in whole or in part by the Secured Party against, all or any part of the Obligations (including, without limitation, any expenses of the Secured Party payable pursuant to Section 23 hereof).     Section 23.  Costs and Expenses; Indemnity.  The Grantor will pay or reimburse the Secured Party on demand for all out-of-pocket expenses (including in each case all filing and recording fees and taxes and all reasonable fees and expenses of counsel and of any experts and agents) incurred by the Secured Party in connection with the creation, perfection, protection, satisfaction, foreclosure or enforcement of the Security Interest and the preparation, administration, continuance, amendment or enforcement of this Agreement, and all such costs and expenses shall be part of the Obligations secured by the Security Interest. The Grantor shall indemnify and hold the Secured Party harmless from and against any and all claims, losses and liabilities (including reasonable attorneys' fees) growing out of or resulting from this Agreement and the Security Interest hereby created (including enforcement of this Agreement) or the Secured Party's actions pursuant hereto, except claims, losses or liabilities resulting from the Secured Party's gross negligence or willful misconduct as determined by a final judgment of a court of competent jurisdiction. Any liability of the Grantor to indemnify and hold the Secured Party harmless pursuant to the preceding sentence shall be part of the Obligations secured by the Security Interest. The obligations of the Grantor under this Section shall survive any termination of this Agreement.     Section 24.  Waivers; Remedies; Marshalling.  This Agreement can be waived, modified, amended, terminated or discharged, and the Security Interest can be released, only explicitly in a writing signed by the Secured Party. A waiver so signed shall be effective only in the specific instance and for the specific purpose given. Mere delay or failure to act shall not preclude the exercise or enforcement of any rights and remedies available to the Secured Party. All rights and remedies of the Secured Party shall be cumulative and may be exercised singly in any order or sequence, or concurrently, at the Secured Party's option, and the exercise or enforcement of any such right or remedy shall neither be a condition to nor bar the exercise or enforcement of any other. The Grantor hereby waives all requirements of law, if any, relating to the marshalling of assets which would be applicable in connection with the enforcement by the Secured Party of its remedies hereunder, absent this waiver.     Section 25.  Notices.  Any notice or other communication to any party in connection with this Agreement 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 on the signature page hereof, 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 after the date of sending if sent by overnight courier, or from four days after the date of mailing if mailed.     Section 26.  Grantor Acknowledgements.  The Grantor hereby acknowledges that (a) it has been advised by (or has had full opportunity to avail itself of the advice of) counsel in the negotiation, execution and delivery of this Agreement, (b) the Secured Party has no fiduciary relationship to the Grantor, the relationship being solely that of debtor and creditor, and (c) no joint venture exists between the Grantor and the Secured Party.     Section 27.  Continuing Security Interest; Assignments under Credit Agreement.  This Agreement shall (a) create a continuing security interest in the Collateral and shall remain in full force and effect until payment in full of the Obligations, (b) be binding upon the Grantor, its successors and assigns, and (c) inure to the benefit of, and be enforceable by, the Secured Party and its successors, transferees, and assigns. Without limiting the generality of the foregoing clause (c), the Secured Party may assign or otherwise transfer all or any portion of its rights and obligations under the Credit Agreement to any other Persons to the extent and in the manner provided in the Credit Agreement and may similarly transfer all or any portion of its rights under this Security Agreement to such Persons. 9 --------------------------------------------------------------------------------     Section 28.  Termination of Security Interest.  Upon payment in full of the Obligations, the Security Interest granted hereby shall terminate. Upon any such termination, the Secured Party will return to the Grantor such of the Collateral then in the possession of the Secured Party as shall not have been sold or otherwise applied pursuant to the terms hereof and execute and deliver to the Grantor such documents as the Grantor shall reasonably request to evidence such termination. Any reversion or return of Collateral upon termination of this Agreement and any instruments of transfer or termination shall be at the expense of the Grantor and shall be without warranty by, or recourse on, the Secured Party. As used in this Section, "Grantor" includes any assigns of Grantor, any Person holding a subordinate security interest in any of the Collateral or whoever else may be lawfully entitled to any part of the Collateral.     Section 29.  Governing Law and Construction.  THE VALIDITY, CONSTRUCTION AND ENFORCEABILITY OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF MINNESOTA, WITHOUT GIVING EFFECT TO CONFLICT OF LAWS PRINCIPLES THEREOF, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE MANDATORILY GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF MINNESOTA. Whenever possible, each provision of this Agreement 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 Agreement 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 Agreement or any other statement, instrument or transaction contemplated hereby or relating hereto.     Section 30.  Consent to Jurisdiction.  AT THE OPTION OF THE SECURED PARTY, THIS AGREEMENT MAY BE ENFORCED IN ANY FEDERAL COURT OR MINNESOTA STATE COURT SITTING IN HENNEPIN COUNTY; AND THE GRANTOR CONSENTS TO THE JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVES ANY ARGUMENT THAT VENUE IN SUCH FORUMS IS NOT CONVENIENT. IN THE EVENT THE GRANTOR COMMENCES ANY ACTION IN ANOTHER JURISDICTION OR VENUE UNDER ANY TORT OR CONTRACT THEORY ARISING DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS AGREEMENT, THE SECURED PARTY AT ITS OPTION SHALL BE ENTITLED TO HAVE THE CASE TRANSFERRED TO ONE OF THE JURISDICTIONS AND VENUES ABOVE-DESCRIBED, OR IF SUCH TRANSFER CANNOT BE ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE DISMISSED WITHOUT PREJUDICE.     Section 31.  Waiver of Notice and Hearing.  THE GRANTOR HEREBY WAIVES ALL RIGHTS TO A JUDICIAL HEARING OF ANY KIND PRIOR TO THE EXERCISE BY THE SECURED PARTY OF ITS RIGHTS TO POSSESSION OF THE COLLATERAL WITHOUT JUDICIAL PROCESS OR OF ITS RIGHTS TO REPLEVY, ATTACH, OR LEVY UPON THE COLLATERAL WITHOUT PRIOR NOTICE OR HEARING. THE GRANTOR ACKNOWLEDGES THAT IT HAS BEEN ADVISED BY COUNSEL OF ITS CHOICE WITH RESPECT TO THIS PROVISION AND THIS AGREEMENT.     Section 32.  Waiver of Jury Trial.  EACH OF THE GRANTOR AND THE SECURED PARTY, BY ITS ACCEPTANCE OF THIS AGREEMENT, IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.     Section 33.  Counterparts.  This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument.     Section 34.  General.  All representations and warranties contained in this Agreement or in any other agreement between the Grantor and the Secured Party shall survive the execution, delivery and performance of this Agreement and the creation and payment of the Obligations. The Grantor waives notice of the acceptance of this Agreement by the Secured Party. Captions in this Agreement are for reference and convenience only and shall not affect the interpretation or meaning of any provision of this Agreement. 10 --------------------------------------------------------------------------------     IN WITNESS WHEREOF, the Grantor has caused this Security Agreement to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written.     REUTER MANUFACTURING, INC.           By   /s/ MICHAEL J. TATE    -------------------------------------------------------------------------------- Title President Address for Grantor: 410 11th Avenue South Hopkins, MN 55343 Grantor's Tax ID #41-0780999 Address for Secured Party: U.S. Bank National Association U.S. Bank Place 601 Second Avenue South Minneapolis, MN 55402 Fax: (612) 973-2851 11 -------------------------------------------------------------------------------- SCHEDULE I TO SECURITY AGREEMENT Locations of Equipment and Inventory as of Date of Security Agreement 410 11th Avenue South Hopkins, MN 55343 12 -------------------------------------------------------------------------------- SCHEDULE II TO SECURITY AGREEMENT Trade Names and Trade Styles Envi-ro-fuge 2000® Reuter® 13 -------------------------------------------------------------------------------- QUICKLINKS SECURITY AGREEMENT RECITALS

EXHIBIT 10.1 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of this 10th day of March 2000 by and between Textron Inc. (the "Company"), a Delaware corporation having its principal office at 40 Westminster Street, Providence, Rhode Island 02903 and Terrence O'Donnell residing at 5133 Yuma Street, N.W., Washington, DC 20016 (the "Executive"). W I T N E S S E T H : WHEREAS, the Company desires to employ the Executive and the Executive is willing to be employed by the Company; and WHEREAS, the Company and the Executive desire to set forth the terms and conditions of such employment. NOW THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements of the parties set forth in this Agreement, and of other good and valuable consideration, the adequacy and receipt of which is acknowledged, the parties hereto agree as follows: 1.     Term of Employment The Company hereby agrees to employ the Executive and the Executive hereby accepts employment, in accordance with the terms and conditions set forth herein, for a term (the "Employment Term") commencing on the date hereof (the "Effective Date") and terminating, unless otherwise terminated earlier in accordance with Section 5 hereof, on the third anniversary of the Effective Date (the "Original Employment Term"), provided that the Employment Term shall be automatically extended, subject to earlier termination as provided in Section 5 hereof, for successive additional one (1) year periods (the "Additional Terms"), unless, at least ninety (90) days prior to the end of the Original Employment Term or the then Additional Term, the Company or the Executive has notified the other in writing that the Employment Term shall terminate at the end of the then current term. 2.     Position and Responsibilities During the Employment Term, the Executive shall serve as the Executive Vice President and General Counsel of the Company or in such higher capacity as agreed by the Company and the Executive. The Executive shall also serve as a member of the Management Committee (or any equivalent committee or group as may replace the Management Committee from time to time). The Executive shall report exclusively to the Chief Executive Officer and the Board of Directors of the Company (the "Board"). The Executive shall, to the extent appointed or elected, serve on the Board as a director and as a member of any committee of the Board, in each case, without additional compensation. The Executive shall, to the extent appointed or elected, serve as a director or as a member of any committee of the board (or the equivalent bodies in a non-corporate subsidiary or affiliate) of any of the Company's subsidiaries or affiliates and as an officer or employee (in a capacity commensurate with his position with the Company) of any such subsidiaries or affiliates, in all cases without additional compensation or benefits, and any compensation paid to the Executive, or benefits provided to the Executive, in such capacities shall be a credit with regard to the amounts due hereunder from the Company. The Executive shall have duties, authorities and responsibilities generally commensurate with the duties, authorities and responsibilities of persons in similar capacities in similarly sized companies, subject to the By-laws of the Company and the organizational structure of the Company. Except as provided in the next succeeding sentence, the Executive shall devote substantially all of his business time, attention and energies to the performance of his duties hereunder, provided the foregoing will not prevent the Executive from participating in charitable, community or industry affairs, from managing his and his family's personal passive investments, and (with the consent of the Chief Executive Officer or the Organization and Compensation Committee (or its successor) of the Board (the "O&C Committee"), which consent will not be unreasonably withheld, conditioned or delayed) serving on the board of directors of other companies or as a partner in the law firm of Williams & Connolly LLP, provided in each case that these activities do not materially interfere with the performance of his duties hereunder or create a potential business conflict or the appearance thereof. In particular, Executive (a) may continue to serve as a part-time partner at Williams & Connolly LLP, and (b) may serve on the board of directors of each of (i) The Gerald R. Ford Foundation, (ii) the Air Force Academy Falcon Foundation, (iii) IGI, Inc. and (iv) ePlus, Inc., in each case retaining any compensation or emoluments therefrom. 3.     Compensation and Benefits During the Employment Term, the Company shall pay and provide the Executive the following: 3.1     Base Salary . The Company shall pay the Executive an initial base salary (the "Base Salary") at a rate of $425,000.00. Base Salary shall be paid to the Executive in accordance with the Company's normal payroll practices for executives. Base Salary shall be reviewed at least annually by the O&C Committee (or as otherwise designated by the Board) to ascertain whether, in the judgment of the reviewing committee, such Base Salary should be increased. If so increased, Base Salary shall not be thereafter decreased and shall thereafter, as increased, be the Base Salary hereunder. 3.2     Annual Bonus . The Company shall provide the Executive with the opportunity to earn an annual cash bonus under the Company's current annual incentive compensation plan for executives or a replacement plan therefor at a level commensurate with his position, provided that the minimum annual target award payable upon the achievement of reasonably attainable objective performance goals shall be at least 55% of Base Salary. 3.3     Long-Term Incentives . The Company shall provide the Executive the opportunity to earn long-term incentive awards under the current equity and cash based plans and programs or replacements therefor. 3.4     Employee Benefits . The Executive shall, to the extent eligible, be entitled to participate at a level commensurate with his position in all employee benefit welfare and retirement plans and programs, as well as equity plans, generally provided by the Company to its senior executives in accordance with the terms thereof as in effect from time to time. In particular, the Executive shall participate in (a) the Textron Key Executive Benefits Program (which shall include (i) the Deferred Income Plan, (ii) the Supplemental Benefits Plan, and (iii) the Survivor Benefit Plan), (b) the Supplemental Retirement Plan, and (c) the Executive Supplemental Retirement Plan. 3.5      Vacation. The Executive shall be entitled to paid vacation in accordance with the standard written policies of the Company with regard to vacations of executives, but in no event less than four (4) weeks per calendar year. 3.6     Perquisites . The Company shall provide to the Executive, at the Company's cost, all perquisites to which other senior executives of the Company are generally entitled to receive and such other perquisites which are suitable to the character of the Executive's position with the Company and adequate for the performance of his duties hereunder. To the extent legally permissible, the Company shall not treat such amounts as income to the Executive. 3.7     Right to Change Plans . The Company shall not be obligated by reason of this Section 3 to institute, maintain, or refrain from changing, amending, or discontinuing any benefit plan, program, or perquisite, so long as such changes are similarly applicable to executive employees generally. 3.8     Special Provisions . The Company shall provide to the Executive the special provisions set forth on Exhibit B hereto, which Exhibit B is incorporated herein. 4.     Expenses Upon submission of appropriate documentation, in accordance with its policies in effect from time to time, the Company shall pay, or reimburse, the Executive for all ordinary and necessary expenses, in a reasonable amount, which the Executive incurs in performing his duties under this Agreement including, but not limited to, travel, entertainment, professional dues and subscriptions, and all dues, fees, and expenses associated with membership in various professional, business, and civic associations and societies in which the Executive participates in accordance with the Company's policies in effect from time to time. 5.     Termination of Employment The Executive's employment with the Company (including but not limited to any subsidiary or affiliate or the Company) and the Employment Term shall terminate upon the occurrence of the first of the following events: > (a)     Automatically on the date of the Executive's death. > > (b)     Upon thirty (30) days written notice by the Company to the Executive > of a termination due to Disability, provided such notice is delivered during > the period of Disability. The term "Disability" shall mean, for purposes of > this Agreement, the inability of the Executive, due to injury, illness, > disease or bodily or mental infirmity, to engage in the performance of his > material duties of employment with the Company as contemplated by Section 2 > herein for a period of more than one hundred eighty (180) consecutive days or > for a period that is reasonably expected to exist for a period of more than > one hundred eighty (180) consecutive days, provided that interim returns to > work of less than ten (10) consecutive business days in duration shall not be > deemed to interfere with a determination of consecutive absent days if the > reason for absence before and after the interim return are the same. The > existence or non-existence of a Disability shall be determined by a physician > agreed upon in good faith by the Executive (or his representatives) and the > Company. It is expressly understood that the Disability of the Executive for a > period of one hundred eighty (180) consecutive days or less shall not > constitute a failure by him to perform his duties hereunder and shall not be > deemed a breach or default and the Executive shall receive full compensation > for any such period of Disability or for any other temporary illness or > incapacity during the term of this Agreement. In no event shall compensation > cease by reason of a termination for Disability prior to that date on which > the Executive shall commence his eligibility for payments pursuant to the > Company's disability benefits program. > > (c)     Immediately upon written notice by the Company to the Executive of a > termination due to his retirement at or after the Executive's attainment of > age sixty-five (65). > > (d)     Immediately upon written notice by the Company to the Executive of a > termination for Cause, provided such notice is given within ninety (90) days > after the discovery by the Board or the Chief Executive Officer of the Cause > event and has been approved by the O&C Committee at a meeting at which the > Executive and his counsel had the right to appear and address such meeting > after receiving at least five (5) business days written notice of the meeting > and reasonable detail of the facts and circumstances claimed to provide a > basis for such termination. The term "Cause" shall mean, for purposes of this > Agreement: (i) an act or acts of willful misrepresentation, fraud or willful > dishonesty (other than good faith expense account disputes) by the Executive > which in any case is intended to result in his or another person or entity's > substantial personal enrichment at the expense of the Company; (ii) any > willful misconduct by the Executive with regard to the Company, its business, > assets or employees that has, or was intended to have, a material adverse > impact (economic or otherwise) on the Company; (iii) any material, willful and > knowing violation by the Executive of (x) the Company's Business Conduct > Guidelines, or (y) any of his fiduciary duties to the Company which in either > case has, or was intended to have, a material adverse impact (economic or > otherwise) on the Company; (iv) the willful or reckless behavior of the > Executive with regard to a matter of a material nature which has a material > adverse impact (economic or otherwise) on the Company; (v) the Executive's > willful failure to attempt to perform his duties under Section 2 hereof or his > willful failure to attempt to follow the legal written direction of the Board, > which in either case is not remedied within ten (10) days after receipt by the > Executive of a written notice from the Company specifying the details thereof; > (vi) the Executive's conviction of, or pleading nolo contendere or guilty to, > a felony (other than (x) a traffic infraction or (y) vicarious liability > solely as a result of his position, provided that with respect to such > vicarious liability the Executive did not have actual knowledge of the actions > or inactions creating the violation of the law or the Executive relied in good > faith on the advice of counsel with regard to the legality of such action or > inaction (or the advice of other specifically qualified professionals as to > the appropriate or proper action or inaction to take with regard to matters > which are not matters of legal interpretation)); or (vii) any other material > breach by the Executive of this Agreement that is not cured by the Executive > within twenty (20) days after receipt by the Executive of a written notice > from the Company of such breach specifying the details thereof. No action or > inaction should be deemed willful if not demonstrably willful and if taken or > not taken by the Executive in good faith as not being adverse to the best > interests of the Company. Reference in this paragraph (d) to the Company shall > also include direct and indirect subsidiaries of the Company, and materiality > and material adverse impact shall be measured based on the action or inaction > and the impact upon, and not the size of, the Company taken as a whole, > provided that after a Change in Control, the size of the Company, taken as a > whole, shall be a relevant factor in determining materiality and material > adverse impact. > > (e)     Upon written notice by the Company to the Executive of an involuntary > termination without Cause. A notice by the Company of non-renewal of the > Employment Term pursuant to Section 1 above shall be deemed an involuntary > termination of the Executive by the Company without Cause as of the end of the > Employment Term, but the Executive may terminate at any time after the receipt > of such notice and shall be treated as if he was terminated without Cause as > of such date. > > (f)     Upon twenty (20) days written notice by the Executive to the Company > of a termination for Good Reason (which notice sets forth in reasonable detail > the facts and circumstances claimed to provide a basis for such termination) > unless the Good Reason event is cured within such twenty (20) day period. The > term "Good Reason" shall mean, for purposes of this Agreement, without the > Executive's express written consent, the occurrence of any one or more of the > following: (i) the assignment to the Executive of duties materially > inconsistent with the Executive's then authorities, duties, responsibilities, > and status (including offices, titles, and reporting requirements), or any > reduction in the Executive's then title, position (including membership on the > Management Committee or its equivalent) or reporting lines or a material > reduction (other than temporarily while Disabled or otherwise incapacitated) > in his then status, authorities, duties or responsibilities (or, should the > Company be reorganized such that it becomes a subsidiary or controlled party > of any other entity, the Executive's not holding authorities, duties, > responsibilities, status, offices, titles or reporting lines in such parent or > controlling party at least commensurate with those held by him at the Company > immediately prior to such reorganization) or, if then a director of the > Company, failure to be nominated or reelected as a director of the Company or > removal as such; (ii) relocation of the Executive from the principal office of > the Company (excluding reasonable travel on the Company's business to an > extent substantially consistent with the Executive's business obligations) or > relocation of the principal office of the Company to a location which is at > least fifty (50) miles from the Company's current headquarters, provided, > however, if the Executive at the time of the relocation is not located at the > principal office, such relocation provision shall apply based on his then > location but shall not cover a relocation to the principal office prior to a > Change in Control; (iii) a reduction by the Company in the Executive's Base > Salary; (iv) a reduction in the Executive's aggregate level of participation > in any of the Company's short and/or long-term incentive compensation plans, > or employee benefit or retirement plans, policies, practices, or arrangements > in which the Executive participated as of the Effective Date, or, after a > Change in Control, participated immediately prior to the Change in Control; > (v) the failure of the Company to obtain and deliver to the Executive a > satisfactory written agreement from any successor to the Company to assume and > agree to perform this Agreement; or (vi) any other material breach by the > Company of this Agreement. > > (g)     Upon written notice by the Executive to the Company of the Executive's > voluntary termination of employment without Good Reason (which the Company > may, in its sole discretion, make effective earlier than any notice date). A > notice by the Executive of non-renewal of the Employment Term pursuant to > Section 1 above shall be deemed a voluntary termination by the Executive > without Good Reason as of the end of the Employment Term. Section 6.  Consequences of a Termination of Employment 6.1     Termination Due to Death or Retirement. If the Employment Term ends on account of the Executive's termination due to death pursuant to Section 5(a) above or retirement pursuant to Section 5(c) above, the Executive (or the Executive's surviving spouse, or other beneficiary as so designated by the Executive during his lifetime, or to the Executive's estate, as appropriate) shall be entitled, in lieu of any other payments or benefits, to (i) payment promptly of any unpaid Base Salary, unpaid annual incentive compensation (for the preceding fiscal year) and any accrued vacation, (ii) reimbursement for any unreimbursed business expenses incurred prior to the date of termination, and (iii) any amounts, benefits or fringes due under any equity, benefit or fringe plan, grant or program in accordance with the terms of said plan, grant or program but without duplication (collectively, the "Accrued Obligations"). 6.2     Termination Due To Disability. If the Employment Term ends as a result of Disability pursuant to Section 5(b) above, the Executive shall be entitled, in lieu of any other payments or benefits (but subject to the last sentence of such Section 5(b)), to any Accrued Obligations. 6.3     Involuntary Termination by the Company Without Cause or Termination by the Executive for Good Reason. If the Executive is involuntarily terminated by the Company without Cause in accordance with Section 5(e) above or the Executive terminates his employment for Good Reason in accordance with Section 5(f) above, the Executive shall be entitled, in lieu of any other payments or benefits, subject to Section 7(b) hereof, to any Accrued Obligations and the following: > > (a)     Payment of the Prorated Portion (as determined in the next sentence) > > of the earned annual incentive compensation award for the fiscal year in > > which the Executive's termination occurs, payable promptly after the end of > > such fiscal year. "Prorated Portion" shall be determined by multiplying such > > amount by a fraction, the numerator of which is the number of days during > > the fiscal year of termination that the Executive is employed by the > > Company, and the denominator of which is, 365. > > > > (b)     Continued payment off payroll for two years (in approximately equal > > monthly installments) of an amount equal to two times the sum of (i) the > > Executive's Base Salary and (ii) the higher of (x) the Executive's target > > incentive compensation established for the fiscal year in which the > > Executive's termination occurs or (y) a multiple thereof equal to the > > product of such target amount and the multiple of target earned by the > > Executive for the prior fiscal year (whether or not deferred). > > > > (c)     Payment of the premium for COBRA continuation health coverage > > (whether under the Company's health plans or those of Williams & Connolly > > LLP, but in no event at a premium rate higher than the premiums payable > > under COBRA to the Company for the continuation of such health care coverage > > as the Executive had in effect with respect to himself and his family > > immediately prior to his termination) for the Executive and the Executive's > > dependents until the earliest of (i) eighteen (18) months after such > > termination, (ii) until no longer eligible for COBRA continuation benefit > > coverage or (iii) the Executive commences other substantially full-time > > employment. 6.4     Termination by the Company for Cause or Termination by the Executive without Good Reason. If the Executive is terminated by the Company for Cause or the Executive terminates his employment without Good Reason, the Executive shall be entitled to receive all Accrued Obligations. Section 7.    No Mitigation/No Offset/Release > (a)     In the event of any termination of employment hereunder, the Executive > shall be under no obligation to seek other employment and there shall be no > offset against any amounts due the Executive under this Agreement on account > of any remuneration attributable to any subsequent employment that the > Executive may obtain. The amounts payable hereunder shall not be subject to > setoff, counterclaim, recoupment, defense or other right which the Company may > have against the Executive or others, except as specifically set forth in > Section 9 hereof or upon obtaining by the Company of a final unappealable > judgement against the Executive. > > (b)     Any amounts payable and benefits or additional rights provided > pursuant to Section 6.3 or Section 8.1 beyond any Accrued Obligations and > beyond the sum of any amounts due (without execution of a release) under the > Company severance program then in effect, or, if greater, three (3) months > Base Salary as severance, shall only be payable if the Executive delivers to > the Company a release of all claims of the Executive (other than those > specifically payable or providable hereunder on or upon the applicable type of > termination and any rights of indemnification under the Company's > organizational documents) with regard to the Company, its subsidiaries and > related entities and their respective past or present officers, directors and > employees in such form as reasonably requested by the Company. > > (c)     Upon any termination of employment, upon the request of the Company, > the Executive shall deliver to the Company a resignation from all offices and > directorships and fiduciary positions of the Executive in which the Executive > is serving with, or at the request of, the Company or its subsidiaries, > affiliates or benefit plans. > > (d)     The amounts and benefits provided under Sections 6 and 8 hereof are > intended to be inclusive and not duplicative of the amounts and benefits due > under the Company's employee benefit plans and programs to the extent they are > duplicative. 8.     Change in Control 8.1     Employment Termination in Connection with a Change in Control. In the event of a Qualifying Termination (as defined below) during the period commencing one-hundred eighty (180) days prior to the effective date of a Change in Control and terminating on the second anniversary of the effective date of a Change in Control (the "Change in Control Protection Period"), then in lieu of the benefits provided to the Executive under Section 6.3 of this Agreement, the Company shall pay the Executive the following amounts within (except as otherwise provided) thirty (30) business days of the Qualifying Termination (or, if later, the effective date of the Change in Control; in which case any amounts or benefits previously paid pursuant to Section 6 shall be setoff against those under this Section 8) and provide the following benefits: > > (a)     Any Accrued Obligations. > > > > (b)     A lump-sum cash payment equal to three (3) times the highest rate of > > the Executive's Base Salary rate in effect at any time up to and including > > the date of the Executive's termination. > > > > (c)     A lump-sum cash payment equal to the Prorated Portion of the greater > > of: (i) the Executive's target annual incentive compensation award > > established for the fiscal year during which the Executive's award > > termination occurs, or (ii) the Executive's earned annual incentive award > > for the fiscal year prior to the fiscal year in which the Change in Control > > occurs (whether or not deferred). > > > > (d)     A lump-sum cash payment equal to three (3) times the greater of: (i) > > the Executive's highest annual incentive compensation earned over the three > > (3) fiscal years ending prior to the Change in Control (whether or not > > deferred); or (ii) the Executive's target incentive compensation established > > for the fiscal year in which the Executive's date of termination occurs. > > > > (e)     To the extent the Executive is eligible, was eligible prior or after > > the Change in Control or if the Executive would be eligible with credit for > > an additional three (3) years of age and service credit, coverage under all > > applicable retiree health and other retiree welfare plans for the Executive > > and the Executive's eligible dependents (including an adjustment to the > > extent necessary to put the Executive on the same after tax basis as if the > > Executive had been eligible for such coverage). > > > > (f)     To the extent eligible prior or after the Change in Control, > > continued participation, (coordinated with (e) above to the extent > > duplicative), at no additional after tax cost to the Executive than the > > Executive would have as an employee, in all welfare plans, until three (3) > > years after the date of termination, provided, however, that in the event > > the Executive obtains other employment that offers substantially similar or > > improved benefits, as to any particular welfare plan, such continuation of > > coverage by the Company for such similar or improved benefit under such plan > > shall immediately cease. To the extent such coverage cannot be provided > > under the Company's welfare benefit plans without jeopardizing the tax > > status of such plans, for underwriting reasons or because of the tax impact > > on the Executive, the Company shall pay the Executive an amount such that > > the Executive can purchase such benefits separately at no greater after tax > > cost to him than he would have had if the benefits were provided to him as > > an employee. > > > > (g)     A lump-sum cash payment of the actuarial present value equivalent > > (as determined in accordance with the most favorable (to the Executive) > > overall actuarial assumptions and subsidies in any of the Company's > > tax-qualified or nonqualified type defined benefit pension plans in which > > the Executive then participates) of the accrued benefits accrued by the > > Executive as of the date of termination under the terms of any nonqualified > > defined benefit type retirement plan, including but not limited to, the > > Amended and Restated Supplemental Executive Retirement Plan for Textron Inc. > > Key Executives and the Supplemental Benefits Plan and assuming the benefit > > was fully vested without regard to any minimum age or service requirements. > > For this purpose, such benefits shall be calculated under the assumption > > that the Executive's employment continued following the date of termination > > for three (3) full years (i.e., three (3) additional years of age > > (including, but not limited to, for purposes of determining the actuarial > > present value), compensation and service credits shall be added). > > > > (h)     Three (3) times the amount of the maximum Company contribution or > > match to any defined contribution type plan in which the Executive > > participates. > > > > (i)     A lump-sum cash payment of the product of (i) the Interest Factor > > (as determined in the next sentence) multiplied by (ii) the Executive's > > entire account balance under the Deferred Income Plan (or any replacement > > therefor), plus an additional amount equal to three (3) times the match > > which the Company made for the Executive to such plan for the fiscal year > > ending immediately prior to the Change in Control. The "Interest Factor" > > shall be equal to one (1) plus three (3) times the rate of earnings of the > > Executive's account under such plan for the fiscal year ending immediately > > prior to his termination. > > > > (j)     Immediate full vesting of any outstanding stock options, performance > > share units and other equity awards (and lapse of any forfeiture provisions) > > to the extent permitted under the plan or grant, or if full vesting is not > > permitted with regard to stock options, a cash payment equal to the > > difference between the fair market value of the shares covered by the > > unvested options and the exercise price of such unvested options on such > > unvested options on the date of termination (or, if later, the date of the > > Change in Control). > > > > (k)     Outplacement services at a level commensurate with the Executive's > > position, including use of an executive office and secretary, for a period > > of one (1) year commencing on the date of termination but in no event > > extending beyond the date on which the Executive commences other full time > > employment. > > > > (l)     Continuation of participation for three (3) additional years in the > > Company's programs with regard to tax preparation assistance and financial > > planning assistance, club dues and automobile (but based on the automobile > > then being used and no new one), in accordance with the Company's programs > > in effect at the time of the Change in Control. For purposes of this Section 8, a Qualifying Termination shall mean any termination of the Executive's employment (i) by the Company without Cause, or (ii) by the Executive for Good Reason. 8.2     Definition of "Change in Control." A Change in Control of the Company shall be deemed to have occurred as of the first day any one or more of the following conditions shall have been satisfied: > > (a)     Any "person" or "group" (within the meaning of Section 13(d) and > > 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange > > Act")) other than the Company, any trustee or other fiduciary holding > > Company common stock under an employee benefit plan of the Company or a > > related company, or any corporation which is owned, directly or indirectly, > > by the stockholders of the Company in substantially the same proportions as > > their ownership of the Company's common stock, is or becomes the beneficial > > owner (as defined in Rule 13d-3 under the Exchange Act) of more than thirty > > percent (30%) of the then outstanding voting stock; > > > > (b)     During any period of two (2) consecutive years, individuals who at > > the beginning of such period constitute the Board and any new director whose > > election by the Board or nomination for election by the Company's > > stockholders was approved by a vote of at least two-thirds of the directors > > then still in office who either were directors at the beginning of the two > > year period or whose election or nomination for election was previously so > > approved, cease for any reason to constitute at least a majority of the > > Board; > > > > (c)     The consummation of 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 being > > converted into voting securities of the surviving entity) more than fifty > > percent (50%) of the combined voting securities of the Company or such > > surviving entity outstanding immediately after such merger or consolidation; > > or > > > > (d)     The approval of the stockholders of the Company of a plan of > > complete liquidation of the Company or an agreement for the sale or > > disposition by the Company of all or substantially all of its assets. 8.3     Excise Tax Equalization Payment. In the event that the Executive becomes entitled to payments and/or benefits which would constitute "parachute payments" within the meaning of Section 280G(b)(2) of the Code, the provisions of Exhibit A will apply. 9.     Noncompetition, Confidentiality and Nondisparagement 9.1     Agreement Not to Compete . > > (a)     The Executive agrees that for a period of two (2) years after the > > termination of the Executive's employment, the Executive will not engage in > > Competition with the Company with the Listed Companies, provided that after > > the Executive's termination of employment the Listed Companies shall be > > limited to those effectively listed at the time of his termination and still > > on such list at the time of any alleged activity of the Executive, > > including, but not limited to, (i) soliciting customers, business or orders > > for, or selling any products and services in, Competition with the Company > > for such Listed Companies or (ii) diverting, enticing, or otherwise taking > > away customers, business or orders of the Company, or attempting to do so, > > in either case in Competition with the Company for such Listed Companies. > > > > (b)     The Executive agrees that if, while he is receiving severance pay > > from the Company pursuant to Section 6.3(b), the Executive: (i) violates (a) > > above, or (ii) otherwise engages in Competition in the Restricted Territory, > > whether or not with the Listed Companies, Section 9.6(b) hereof shall apply. > > > > (c)     The Executive agrees that the restrictions contained in this Section > > 9 are necessary for the protection of the business and goodwill of the > > Company because of the trade secrets within the Executive's knowledge and > > are considered by the Executive to be reasonable for such purpose. 9.2     Definitions. > > (a)     "Competition" shall mean engaging in, as an employee, director, > > partner, principal, shareholder, consultant, advisor, independent contractor > > or similar capacity, with (a) the Listed Companies or (b) in any business, > > activity or conduct which directly competes with the business of the > > Company, provided that, with regard to the period after termination of the > > Executive's employment, Section 9.1(b)(ii) shall only apply to business > > lines in which the Company is engaged both at the time of termination of > > employment and at the time of the determination and which during the last > > fiscal year ending prior to the date of such termination represented at > > least five percent (5%) of the Company's revenues (the "Prohibited Lines"). > > Notwithstanding anything else in this Section 9, Competition shall not > > include: (A) (i) holding five percent (5%) or less of an interest in the > > equity or debt of any publicly traded company, (ii) engaging in any activity > > with the prior written approval of the Chief Executive Officer or the O&C > > Committee, (iii) the practice of law in a law firm that represents entities > > in Competition with the Company, provided that the Executive does not > > personally represent such entities, or (iv) the employment by, or provision > > of services to, an investment banking firm or consulting firm that provides > > services to entities that are in Competition with the Company provided that > > the Executive does not personally represent or provide services to such > > entities that are Listed Companies or otherwise with regard to businesses in > > Competition with the Prohibited Lines, or (B) with regard to Section > > 9.1(b)(ii), (i) being employed by, or consulting for, a non-Competitive > > division or business unit of an entity which is in Competition with the > > Company (and participating in such entity's employee equity plans), (ii) > > being employed by, or consulting for, an entity which had annual revenues in > > the last fiscal year prior to the Executive being employed by, or consulting > > for, the entity generated through business lines in Competition with the > > Prohibited Lines of the Company that do not exceed five percent (5%) of such > > entity's total annual revenues, provided that revenues within the > > Executive's area of responsibility or authority are not more than ten > > percent (10%) composed of the revenues from the businesses in Competition > > with the Prohibited Lines, or (iii) any activities conducted after a Change > > in Control of the Company. > > > > (b)     The Restricted Territory shall mean any geographic area in which the > > Company with regard to the Prohibited Lines did more than nominal business. > > > > (c)     Listed Companies shall mean those entities which are within the > > "peer group" established by the Company for the performance graphs in its > > proxy statement pursuant to Item 402(l) of Regulation S-K under the Exchange > > Act and which are in a list of no more than five (5) entities established by > > the Company from time to time and available from the Chief Human Resources > > Officer, provided that the addition of any entity to the list shall not be > > effective until sixty (60) days after it is so listed. > > > > (d)     For purposes of this Section 9, "Company" shall mean the Company and > > its subsidiaries and affiliates. 9.3     Agreement Not to Engage in Certain Solicitation . The Executive agrees that the Executive will not, during the Executive's employment with the Company or during the two (2) year period thereafter, directly or indirectly, solicit or induce, or attempt to solicit or induce, any non-clerical employee(s), sales representative(s), agent(s), or consultant(s) of the Company to terminate such person's employment, representation or other association with the Company for the purpose of affiliating with any entity with which the Executive is associated ("Solicitation"). 9.4     Confidential Information . > > (a)     The Executive specifically acknowledges that any trade secrets or > > confidential business and technical information of the Company or its > > vendors, suppliers or customers, whether reduced to writing, maintained on > > any form of electronic media, or maintained in mind or memory and whether > > compiled by the Executive or the Company (collectively, "Confidential > > Information"), derives independent economic value from not being readily > > known to or ascertainable by proper means by others; that reasonable efforts > > have been made by the Company to maintain the secrecy of such information; > > that such information is the sole property of the Company or its vendors, > > suppliers, or customers and that any retention, use or disclosure of such > > information by the Executive during the Employment Term (except in the > > course of performing duties and obligations of employment with the Company) > > or any time after termination thereof, shall constitute misappropriation of > > the trade secrets of the Company or its vendors, suppliers, or customers, > > provided that Confidential Information shall not include: (i) information > > that is at the time of disclosure public knowledge or generally known within > > the industry, (ii) information deemed in good faith by the Executive, while > > employed by the Company, desirable to disclose in the course of performing > > the Executive's duties, (iii) information the disclosure of which the > > Executive in good faith deems necessary in defense of the Executive's rights > > provided such disclosure by the Executive is limited to only disclose as > > necessary for such purpose, or (iv) information disclosed by the Executive > > to comply with a court, or other lawful compulsory, order compelling him to > > do so, provided the Executive gives the Company prompt notice of the receipt > > of such order and the disclosure by the Executive is limited to only > > disclosure necessary for such purpose. > > > > (b)     The Executive acknowledges that the Company from time to time may > > have agreements with other persons or with the United States Government, or > > agencies thereof, that impose obligations or restrictions on the Company > > regarding inventions made during the course of work under such agreements or > > regarding the confidential nature of such work. If the Executive's duties > > hereunder will require disclosures to be made to him subject to such > > obligations and restrictions, the Executive agrees to be bound by them. 9.5     Scope of Restrictions . If, at the time of enforcement of this Section 9, a court holds that the restrictions stated herein are unreasonable under circumstances then existing, the parties hereto agree that the maximum period, scope or geographical area reasonable under such circumstances shall be substituted for the stated period, scope or area and that the court shall be allowed to revise the restrictions contained herein to cover the maximum period, scope and area permitted by law. 9.6     Remedies . > > (a)     In the event of a material breach or threatened material breach of > > Section 9.1(a), Section 9.3, Section 9.4 or Section 9.10, the Company, in > > addition to its other remedies at law or in equity, shall be entitled to > > injunctive or other equitable relief in order to enforce or prevent any > > violations of the provisions of this Section 9. Except as specifically > > provided with regard to Listed Companies, the Company agrees that it will > > not assert to enjoin or otherwise limit the Executive's activities based on > > an argument of inevitable disclosure of confidential information. > > > > (b)     In the event Section 9.1(b) applies, the Company may immediately > > cease payment to the Executive of all future amounts due under Sections > > 6.3(a) or (b) as well as otherwise specifically provided in any other plan, > > grant or program. > > > > (c)     Upon written request of the Executive, the Company shall within > > thirty (30) days notify the Executive in writing whether or not in good > > faith it believes any proposed activities would be in Competition and, if it > > so determines or does not reply within thirty (30) days, it shall be deemed > > to waive any right to treat such activities as Competition unless the facts > > are otherwise than as presented by the Executive or there is a change > > thereafter in such activities. The Executive shall promptly provide the > > Company with such information as it may reasonably request to evaluate > > whether or not such activities are in Competition. 9.7 Uniformity. In no event shall any definitions of Competition or Solicitation (or a similar provision) as it applies to the Executive with regard to any plan of program or grant of the Company be interpreted to be any broader than as set forth in this Section 9. 9.8 Delivery of Documents. Upon termination of this Agreement or at any other time upon request by the Company, the Executive shall promptly deliver to the Company all records, files, memoranda, notes, designs, data, reports, price lists, customer lists, drawings, plans, computer programs, software, software documentation, sketches, laboratory and research notebooks and other documents (and all copies or reproductions of such materials in his possession or control) belonging to the Company. Notwithstanding the foregoing, the Executive may retain his rolodex and similar phone directories (collectively, the "Rolodex") to the extent the Rolodex does not contain information other than name, address, telephone number and similar information, provided that, at the request of the Company, the Executive shall provide the Company with a copy of the Rolodex. > > 9.9 Nondisparagement. > > > > (a)     During the Employment Term and thereafter, the Executive shall not > > with willful intent to damage economically or as to reputation or > > vindictively disparage the Company, its subsidiaries or their respective > > past or present officers, directors or employees (the "Protected Group"), > > provided that the foregoing shall not apply to (i) actions or statements > > taken or made by the Executive while employed by the Company in good faith > > as fulfilling the Executive's duties with the Company or otherwise at the > > request of the Company, (ii) truthful statements made in compliance with > > legal process or governmental inquiry, (iii) as the Executive in good faith > > deems necessary to rebut any untrue or misleading public statements made > > about him or any other member of the Protected Group, (iv) statements made > > in good faith by the Executive to rebut untrue or misleading statements made > > about him or any other member of the Protected Group by any member of the > > Protected Group, and (v) normal commercial puffery in a competitive business > > situation. No member of the Protected Group shall be a third party > > beneficiary of this Section 9.9(a). > > > > (b)     During the Employment Term and thereafter, neither the Company > > officially nor any then member of the Executive Leadership Team (or the > > equivalent) of the Company, as such term is currently used within the > > Company, shall with willful intent to damage the Executive economically or > > as to reputation or otherwise vindictively disparage the Executive, provided > > the foregoing shall not apply to (i) actions or statements taken or made in > > good faith within the Company in fulfilling duties with the Company, (ii) > > truthful statements made in compliance with legal process, governmental > > inquiry or as required by legal filing or disclosure requirements, (iii) as > > in good faith deemed necessary to rebut any untrue or misleading statements > > by the Executive as to any member of the Protected Group, or (iv) normal > > commercial puffery in a competitive business situation. > > > > (c)     In the event of a material breach or threatened material breach of > > clauses (a) or (b) above, the Company or the Executive, as the case may be, > > in addition to its or the Executive's other remedies at law or in equity, > > shall be entitled to injunctive or other equitable relief in order to > > enforce or prevent any violations of this Section 9.9. 9.10      Pooling of Interests. If the Company is involved in any proposed business combination that is contemplated to be accounted for as a pooling of interests, the Executive agrees to cooperate with the reasonable requests of the Company with regard to the exercise of stock options, the sale of Company stock or other matters that could affect the ability of the combination to be accounted for as a pooling of interests. 10.     Liability Insurance The Company shall cover the Executive under directors and officers liability insurance both during and, while potential liability exists, after the Employment Term in the same amount and to the same extent, if any, as the Company covers its then current officers and directors. 11.     Assignment 11.1     Assignment by the Company . This Agreement may and shall be assigned or transferred to, and shall be binding upon and shall inure to the benefit of, any successor of the Company, and any such successor shall be deemed substituted for all purposes of the "Company" under the terms of this Agreement. As used in this Agreement, the term "successor" shall mean any person, firm, corporation or business entity which at any time, whether by merger, purchase, or otherwise, acquires all or substantially all of the assets of the Company. Notwithstanding such assignment, the Company shall remain, with such successor, jointly and severally liable for all its obligations hereunder. Except as herein provided, this Agreement may not otherwise be assigned by the Company. 11.2     Assignment by the Executive . This Agreement is not assignable by the Executive. This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, and administrators, successors, heirs, distributees, devisees, and legatees. If the Executive should die while any amounts payable to the Executive hereunder remain outstanding, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive's devisee, legatee, or other designee or, in the absence of such designee, to the Executive's estate. 12.     Legal Remedies 12.1     Payment of Legal Fees . The Company shall pay the Executive's reasonable legal fees and costs associated with entering into this Agreement. To the fullest extent permitted by law, the Company shall promptly pay upon submission of statements all legal and other professional fees, costs of litigation, prejudgment interest, and other expenses incurred in connection with any dispute arising hereunder; provided, however, the Company shall be reimbursed by the Executive for (i) the fees and expenses advanced in the event the Executive's claim is in a material manner in bad faith or frivolous and the arbitrator or court, as applicable, determines that the reimbursement of such fees and expenses is appropriate, or (ii) to the extent that the arbitrator or court, as appropriate, determines that such legal and other professional fees are clearly and demonstrably unreasonable. 12.2     Arbitration . All disputes and controversies arising under or in connection with this Agreement, other than the seeking of injunctive or other equitable relief pursuant to Section 9 hereof, shall be settled by arbitration conducted before a panel of three (3) arbitrators sitting in New York City, New York, or such other location agreed by the parties hereto, in accordance with the rules for expedited resolution of commercial disputes of the American Arbitration Association then in effect. The determination of the majority of the arbitrators shall be final and binding on the parties. Judgment may be entered on the award of the arbitrator in any court having proper jurisdiction. All expenses of such arbitration, including the fees and expenses of the counsel of the Executive, shall be borne by the Company and the Executive shall be entitled to reimbursement of his expenses as provided in Section 12.1 hereof. 12.3     Notice . Any notices, requests, demands, or other communications provided for by this Agreement shall be sufficient if in writing and if delivered personally, sent by telecopier, sent by an overnight service or sent by registered or certified mail. Notice to the Executive not delivered personally (or by telecopy where the Executive is known to be) shall be sent to the last address on the books of the Company, and notice to the Company not delivered personally (or by telecopy to the known personal telecopy of the person it is being sent to) shall be sent to it at its principal office. All notices to the Company shall be delivered to the Chief Executive Officer with a copy (not itself constituting notice) to the Executive Vice President, Human Relations. A copy (not itself constituting notice) of any notice to the Executive shall be delivered to Jerry L. Shulman, Williams & Connolly LLP, 725 12th Street, N.W., Washington, D.C. 20005. Delivery shall be deemed to occur on the earlier of actual receipt or tender and rejection by the intended recipient. 12.4     Continued Payments . In the event after a Change in Control either party files for arbitration to resolve any dispute as to whether a termination is for Cause or Good Reason, until such dispute is determined by the arbitrators, the Executive shall continue to be treated economically and benefit wise in the manner asserted by him in the arbitration effective as of the date of the filing of the arbitration, subject to the Executive's promptly refunding any amounts paid to him, paying the cost of any benefits provided to him and paying to the Company the profits in any stock option or other equity awards exercised or otherwise realized by him during the pendency of the arbitration which he is ultimately held not to be entitled to; provided the arbitrators may terminate such payments and benefits in the event that they determine at any point that the Executive is intentionally delaying conclusion of the arbitration.] 13.     Miscellaneous 13.1     Entire Agreement . This Agreement and each Exhibit hereto, except to the extent specifically provided otherwise herein or therein, supersedes any prior agreements or understandings, oral or written, between the parties hereto with respect to the subject matter hereof and constitutes the entire agreement of the parties with respect to the subject matter hereof. In the event of any discrepancy or conflict between this Agreement and either Exhibit, the provisions of the Exhibit shall prevail. To the extent any severance plan or program of the Company that would apply to the Executive is more generous to the Executive than the provisions hereof, the Executive shall be entitled to any additional payments or benefits that are not duplicative, but shall otherwise not be eligible for such plan or program. 13.2     Modification . This Agreement shall not be varied, altered, modified, canceled, changed, or in any way amended, nor any provision hereof waived, except by mutual agreement of the parties in a written instrument executed by the parties hereto or their legal representatives. 13.3     Severability . In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, the remaining provisions of this Agreement shall be unaffected thereby and shall remain in full force and effect. 13.4     Counterparts . This Agreement may be executed in two (2) 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. 13.5     Tax Withholding . The Company may withhold from any benefits payable under this Agreement all federal, state, city, or other taxes as may be required pursuant to any law or governmental regulation or ruling. 13.6     Beneficiaries . The Executive may designate one or more persons or entities as the primary and/or contingent beneficiaries of any amounts to be received under this Agreement. Such designation must be in the form of a signed writing acceptable to the Board or the Board's designee. The Executive may make or change such designation at any time. 13.7     Representation . The Executive represents that the Executive's employment by the Company and the performance by the Executive of his obligations under this Agreement do not, and shall not, breach any agreement that obligates him to keep in confidence any trade secrets or confidential or proprietary information of his or of any other party, to write or consult to any other party or to refrain from competing, directly or indirectly, with the business of any other party. The Executive shall not disclose to the Company, and the Company shall not request that the Executive disclose, any trade secrets or confidential or proprietary information of any other party. 14.     Governing Law The provisions of this Agreement shall be construed and enforced in accordance with the laws of the state of Delaware, without regard to any otherwise applicable principles of conflicts of laws. IN WITNESS WHEREOF, the Executive and the Company have executed this Agreement, as of the day and year first above written.   s\Terrence O'Donnell   TERRENCE O'DONNELL           TEXTRON INC.       By: s\John D. Butler        JOHN D. BUTLER         Executive Vice President & Chief Human      Resources Officer Exhibit A Parachute Gross Up (a)     In the event that the Executive shall become entitled to payments and/or benefits provided by this Agreement or any other amounts in the "nature of compensation" (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, any person whose actions result in a change of ownership or effective control covered by Section 280G(b)(2) of the Code or any person affiliated with the Company or such person) as a result of such change in ownership or effective control (collectively the "Company Payments"), and such Company Payments will be subject to the tax (the "Excise Tax") imposed by Section 4999 of the Code (and any similar tax that may hereafter be imposed by any taxing authority) the Company shall pay to the Executive at the time specified in subsection (d) below an additional amount (the "Gross-up Payment") such that the net amount retained by the Executive, after deduction of any Excise Tax on the Company Payments and any U.S. federal, state, and for local income or payroll tax upon the Gross-up Payment provided for by this paragraph (a), but before deduction for any U.S. federal, state, and local income or payroll tax on the Company Payments, shall be equal to the Company Payments. (b)     For purposes of determining whether any of the Company Payments and Gross-up Payments (collectively the "Total Payments") will be subject to the Excise Tax and the amount of such Excise Tax, (x) the Total Payments shall be treated as "parachute payments" within the meaning of Section 280G(b)(2) of the Code, and all "parachute payments" in excess of the "base amount" (as defined under Code Section 280G(b)(3) of the Code) shall be treated as subject to the Excise Tax, unless and except to the extent that, in the opinion of the Company's independent certified public accountants appointed prior to any change in ownership (as defined under Code Section 280G(b)(2)) or tax counsel selected by such accountants (the "Accountants") such Total Payments (in whole or in part) either do not constitute "parachute payments," represent reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4) of the Code in excess of the "base amount" or are otherwise not subject to the Excise Tax, and (y) the value of any non-cash benefits or any deferred payment or benefit shall be determined by the Accountants in accordance with the principles of Section 280G of the Code. (c)     For purposes of determining the amount of the Gross-up Payment, the Executive shall be deemed to pay U.S. federal income taxes at the highest marginal rate of U.S. federal income taxation in the calendar year in which the Gross-up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of the Executive's residence for the calendar year in which the Company Payment is to be made, net of the maximum reduction in U.S. federal income taxes which could be obtained from deduction of such state and local taxes if paid in such year. In the event that the Excise Tax is subsequently determined by the Accountants to be less than the amount taken into account hereunder at the time the Gross-up Payment is made, the Executive shall repay to the Company, at the time that the amount of such reduction in Excise Tax is finally determined, the portion of the prior Gross-up Payment attributable to such reduction (plus the portion of the Gross-up Payment attributable to the Excise Tax and U.S. federal, state and local income tax imposed on the portion of the Gross-up Payment being repaid by the Executive if such repayment results in a reduction in Excise Tax or a U.S. federal, state and local income tax deduction), plus interest on the amount of such repayment at the rate provided in Section 1274(b)(2)(B) of the Code. Notwithstanding the foregoing, in the event any portion of the Gross-up Payment to be refunded to the Company has been paid to any U.S. federal, state and local tax authority, repayment thereof (and related amounts) shall not be required until actual refund or credit of such portion has been made to the Executive, and interest payable to the Company shall not exceed the interest received or credited to the Executive by such tax authority for the period it held such portion. The Executive and the Company shall mutually agree upon the course of action to be pursued (and the method of allocating the expense thereof) if the Executive's claim for refund or credit is denied. In the event that the Excise Tax is later determined by the Accountant or the Internal Revenue Service to exceed the amount taken into account hereunder at the time the Gross-up Payment is made (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-up Payment), the Company shall make an additional Gross-up Payment in respect of such excess (plus any interest or penalties payable with respect to such excess) at the time that the amount of such excess is finally determined. (d)     The Gross-up Payment or portion thereof provided for in subsection (c) above shall be paid not later than the thirtieth (30th) day following an event occurring which subjects the Executive to the Excise Tax; provided, however, that if the amount of such Gross-up Payment or portion thereof cannot be finally determined on or before such day, the Company shall pay to the Executive on such day an estimate, as determined in good faith by the Accountant, 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), subject to further payments pursuant to subsection (c) hereof, as soon as the amount thereof can reasonably be determined, but in no event later than the ninetieth day after the occurrence of the event subjecting the Executive to the Excise Tax. 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 the Executive, 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). (e)     In the event of any controversy with the Internal Revenue Service (or other taxing authority) with regard to the Excise Tax, the Executive shall permit the Company to control issues related to the Excise Tax (at its expense), provided that such issues do not potentially materially adversely affect the Executive, but the Executive shall control any other issues. In the event the issues are interrelated, the Executive and the Company shall in good faith cooperate so as not to jeopardize resolution of either issue, but if the parties cannot agree the Executive shall make the final determination with regard to the issues. In the event of any conference with any taxing authority as to the Excise Tax or associated income taxes, the Executive shall permit the representative of the Company to accompany the Executive, and the Executive and the Executive's representative shall cooperate with the Company and its representative. (f)     The Company shall be responsible for all charges of the Accountant. (g)     The Company and the Executive shall promptly deliver to each other copies of any written communications, and summaries of any verbal communications, with any taxing authority regarding the Excise Tax covered by this Exhibit A. EXHIBIT B TO EMPLOYMENT AGREEMENT OF TERRENCE O'DONNELL DATED AS OF MARCH 10, 2000 (the "Employment Agreement")      The following constitute special compensation provisions to be provided to the Executive by the Company. All initially capitalized terms not otherwise defined in this Exhibit B shall have the same meanings as in the Employment Agreement. This Exhibit B shall be deemed incorporated by reference into and to be part of the Employment Agreement, provided, however, that to the extent, if any, that there is a discrepancy or conflict between the text of the Employment Agreement and this Exhibit B, the provisions of this Exhibit B shall prevail. 1)     Hiring Bonus:           The Executive shall receive a special hiring bonus in the amount of $200,000, payable not later than April 1, 2000, subject to withholding and other deductions in accordance with the Company's usual compensation policies. 2)     Performance Share Units:           The Executive is hereby granted initial Performance Share Units ("PSU's") as follows: > > a)     Cycle 2000    4,000 PSU's > > > > b)     Cycle 2000-01     6,000 PSU's > > > > c)     Cycle 2000-02     7,500 PSU's 3)     Stock Options: The Executive is to receive an initial grant of non-qualified options to acquire 20,000 shares of voting common stock of the Company, such grant to be pursuant to an agreement in the form of the Company's normal non-qualified stock option agreement for key executives. 4)     Special Pension Calculations > a)     All long term incentive compensation earned by the Executive (whether or not deferred) pursuant to any long term incentive plan (including without limitation the Performance Share Units) shall be included in measuring the Executive's compensation for purposes of any of the Company's pension plans. b)     There shall be no deduction from or offset to any pension payment or death benefit otherwise due to the Executive from the Company or any affiliated entity (collectively, the "Textron Group") or pursuant to any employee benefit plan, program or policy provided by the Textron Group as a result of or in connection with any amounts available or paid to the Executive that are derived or paid from any defined benefit plan, defined contribution plan or unfunded retirement, withdrawal or death benefit plan of Williams & Connolly LLP ("W&C"). c)     In the event that the Executive is involuntarily terminated without Cause or terminates his employment with Good Reason (as such term is defined in the Employment Agreement), in either case prior to reaching age 60, the Executive shall nevertheless be entitled to payment of a pension pursuant to the Executive Supplemental Pension Plan equal to 25% of the pension to which he would have been entitled thereunder upon retirement at age 65. 5)     Deferred Income Plan In the event of (a) a Qualified Termination following a Change in Control, (b) an involuntary termination of the Executive by the Company without Cause or (c) a termination by the Executive for Good Reason, any otherwise unvested premium payable by the Company with respect to any deferred income under the Deferred Income Plan shall be fully vested as of such date. 6)     Perquisites The Executive shall be entitled to: > a)     An executive automobile and related expenses in accordance with normal > Company policy for key executives > > b)     Financial Planning and Tax Preparation services generally accorded key > executives > > c)     Club membership (both initiation fees and regular dues) in accordance > with normal Company policy for key executives > > d)     Payment of or reimbursement for all bar review course fees, bar > examination fees, annual dues or similar fees or expenses incurred by the > Executive for the purpose of becoming licensed or qualified as an attorney > eligible to practice within the State of Rhode Island or in any other > jurisdiction in which the Executive in good faith determines he should be so > licensed or qualified > > e)     Payment or reimbursement for (i) up to six (6) months temporary housing > in a furnished "executive suites" or comparable housing in the Providence, > Rhode Island metropolitan area, (ii) all local travel, food and entertainment > expenses within such metropolitan area while the Executive is housed in such > temporary housing, and (iii) reasonable travel, housing, food and other > househunting expenses actually incurred by the Executive or members of his > immediate family in traveling to, from and within the Providence, Rhode Island > metropolitan area in search of long-term housing for the Executive and his > family 7)     Travel between Providence, Rhode Island and Washington, DC The parties to the Employment Agreement acknowledge that (a) the Executive will maintain residences in each of the Providence, Rhode Island and Washington, DC metropolitan areas, and (b) the Executive will, in addition to his position with the Company, continue on a limited-time basis as a partner in W&C. The Executive will, therefore, travel frequently between such metropolitan areas. In recognition of such understandings, and in order to clarify the allocation of expenses for such travel, the parties have agreed to the following: > a)     To the extent that the Executive uses transportation equipment or > facilities owned or operated by or for any member of the Textron Group, which > equipment or facilities are not being diverted from another corporate use to > accommodate the Executive, and without regard to the purpose of the > Executive's travel, the Executive may utilize such equipment or facilities at > no cost to him, provided, however, that to the extent required by any law, the > Company shall report appropriate charges for any travel thereupon by the > Executive as additional income to the Executive in accordance with such law > and normal Company policy. > > b)     The parties acknowledge and agree that the Executive will conduct > Textron-Group related business in both Providence, Rhode Island and > Washington, DC. To the extent that the Executive travels between such > metropolitan areas on Textron Group-related business using commercial travel > facilities, all such reasonable travel expenses shall be paid for or > reimbursed by the Company in accordance with its normal policies for key > executives. > > c)     To the extent that such travel utilizes commercial travel facilities > but is for non-Textron Group related purposes, the Executive shall be > responsible for paying for or reimbursing the Company for all such expenses. 8)     Special Relationship with W&C In further recognition of (a) the Executive's continuing relationship with W&C, and (b) the attorney-client relationship between the Company and W&C, the parties have agreed as follows: > a)     The Executive may simultaneously serve the Company as provided for in > Section 2 of the Employment Agreement and remain as a part-time partner in > W&C, all as set forth in such Section 2. > > b)     Any legal services performed by the Executive, whether directly or as a > supervisor, on behalf of any member of the Textron Group, regardless of where > it is performed, shall be considered as having been performed in his capacity > as an officer and employee of the Company and not as a partner of W&C. > > c)     Any legal services performed or supervised by any other partner, > associate or staff at W&C for any member of the Textron Group, whether or not > subject to supervision by the Executive, shall be considered as having been > performed by the firm as outside counsel to the Textron Group. > > d)     W&C shall not bill the Company for any time spent by the Executive with > respect to any matter relating to any member of the Textron Group, nor will it > bill the Company for any travel expenses incurred by the Executive in the > course of such representation (all of which will be treated as > employment-related expenses of the Executive subject to his Employment > Agreement). W&C shall bill the Company, however, for all travel expenses of > any other partner or employee of W&C, and for all messenger, photocopying and > similar office services, all in accordance with its normal billing practices, > without regard to whether the Executive directed the incurrence of such > services on behalf of any member of the Textron Group or supervised the matter > with respect to which such travel or services were ordered. > > e)     W&C shall remain free to represent and to provide any services to or on > behalf of any other clients to the same extent as if the Executive had no > personal affiliation with the Company. The Executive shall timely inform W&C > of any matter from which he should, in his good faith judgment, be screened, > and W&C may rely in good faith on such determination by the Executive. > > f)     The Company will indemnify, defend and hold harmless W&C and its > partners, associates and staff from and against any liability, loss, cost or > expense (a "Loss") incurred or suffered by any of them, in whatever capacity, > in connection with or as a result of any investigation or proceeding of any > sort to the extent relating to or arising out of any legal services performed > by the Executive (including his supervision of any legal services provided by > the firm for or on behalf of any member of the Textron Group) in his capacity > as an employee of the Company, provided, however, no such indemnity shall > apply if and to the extent that such Loss relates to or arises out of services > deemed hereunder to have been performed by the firm for or on behalf of any > member of the Textron Group (whether or not such services were supervised by > the Executive). > > g)     W&C and each other indemnified party under this Section 8 shall be a > third party beneficiary thereof, with rights to enforce the provisions thereof > to the extent related to such indemnified party. 9)     Approvals To the extent that any commitment or covenant of the Company contained in either the Employment Agreement or this Exhibit B, including without limitation the provisions of Sections 4 and 5 of this Exhibit B, shall constitute an exception to normal compensation or benefit policies of the Company for its key executives, the Organization and Compensation Committee of the Board of Directors of the Company shall promptly and expressly approve such exceptions.

EXHIBIT 10.4 EMPLOYMENT AGREEMENT       AGREEMENT made as of July 1, 2000 by and between JONES APPAREL GROUP, INC., a Pennsylvania corporation (the "Company"), and IRWIN SAMELMAN (the "Executive"). W I T N E S S E T H:       WHEREAS, Executive has been serving as a senior executive of the Company; and     WHEREAS, the Company wishes to continue to employ the Executive, and the Executive wishes to continue employment with the Company, on the terms and conditions hereinafter set forth.     NOW, THEREFORE, it is agreed as follows:     1.    Employment. During the term of this Agreement, the Company shall employ the Executive as the Executive Vice President-Marketing of the Company, with such responsibilities and authority as Executive has heretofore had as Executive Vice President-Marketing of the Company. The Executive shall report directly to the Chief Executive Officer of the Company. During the term of this Agreement, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote all of Executive's business time and attention to the business affairs of the Company, and to perform such responsibilities in a professional manner. Notwithstanding the foregoing, during the term of this Agreement, it shall not be a violation of this Agreement for the Executive to (a) serve on civic or charitable boards or committees; (b) deliver lectures, fulfill speaking engagements or teach at educational institutions; (c) serve as a non-employee member of a board of directors of a business entity which is not competitive with the Company and as to which the Board of Directors of the Company has given its consent; and (d) attend to personal business, so long as such activities do not interfere with the performance of the Executive's responsibilities as a senior executive of the Company in accordance with this Agreement.     2.     Term. The Company shall employ the Executive for the period commencing as of July 1, 2000 and ending as of June 30, 2003 (the "Expiration Date"), as renewed in accordance with the following sentence (the "Term"). The Executive's employment with the Company will continue, and this Agreement will be automatically extended without limitation, for successive 12-month periods commencing July 1 and ending June 30 (a "Contract Year"), unless either party to this Agreement advises the other in writing, no later than June 30, 2001 and no later than each June 30 thereafter, that such party does not wish to extend (a "Non-extension Notice"). If this Agreement shall be so extended, the "Expiration Date" shall mean the then applicable extended "Expiration Date", and the "Term" shall mean the period commencing July 1, 2000 and <PAGE> 2 ending on the then applicable extended "Expiration Date". For example, (i) if by June 30, 2001, neither party has given a Non-extension Notice to the other, the Term will be automatically extended through June 30, 2004, and (ii) if the Term is so extended through June 30, 2004, then if by June 30, 2002, neither party has given a Non-extension Notice to the other, the Term will be automatically extended through June 30, 2005.     3.    Salary, Retirement Plans, Fringe Benefits and Allowances.         (a) Throughout the Term, the Executive shall receive a salary at the annual rate of not less than $900,000. The Executive's salary shall be payable at such regular times and intervals as the Company customarily pays its senior executives from time to time, but no less frequently than once a month.         (b) During the Term, the Executive shall be eligible to participate in all savings and retirement plans, practices, policies and programs to the extent applicable generally to other senior executives of the Company.         (c) During the Term, the Executive and/or the Executive's family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare, fringe and other benefit plans, practices, policies and programs provided by the Company (including, without limitation, medical, prescription drug, dental, disability, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other senior executives of the Company.         (d) The Executive shall be entitled to an aggregate of four (4) weeks paid vacation during each calendar year of the Term. The Executive shall also be entitled to the benefits of the Company's policies relating to sick leave and holidays.         (e) The Executive shall have all expenses reasonably incurred by Executive on behalf of the Company reimbursed by the Company in accordance with the Company's standard policies and practices. The Executive shall be entitled to first class seating for air travel on Company business.         (f) The Company shall make available to the Executive all perquisites that are made available to senior executives of the Company.     4.    Bonus.     Executive shall participate in the Company's Executive Annual Incentive Plan (the "Bonus Plan"), pursuant to which the Executive may be entitled to receive annual bonus payments for each full calendar year of employment which ends prior to the Expiration Date and throughout which the Executive has been employed by the Company, conditioned upon the attainment of annual criteria and objectives established for participants in the Bonus Plan. 2 <PAGE > 3     5.    Stock Options. Subject to the absolute authority of the Stock Option Committee of the Board of Directors of the Company from time to time to grant (or not to grant) to eligible individuals options to purchase common stock of the Company ("Options"), it is the intention of the Company and the expectation of the Executive that while the Executive is employed hereunder, the Executive will receive Options annually, on the following terms and conditions (and any Options so granted shall be subject to the following terms and conditions, which shall govern any conflicts in the terms hereof with any terms and conditions in any stock option agreement):         (a) Target awards will be in an amount (plus or minus 25%) equal to 150% of Executive's salary;         (b) For purposes of determining the number of shares subject to a given Option grant, the value of such Option shall be determined using the Black-Scholes valuation method, or another generally recognized valuation method which is being used uniformly by the Company for its senior executives;         (c) The exercise price per share of the Options shall be the fair market value of the common stock on the date of grant, and the Options shall expire on the tenth anniversary of the date of grant; and         (d) The Options shall vest ratably on the first three anniversaries of the date of grant; provided, however, that all such Options and all other options to purchase Common Shares then held by the Executive which are not then vested (in the aggregate being referred to herein as "Accelerated Options") shall become fully vested and immediately exercisable during the remaining original term of each such Accelerated Option, upon the occurrence of any of the following events ("Acceleration Events"): Executive's Retirement (as defined herein), death, Disability, a Change in Control (as defined herein), and termination of Executive's employment by the Company without Cause or by the Executive for Good Reason; and         (e) The Options shall be granted on such other terms and conditions as are generally made applicable to Options granted to the other senior executives of the Company.     6.   Termination of Employment.         (a) By the Company for Cause, or by the Executive without Good Reason. The Company may terminate the Executive's employment for Cause (as defined herein) before the Expiration Date. If the Executive's employment is terminated for Cause, or if Executive resigns during the Term without Good Reason (as defined below), the Company shall pay to the Executive any unpaid salary through the date of termination, as well as reimburse the Executive for any unpaid reimbursable expenses incurred on behalf of the Company, and thereafter the Company shall have no additional obligations to the Executive under this Agreement.         (b) Death or Disability; Retirement. (i) If the Executive's employment 3 <PAGE> 4 terminates before the Expiration Date because of Executive's death or Disability (as defined herein), the Company shall pay Executive or Executive's duly appointed personal representative, as the case may be, (i) any unpaid salary through the date of death or the Disability Termination Date (as defined herein), as well as reimbursement of any unpaid reimbursable expenses incurred on behalf of the Company, (ii) an amount equal to Executive's monthly salary during each of the six (6) months following Executive's death or the Disability Termination Date, and (iii) the Target Bonus for the calendar year in which Executive dies or becomes Disabled, prorated for the portion of such year preceding Executive's death or the Disability Termination Date, which shall be paid not later than 120 days after the end of such year. Except as set forth in this Section 6(b), the Company shall have no additional obligations to the Executive under this Agreement in the event of Executive's termination of employment under this Section 6(b).             (ii) In addition to the foregoing and notwithstanding any other agreement between the Executive and the Company, (x) all Accelerated Options which were held by the Executive at the time of the Executive's Retirement, death or the Disability Termination Date, shall become fully exercisable and shall remain exercisable by the Executive or by the Executive's estate or his representative, as the case may be, during the remaining original term of the Accelerated Option in the case of the Executive's Retirement or Disability, or during the 3-year period following the date of the Executive's death, and (y) if the Executive's employment with Company shall terminate for any reason other than Executive's death or for Cause, during the period commencing with the date of such termination and ending with Executive's death, the Company shall continue to include the Executive (and his spouse and dependents, if any) in the Company's health care benefits plans (at the Company's sole expense) in which the Executive was participating immediately prior to his Retirement.         (c) By the Company without Cause, or by the Executive for Good Reason. (i) The Company may terminate the Executive's employment before the Expiration Date without Cause, and the Executive may terminate Executive's employment before the Expiration Date for Good Reason, upon 30-days written notice to the other party. If the Executive's employment is so terminated by the Company without Cause, or by the Executive for Good Reason, as the case may be, the Company shall pay and provide to the Executive (i) any unpaid salary through the date of termination, as well as reimbursement of any unpaid reimbursable expenses incurred on behalf of the Company, (ii) the Target Bonus for the calendar year in which termination occurs, prorated for the portion of such year preceding termination (payable no later than the 30th day immediately following termination of employment), (iii) during each month of the Severance Period (as defined below), an amount equal to the sum of (x) Executive's monthly salary at the rate in effect immediately preceding termination and (y) one-twelfth of the Executive's Target Bonus for the calendar year in which termination occurs, (iv) throughout the Severance Period, continuation of Executive's participation (including the Company's contributions thereto) in all benefit plans and practices in which Executive was participating immediately preceding termination, and (v) reimbursement to the Executive for up to $10,000 of executive outplacement services. Except as set forth in this Subsection 6(c), the Company shall not have any additional obligations to the Executive under this Agreement in the event of Executive's termination of employment under this Subsection 6(c). 5 <PAGE> 6             (ii) In addition to the foregoing and notwithstanding any other agreement between the Executive and the Company, all Accelerated Options which were held by the Executive at the time of the termination of the Executive's employment by the Company without Cause or by the Executive for Good Reason (whether or not following a Change of Control), shall become fully exercisable and shall remain exercisable for the same period following termination as would apply if the Executive's employment had not terminated.         (d) Change in Control. If, following a "Change in Control" (as defined herein) and prior to the Expiration Date, the Company terminates the Executive's employment without Cause, or the Executive terminates employment hereunder for Good Reason, the Company shall pay to the Executive, within 20 days following termination, (i) any unpaid salary through the date of termination, as well as reimbursement of any unpaid reimbursable expenses incurred on behalf of the Company, (ii) the Target Bonus for the calendar year in which termination occurs, prorated for the portion of such year preceding termination, (iii) a lump-sum payment equal to (x) 200% of Executive's yearly salary at the rate in effect immediately preceding termination multiplied by (y) the Severance Multiple (as defined herein), (iv) reimbursement to the Executive for up to $10,000 of executive outplacement services, and (v) a lump-sum equal to the Company's cost for life insurance and retirement benefits for the Severance Period.         (e) Special Termination Provision. (i) Any other provision in this Agreement notwithstanding, during the period commencing either when Sidney Kimmel first does not hold the position of Chief Executive Officer of the Company or a Change in Control has occurred, and ending on the 90th day immediately following either such event, Executive may give written notice (an "Early Termination Notice") to the Company that he is terminating his employment effective on the 30th day following the giving of such Early Termination Notice.             (ii) If the Executive's employment is so terminated by the Executive, the Company shall pay to the Executive, within 20 days following termination, (i) any unpaid salary through the date of termination, as well as reimbursement of any unpaid reimbursable expenses incurred on behalf of the Company, (ii) the Target Bonus for the calendar year in which termination occurs, prorated for the portion of such year preceding termination, (iii) a lump-sum payment equal to (x) 200% of Executive's yearly salary at the rate in effect immediately preceding termination multiplied by (y) the Severance Multiple (as defined herein), (iv) reimbursement to the Executive for up to $10,000 of executive outplacement services, and (v) a lump-sum equal to the Company's cost for life insurance and retirement benefits for the Severance Period.         (f) As used herein:             (i) the term "Cause" shall mean (v) the Executive's commission of an act of fraud or dishonesty or a crime involving money or other property of the Company; (w) the Executive's conviction of a felony or a plea of guilty or nolo contendere to an indictment for a felony; (x) if, in carrying out Executive's duties hereunder, the Executive engages in conduct which constitutes willful misconduct or gross negligence; (y) the Executive's failure to carry out 5 <PAGE> 6 a lawful order of the Board of Directors of the Company or its Chief Executive Officer; or (z) a material breach by the Executive of this Agreement. Any act or failure to act on the part of the Executive which is based upon authority given pursuant to a resolution duly adopted by the Board of Directors of the Company or authorized in writing by the Chief Executive Officer of the Company, or based upon the advice of counsel for the Company, shall not constitute Cause as used herein. For purposes of this provision only, a breach shall be "material" if it is demonstrably injurious to the Company, its affiliates or any of its respective business units, financially or otherwise.             Cause shall not exist unless and until the Company (i) has delivered to the Executive a written Notice of Termination that specifically identifies the events, actions, or non-actions, as applicable, that the Company believes constitute Cause hereunder, and, in the case of termination for Cause under clauses (x), (y) or (z) above, the Executive has been provided with an opportunity to cure the offending conduct (if curable) within 30 days after delivery of the written Notice of Termination, and has not so cured such conduct (if curable), and (ii) the Executive has been provided an opportunity to be heard (with counsel) within 30 days after delivery of the Notice of Termination; provided, however, that in the case of termination for Cause under clauses (x), (y), and (z) above, the date of termination shall be no earlier than 35 days after delivery of the Notice of Termination.             (ii) the term "Good Reason" shall mean any one of the following:                 (1) a material breach of the Company's obligations under this Agreement, which breach has not been cured within 20 business days after the Company's receipt of written notice from the Executive of such breach;                 (2) a reduction in the Executive's then annual base salary;                 (3) the relocation of the Executive's office to a location more than 30 miles from Executive's present office;                 (4) the failure to pay the Executive any undisputed portion of the Executive's compensation within 15 business days after the date of receipt of written notice that such compensation or payment is due;                 (5) the failure to continue in effect any compensation or benefit plan in which the Executive is participating, unless either (i) an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan; or (ii) the failure to continue the Executive's participation therein (or in such substitute or alternative plan) does not discriminate against the Executive, both with respect to the amount of benefits provided and the level of the Executive's participation, relative to other similarly situated participants;                 (6) a reduction in the Executive's title and status as Executive Vice President-Marketing of the Company, or any change in the Executive's status as reporting 6 <PAGE> 7 directly to the Chief Executive Officer; or the assignment to the Executive of any duties materially inconsistent with the Executive's position (including, without limitation, status, office, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 1 of this Agreement, or any other action by the Company which results in a material diminution in such position, authority, duties or responsibilities, excluding for this purpose any action not taken in bad faith and which is remedied by the Company no later than thirty (30) days after written notice by the Executive; or                 (7) any purported termination by the Company of the Executive's employment otherwise than as expressly permitted in this Agreement.             (iii) the terms "Disabled" or "Disability" shall mean the Executive's physical or mental incapacity which renders the Executive incapable, even with a reasonable accommodation by the Company, of performing the essential functions of the duties required of Executive by this Agreement for one hundred twenty (120) or more consecutive days; the term "Disability Termination Date" shall mean the date as of which the Executive's employment with the Company is terminated, either by the Executive or by the Company, following the suffering of a Disability by the Executive.             (iv) the term "Severance Period" shall mean the period commencing with the termination of the Executive's employment and ending with the Expiration Date.             (v) the term "Severance Multiple" shall mean 3 times.             (vi) the term "Change in Control" shall have the same meaning as in the Company's 1999 Stock Option Plan, as in effect on the date hereof.             (vii) the term "Target Bonus" shall mean 75% of Executive's annual salary for any given year during the Term.             (viii) The term "Retirement" shall mean voluntary retirement by the Executive after attaining age 55 with 10 years of service with the Company, or, if the Executive has not attained age 55 and/or less than 10 years of service with the Company, the Company determines that circumstances exist that warrant the granting of Retirement status.             (g) The Executive shall have no obligation to seek other employment or otherwise mitigate the Company's obligations to make payments under this Section 6, and the Company's obligations shall not be reduced by the amount, if any, of other compensation or income earned or received by the Executive after the effective date of Executive's termination. 7 <PAGE> 8     7.    Effect of Section 280G of the Internal Revenue Code.         (a) Notwithstanding any other provision of this Agreement to the contrary, and except as provided in Section 7(b), to the extent that any payment or distribution of any type to or for the benefit of the Executive by the Company (or by any affiliate of the Company, any person or entity who acquires ownership or effective control of the Company or ownership of a substantial portion of the Company's assets (within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), and the regulations thereunder), or any affiliate of such person or entity, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (the "Total Payments"), is or will be subject to the excise tax imposed under Section 4999 of the Code (the "Excise Tax"), then the Total Payments shall be reduced (but not below zero) if and to the extent that a reduction in the Total Payments would result in the Executive retaining a larger amount, on an after-tax basis (taking into account federal, state and local income taxes and the Excise Tax), than if the Executive received the entire amount of such Total Payments. Unless the Executive shall have given prior written notice specifying a different order to the Company to effectuate the foregoing, the Company shall reduce or eliminate the Total Payments, by first reducing or eliminating the portion of the Total Payments which are not payable in cash and then by reducing or eliminating cash payments, in each case in reverse order beginning with payments or benefits which are to be paid the farthest in time from the Determination (as defined herein). Any notice given by the Executive pursuant to the preceding sentence shall take precedence over the provisions of any other plan, arrangement or agreement governing the Executive's rights and entitlements to any benefits or compensation.         (b) The determination of whether the Total Payments shall be reduced as provided in this Section 7 and the amount of such reduction shall be made at the Company's expense by an accounting firm selected by the Company from among its independent auditors and the five (5) largest accounting firms (an "Eligible Accounting Firm") in the United States (the "Accounting Firm"). The Accounting Firm shall provide its determination (the "Determination"), together with detailed supporting calculations and documentation to the Company and the Executive within ten (10) days of the last day of Executive's employment. If the Accounting Firm determines that no Excise Tax is payable by the Executive with respect to the Total Payments, it shall furnish the Executive with an opinion reasonably acceptable to the Executive that no Excise Tax will be imposed with respect to any such payments and, absent manifest error, such Determination shall be binding, final and conclusive upon the Company and the Executive. If the Accounting Firm determines that an Excise Tax would be payable, the Executive shall have the right to accept the Determination of the Accounting Firm as to the extent of the reduction, if any, pursuant to this Section 7, or to have such Determination reviewed by another Eligible Accounting Firm selected by the Executive, at the expense of the Company, in which case the determination of such second accounting firm shall be binding, final and conclusive upon the Company and Executive.     8.    Company Property. Any trade name or mark, program, discovery, process, design, invention or improvement which the Executive makes or develops, which relates, directly or 8 <PAGE> 9 indirectly, to the business of the Company or its affiliates, or Executive's employment by the Company, shall be considered as "made for hire" and shall belong to the Company and shall be promptly disclosed to the Company. During the Executive's employment and thereafter, the Executive shall, without additional compensation, execute and deliver to or as requested by the Company, any instruments of transfer and take such other action as the Company may reasonably request to carry out the provisions hereof, including filing, at the Company's sole expense, trademark, patent or copyright applications for any trade name or mark, invention or writing covered hereby and assigning such applications to the Company.     9.    Confidential Information. The Executive shall not, either during the term of Executive's employment by the Company or thereafter, disclose to anyone or use (except, in each case, in the performance of Executive's responsibilities hereunder and in the regular course of the Company's business), any information acquired by the Executive in connection with or during the period of Executive's employment by the Company, with respect to any confidential, proprietary or secret aspect of the affairs of the Company or any of its affiliates, including but not limited to the requirements and terms of dealings with existing or potential licensors, licensees, designers, suppliers and customers and methods of doing business, all of which the Executive acknowledges are confidential and proprietary to the Company, and any of its affiliates, as the case may be.     10.    Competition; Recruitment; Non-Disparagement.         (a) The Executive shall not, at any time during Executive's employment by the Company and during the Severance Period (provided that the Company is making the payments to Executive which may be required hereby during such Severance Period) (the "Non-Compete Period") and under the following circumstances, engage or become interested (as an owner, stockholder, partner, director, officer, employee, consultant or otherwise) in any business which then competes, directly or indirectly, with the business then conducted by the Company or any of its subsidiaries or affiliates. The ownership of less than 5% of the stock of a publicly owned company which competes with the Company, any of its subsidiaries or affiliates, in and of itself, shall not be considered a violation of the provisions of this Section 10.         (b) The Executive shall not, at any time during Executive's employment by the Company and thereafter until the second anniversary of the expiration of the Non-Compete Period, recruit, solicit for employment, hire or engage, or assist any person or entity in recruiting, soliciting for employment, hiring or engaging, any employee or consultant of the Company, any of its subsidiaries or affiliates, or any person who was an employee or consultant of the Company, any of its subsidiaries or affiliates within one year before the termination of the Executive's employment.         (c) For the longer of any period applicable under this Section 10 or a period of three years immediately following the date of termination, (i) the Company, and its respective affiliates and employees shall not disparage the Executive, and (ii) the Executive shall not disparage the Company, or its respective affiliates and employees. 9 <PAGE> 10         (d) The Executive acknowledges that these provisions are necessary for the protection of the Company, and its subsidiaries and affiliates and are not unreasonable, because the Executive would be able to recruit and hire personnel other than employees of the Company, and any of their subsidiaries and affiliates. The Executive further agrees that a breach of Section 8, 9 or 10 of this Agreement shall result in the immediate cessation of any payments pursuant to this Section 10 and Section 6 hereof, if applicable. The duration and the scope of these restrictions on the Executive's activities are divisible, so that if any provision of this Section 10 is held or deemed to be invalid, that provision shall be automatically modified to the extent necessary to make it valid.     11.    Notices. Any notice or other communication to the Company or to the Executive under this Agreement shall be in writing and shall be considered given when mailed by certified mail, return receipt requested, to such party at Executive's address below, or to the Company at 1411 Broadway, New York, New York 10018, Attention: General Counsel (or at such other address as such party may specify by written notice to the other party).     12.    Successors; Binding Agreement.         (a) Company's Successors. No rights or obligations of the Company under this Agreement may be assigned or transferred by the Company, except that such rights or obligations may be assigned or transferred pursuant to a merger or consolidation in which the Company is not the continuing entity, or the sale or liquidation of all or substantially all of the business or assets of the Company, provided that the assignee or transferee is the successor to all or substantially all of the business or assets of the Company and such assignee or transferee assumes all of the liabilities, obligations and duties of the Company, as contained in this Agreement, either contractually or as a matter of law. The Company will require any such successor 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. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business or assets as aforesaid, which executes and delivers the agreement provided for in this Section 12 or which otherwise becomes bound by all the terms and provisions of this Agreement or by operation of law.         (b) Executive's Successors. This Agreement shall not be assignable by the Executive. This Agreement and all rights of the Executive hereunder shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. Upon the Executive's death, all amounts to which Executive is entitled hereunder, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive's devisee, legatee, or other designee or, if there be no such designee, to the Executive's estate.     13.    Indemnification. The Company shall indemnify Executive and hold the Executive harmless, to the maximum extent permitted by applicable law, from and against all claims, actions, suits, proceedings, loss, damage, liability, costs, charges and expenses, including 10 <PAGE> 11 reasonable attorneys' fees and costs arising in connection with the Executive's performance of Executive's duties hereunder or Executive's status as an employee, officer, director or agent of the Company or its affiliates, in accordance with the Company's indemnity policies for its senior executives.     14.    Interest on Late Payments. "Undisputed Late Obligations" shall bear interest beginning on the Due Date until paid in full at an annual rate of one percent (1.0%) plus the prime rate as declared from time to time by The Chase Manhattan Bank. For purposes hereof, "Undisputed Late Obligations" shall mean any obligation which remains unpaid 5 days after written notice thereof is delivered to the other party in accordance with Section 11 (the "Due Date") for money under this Agreement owing from one party to another, which obligation (i) is not subject to any bona fide dispute or (ii) has been adjudicated by an arbitration panel or court of competent jurisdiction to be due and payable.     15.    Arbitration. Except as otherwise provided herein, all controversies, claims or disputes arising out of or related to this Agreement shall be settled under the rules of the American Arbitration Association then in effect in the State of New York, as the sole and exclusive remedy of either party, and judgment upon such award rendered by the arbitrator(s) may be entered in any court of competent jurisdiction.     16.    Attorneys' Fees. The Company shall reimburse the Executive (or the Executive shall reimburse the Company) for all reasonable costs, including without limitation reasonable attorneys' fees, of the Executive or the Company, as the case may be, in any dispute, arbitration or proceeding arising under this Agreement (collectively, a "Proceeding"), so long as the Executive or the Company, as the case may be, "prevails in substantial part" with respect to Executive's or the Company's claims or defenses in such Proceeding. For purposes hereof, the Executive shall be deemed to have "prevailed in substantial part" if (i) the Executive is the party originally demanding a Proceeding, and the arbitrator(s) shall have awarded the Executive at least 75% of the amount originally demanded by the Executive, or (ii) the Company is the party originally demanding a Proceeding, and the arbitrator(s) shall have denied the Company the relief originally requested. The Company shall be deemed to have "prevailed in substantial part" if the Executive is the party originally demanding a Proceeding and the arbitrator(s) shall have awarded the Executive less than 25% of the amount originally demanded by the Executive.     17.    Miscellaneous.         (a) Given that a breach of the provisions of this Agreement would injure the Company irreparably, the Company may, in addition to its other remedies, obtain an injunction or other comparable relief restraining any violation of this Agreement, and no bond, security or other undertaking shall be required of the Company in connection therewith.         (b) The provisions of this Agreement are separable, and if any provision of this Agreement is invalid or unenforceable, the remaining provisions shall continue in full force and effect. 11 <PAGE> 12         (c) This Agreement constitutes the entire understanding and agreement between the parties, supersedes all other existing agreements between them and cannot be amended, unless such amendment is in writing and signed by both parties to this Agreement.         (d) This Agreement shall be governed by and construed in accordance with the laws of the State of New York (other than its choice of laws rules), where it has been entered and where it is to be performed. The parties hereto consent to the exclusive jurisdiction of any federal or state court in the State of New York to resolve any dispute arising under this Agreement or otherwise.         (e) The headings in this Agreement are solely for convenience of reference and shall not affect its interpretation.         (f) The failure of either party to insist on strict adherence to any term of this Agreement on any occasion shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement. For any waiver of a provision of this Agreement to be effective, it must be in writing and signed by the party against whom the waiver is claimed.         (g) The obligations of the Executive and the Company hereunder shall survive the termination of the term of this Agreement and the Executive's employment hereunder, to the extent necessary to give full effect to the provisions of this Agreement.     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed as of the date first above written.   JONES APPAREL GROUP, INC. By: /s/ Sidney Kimmel      Chairman and Chief Executive Officer      /s/ Irwin Samelman      Executive 12

EX-10.67 9 wfs1067.htm 10.67 Wilbert-Contract w/ First Union FINANCIAL SERVICES AGREEMENT THIS FINANCIAL SERVICES AGREEMENT ("Agreement") dated April 24, 2000 (the "Effective Date"), is made by and between WFS FINANCIAL Inc, a California corporation (herein "WFS"), and E-LOAN, Inc., a Delaware corporation (herein "E-LOAN"). Preamble E-LOAN is engaged in the business of, among other things, maintaining and managing Internet computer servers and web sites whereby consumers can request information about auto loans and apply for auto loans. WFS is in the business of providing loans and other financial products and services to its customers. E-LOAN and WFS desire to provide to consumers a broader range of available financing for consumers who seek auto loans through E-LOAN's computer servers and web sites. E-LOAN and WFS desire to enter into an arrangement whereby E-LOAN will forward to WFS certain applications for auto loans from consumers pursuant to the terms and conditions of this Agreement and E-LOAN will assist WFS in communicating with, forwarding WFS loan documentation to consumers relating to loan consummation, and assisting in "Loan" (defined herein) consummation. NOW, THEREFORE, in consideration of the mutual benefits to be derived from this Agreement, the promises, agreements, representations, warranties and covenants contained in this Agreement and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, E-LOAN and WFS hereby agree as follows: 1. DEFINITIONS. As used in this Agreement, and in addition to the terms defined elsewhere in this Agreement, the following words have the following meanings, whether used in the singular or plural: Affiliate means any person or entity which directly, or indirectly through one or more intermediaries, owns or controls, is owned or controlled by, or is under common control or ownership with, E-LOAN or WFS, respectively, or their respective ultimate parent. Applicant means each consumer, whether applicant, applicants, cosigner(s) or guarantor(s), who complete an Application. 1.3 Application means an application for credit relating to a proposed auto loan submitted by a consumer to E-LOAN. Borrower means with respect to each Loan, the borrower or borrowers specified in the Loan, including without limitation, any and all makers, cosigners, guarantors or other persons or entities liable for the debt. Business Day means Monday through Friday, excluding Federal holidays on which either E-LOAN or WFS is closed. Conversion Percentage means the number of Loans in the prior calendar month that resulted from Applications submitted to WFS by E-LOAN under this Agreement, divided by the number of Applications submitted to WFS by E-LOAN in the prior calendar month. Credit Product(s) means an automobile loan or other lending products offered by WFS pursuant to this Agreement. Eligibility Criteria means the credit terms, current rates, underwriting or credit scoring criteria, underwriting guidelines set forth in Exhibit B or other information prescribed by WFS in its sole discretion from time to time to be used in determining the eligibility of the consumers visiting the E-LOAN Website for the Credit Products. This information may be modified or supplemented by WFS at any time in its sole discretion. Law means all federal, state and local laws, rules and regulations as now in effect and as amended from time to time, including without limitation, all consumer protection laws, the federal Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair Credit Reporting Act, and the Fair Debt Collection Practices Act and each of their respective regulations. Loan(s) means a promissory note and security agreement for the purchase or refinancing of a new or used "Vehicle" (defined herein) entered into between WFS and Borrower. Loan Documents means promissory notes, disclosure statements, security agreements and such other forms and documents as WFS shall deem appropriate or reasonably necessary in order for WFS to make loans. Party or Parties means E-LOAN and/or WFS. Program means the arrangement generally described in this Agreement and the specific arrangements described in attached and incorporated Exhibit A, A1 and B to this Agreement. State(s) means the states listed in attached and incorporated Exhibit C , where the Parties expect to offer the Program. Term means the initial term and any renewal term of this Agreement, as set forth in Section 10. Vehicle means a private passenger motor vehicle, light truck, or van for personal, family or household use and eligible as security under WFS's Eligibility Criteria.   2. The Services. Pursuant to the terms, conditions and provisions of this Agreement, E-LOAN will permit WFS to participate in the Program. WFS shall provide the Eligibility Criteria and certain other information requested by E-LOAN about the Credit Products for inclusion in the Program. 3. Compensation. With respect to each Application referred and resulting in a booked Loan to WFS, WFS shall pay E-LOAN the amount set forth on Exhibit D ("Program Marketing and Service Fee"), in the manner, and by the time limits set forth in Exhibit D. All Applications transferred to WFS under this Agreement shall be transferred without recourse, subject to the terms, conditions, representations and warranties of this Agreement. Until the date an Application is submitted to WFS (the "Application Submission Date"), E-LOAN shall own and control the Application and all documentation relating to the Application. On the Application Submission Date and thereafter, each Application, and any Loan that may result from the Application, shall be owned and controlled exclusively by WFS, and no other party, including without limitation E-LOAN, shall have any interest in or to such Application or Loan, except as provided in this Agreement. With respect to each Application as to which E-LOAN has not delivered to WFS a completed Application along with the items and information as shall be mutually agreed by the Parties, WFS shall have no obligation to process or pay the Program Marketing and Service Fee for the subject Application. 4. COVENANTS OF THE PARTIES. Compliance with Law . Each Party will perform all of its activities, obligations and responsibilities contemplated under this Agreement in compliance with all applicable Law and will obtain all licenses or permits as may be required by any applicable Law, except to the extent that party is exempted, in order to conduct the activities contemplated hereunder. Reports . To the extent permitted by applicable Law WFS will, at various times, deliver reports to E-LOAN containing various information as the Parties may mutually agree upon in writing (regarding the number of denied and Approved Loans and the aggregate Program Marketing and Service Fee). C. Relationship of the Parties. At all times during this Agreement, both WFS and its affiliates and E-LOAN may enter into similar agreements with other lenders, brokers, marketing firms, dealers, Internet credit providers, banks, finance companies, or others, and this Agreement is not, nor will ever be mutually exclusive of all other similar agreements. E-LOAN has no obligation to forward any particular number of prospective applicants to WFS. Neither WFS nor any Affiliate has any obligation to approve any particular Application or any particular number of Applications, and WFS and/or its Affiliates may receive applications or acquire loans or sales finance contracts from other organizations, financial institutions, banks, brokers, dealers, Internet credit providers, marketing firms, or others. Notwithstanding any course of conduct between the Parties during the Term of this Agreement, WFS shall never be held, at law or in fact, as the sole and exclusive funding source for E-LOAN and WFS shall never be held, at law or in fact, to be in control of the actions of E-LOAN in the procurement of the prospective applicants. E-LOAN may refer or submit Applications to other lenders or financing sources, provided, however, that with respect to each Application submitted to WFS under this Agreement, E-LOAN shall not refer or submit the subject Application to any other lender or financing source during the time between the Application Submission Date and the earlier of (a) the time WFS makes its final credit decision on the application, or (b) the time the Applicant cancels or withdraws the application from WFS (the "Final Credit Determination Date"). Prior to the Application Submission Date, and after the Final Credit Determination Date, if such decision by WFS is not an approval or counter offer, E-LOAN shall be free to refer or submit the Application to any other person. Record Retention . Each party shall, at its own expense, maintain data, information, records and documents relating to Applications transferred pursuant to this Agreement, in such manner and for such time period as is required by applicable Law. Each party shall cooperate with one another and make such records available to regulatory authorities to satisfy state or federal audit requirements. If a party has reasonable grounds to believe a default has occurred under this Agreement, that party shall have the right to review the records of the other party upon reasonable notice, and at the others party's expense provided that the requesting party shall be entitled to review only those records necessary to determine existence and extent of the default. Electronic Interface . The Parties shall cooperate, work together and move forward in a reasonably timely manner in establishing an electronic interface whereby WFS will be able to receive Applicant information and Applications electronically transmitted via the Internet from E-LOAN and send application status information back to E-LOAN. 5. Duties of WFS. In addition to the other services required to be performed by the WFS under this Agreement, WFS agrees that during the Term of this Agreement: A. Eligibility Criteria. WFS shall make available to E-LOAN the Eligibility Criteria, as described in Exhibit B. B. Credit Product Access; Discontinuance. WFS shall offer to E-LOAN's customers access to Credit Products in the States. Unless otherwise required by Law, WFS shall give E-LOAN not less than thirty (30) days written notice prior to the effective date on which a Credit Product, at WFS's sole discretion, is discontinued or will no longer be available in a particular State. C. Authorizations. Except as otherwise exempt, WFS shall acquire and maintain all governmental regulatory authorizations, licenses, certificates of authority and permits of every type from every State WFS is required to maintain under applicable Law to offer the Credit Products: (i) for the business and operations of WFS and (ii) for WFS's participation in the Program. D. Cooperation. WFS shall cooperate and work in good faith with E-LOAN to implement the Program as promptly as possible and to coordinate with E-LOAN in WFS's participation in the Program. E. Services of WFS. WFS will process, underwrite and make a credit decision on all Applications submitted to WFS by E-LOAN under this Agreement. WFS shall be responsible for all consumer and other applicable disclosures required under applicable Law related to the preprinted Loan Documents and applicable Application disclosures once WFS receives the Application(s). WFS has the absolute and unilateral right to determine the credit worthiness of any applicant and the terms and conditions of the Loan. WFS makes no representations either expressed or implied, as to the Conversion Percentage. Credit criteria and standards to be applied to an applicant will be at WFS's sole discretion subject to compliance with applicable Law. WFS may change its Eligibility Criteria at any time WFS deems appropriate in its sole discretion subject to compliance with applicable Law. WFS shall own and control all servicing rights relating to all Loans resulting from Applications transferred to WFS under this Agreement . F. Adverse Action Notices. WFS shall comply with and send any required adverse action notices and any other notices to the applicant of an Application as may be required by applicable Law as a result of its review of an Application. 6. Duties of E-LOAN. In addition to the services required to be performed by E-LOAN under the terms of this Agreement, E-LOAN agrees that during the Term of this Agreement: Authorizations . E-LOAN shall: (i) acquire and maintain in effect all governmental regulatory authorizations, licenses, certificates of authority, registrations, and permits of every type from every State required by applicable Law for the business and operations of E-LOAN and the Program. Cooperation . E-LOAN shall cooperate and work in good faith with WFS to implement the Program as promptly as possible and to coordinate with WFS in its participation in the Program. Referral of Applicants and Applications . From time to time during the Term of this Agreement, E-LOAN shall refer Applications to WFS, and shall sell, assign, transfer, convey and deliver to WFS, and WFS shall purchase from E-LOAN, Applications ultimately resulting in booked Loans as provided in this Agreement. All Applications transferred pursuant to this Agreement shall be transferred without recourse, subject to the terms, conditions, representations and warranties of this Agreement. With respect to each Application, E-LOAN shall obtain the Applicant's authorization to submit the Application to WFS and for WFS to obtain credit bureau information. Each Application submitted to WFS by E-LOAN shall be in a format acceptable to WFS, and shall include the completed application form relating to each Applicant and such other information as mutually agreed by the parties. In determining whether to submit an Application to WFS, E-LOAN shall apply the Eligibility Criteria, and shall only submit Applications that E-LOAN reasonably believes satisfy the Eligibility Criteria. E-LOAN shall provide prior written notice to WFS of any changes to the form documents for Applications, and shall update the forms as necessary to comply with applicable Law. Communication with Applicants . With respect to Applications referred to WFS under this Agreement, E-LOAN shall communicate with the Applicant with regard to the status of the Application, and shall pass on to the Applicant such status information received by E-LOAN from WFS, including the credit decision and such information as provided on Exhibit A or A1 , as applicable, and as amended from time to time by mutual agreement of the parties. E-LOAN shall assist Applicants in the completion of Loan Documents and have such Applicants execute applicable promissory notes, disclosure statements, security agreements, and other related forms and documents in accordance with the instructions received from time to time by E-LOAN from WFS and in accordance with applicable Law. E-LOAN shall forward completed Loan Documents to WFS in accordance with the procedures established from time to time by WFS. Acceptance of Completed Loan Documents . Except for fraud or misrepresentation discovered by WFS prior to funding a loan WFS shall approve and accept delivery from E-LOAN of Loan Documents completed in accordance with WFS's instructions. Acceptance of any Loan Documents by WFS does not waive any breach by E-LOAN of any of E-LOAN warranties, representations, or obligations contained in this Agreement or any failure of E-LOAN to perform in good faith any of its obligations under this Agreement or any of WFS's rights with respect thereto. All of the warranties, representations and obligations of the parties with respect to any Application or Loan documents shall survive WFS's acceptance of any Loan documents. Representations and Warranties of WFS . WFS represents and warrants to E-LOAN, which representations and warranties shall be effective throughout the Term of this Agreement, as follows: A. Organization. WFS is a corporation duly organized, validly existing and in good standing under the laws of the State of California. WFS has the full corporate power and authority to operate its business as and where its business is now conducted and anywhere it may conduct its business pursuant to the terms of this Agreement. B. Authorization; Enforceability. The execution, delivery and performance of this Agreement by WFS and the consummation by WFS of the transactions contemplated hereby are within the corporate power of WFS and have been duly authorized by all necessary action by WFS. This Agreement constitutes the valid and binding obligation of WFS, enforceable by E-LOAN against it in accordance with the terms hereof, subject only to bankruptcy, insolvency, reorganization, moratoriums or similar laws at the time in effect affecting the enforceability or rights of creditors generally. C. Absence of Conflicting Agreements. Neither the execution, delivery and performance of this Agreement by WFS, nor any aspect hereof will: conflict with, result in a breach of, or constitute a default under the Articles of Incorporation or Bylaws of WFS or any Law applicable to WFS, or any court or administrative order or process, or any contract, agreement, arrangement, commitment or plan to which WFS or any Affiliate of WFS is a party or by which they are bound (each, a "WFS Agreement"). (ii) require the consent of any other person or entity under any WFS Agreement. D. Loan Information. All Eligibility Criteria: (i) does not infringe on any of the intellectual property rights of any person or entity; and (ii) is or will be accurate, correct and complete in all respects at the time supplied to E-LOAN. E. Absence of Market Conduct Proceedings. There are no pending, or to the knowledge of WFS, threatened investigations, proceedings, examinations, or market conduct reviews against WFS or any of the Credit Products, which if adversely decided, could significantly and negatively impact sales of the Credit Products or WFS's ability to perform its obligations under this Agreement. F. Trademarks. WFS owns each of the logos, which will be utilized in the Program free and clear of all liens, encumbrances, and claims of any kind. E-LOAN agrees to obtain WFS's prior specific written permission and approval for each intended use of WFS's trademark on marketing materials (whether written or electronic) and all forms. G. Compliance with Law. WFS shall perform all of its duties and obligations under this Agreement, and with respect to each Application, in compliance with all applicable Law. All Loan Documents and other disclosures required to be given by WFS comply with all applicable Federal and State Law and regulations for the protection of consumers or otherwise applicable. H. Year 2000 Compliance. WFS represents and covenants that it has developed and implemented a program to prepare its operations systems and applications for the year 2000, including those used to perform its obligations hereunder. In this connection, WFS's systems are capable of processing, on and after January 1, 2000, day and date related data consistent with the functionality of such systems and without a material adverse effect upon its performance of its obligations under this Agreement. I. Reliance. E-LOAN may rely upon the foregoing representations and warranties of WFS irrespective of any of the information or knowledge obtained by it of anything contrary to or inconsistent therewith. 8. Representations and Warranties of E-LOAN. E-LOAN represents and warrants to WFS, which representations and warranties shall be effective throughout the Term of this Agreement, as follows: A. Organization. E-Loan is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. E-LOAN has the full corporate power and authority to operate its business as and where its business is now conducted. B. Authorization; Enforceability. The execution, delivery and performance of this Agreement by E-LOAN and the consummation by E-LOAN of the transactions contemplated hereby are within the corporate power of E-LOAN and have been duly authorized by all necessary action by E-LOAN. This Agreement constitutes the valid and binding obligation of E-LOAN, enforceable against it in accordance with the terms hereof, subject only to bankruptcy, insolvency, reorganization, moratoriums or similar laws at the time in effect affecting the enforceability or rights of creditors generally. C. Absence of Conflicting Agreements. Neither the execution, delivery and performance of this Agreement by E-LOAN nor any aspect hereof will: (i) conflict with, result in a breach of, or constitute a default under the Articles of Incorporation or bylaws of E-LOAN or any Law applicable to E-LOAN, or any court or administrative order or process, or any contract, agreement, arrangement, commitment or plan to which E-LOAN or any Affiliate of E-LOAN is a party or by which they are bound ("E-LOAN Agreements"). (ii) require the consent of any other person or entity under any E-LOAN Agreement. D. Regulatory Authorization. E-LOAN is, and throughout the term of this Agreement will remain, duly authorized, properly licensed, and certified in good standing under all applicable Law to transact business as presently conducted and to perform the transactions contemplated under this Agreement, or is exempt from such licensing. E. Absence of Market Conduct Proceedings. There are no pending, or to the knowledge of E-LOAN, threatened investigations, proceedings, examinations, or market conduct reviews against E-LOAN or the Program, which if adversely decided, could significantly and negatively impact E-LOAN's ability to perform its obligations under this Agreement. F. Year 2000 Compliance. E-LOAN represents and covenants that it has developed and has implemented a program to prepare its operations systems and applications for the year 2000, including those used to perform its obligations hereunder. In this connection, E-LOAN's systems are capable of processing, on and after January 1, 2000, day and date related data consistent with the functionality of such systems and without a material adverse effect upon its performance of its obligations under this Agreement. Consumer Information. No consumer information will be obtained by fraud or fraudulent representations and no oral or written agreement exists or will exist whereby any of the consumer information forwarded to WFS will be varied in any way. Reliance . WFS may rely upon the foregoing representations and warranties of E-LOAN irrespective of any of the information or knowledge obtained by it of anything contrary to or inconsistent therewith. Ordinary Course of Business . The services to be performed by E-LOAN under this Agreement are in the ordinary course of the business of E-LOAN. J. Credit Information. E-LOAN has submitted to WFS all credit information furnished by or on behalf of each Applicant, whether favorable or unfavorable. To the best of E-Loan's knowledge, all of the information on each Application submitted by E-LOAN to WFS is true and accurate. Credit Application . With respect to each Application submitted by E-LOAN to WFS for its consideration, E-LOAN agrees and does hereby warrant, represent and covenant: (i) that to the best of E-LOAN's knowledge the information on the Application is accurately described, (ii) that E-LOAN has not altered any information in the Application without the Applicant's consent, as of the time E-LOAN submits it to the WFS, (iii) that E-LOAN has not received, directly or indirectly, and will refuse to accept any reimbursement or payment for the WFS Credit Application (other than from WFS), (iv) that all the statements made by the Applicant in the Application are true and complete to the best knowledge of E-LOAN and E-LOAN has timely disclosed to WFS any information of which it has actual knowledge pertaining to the eligibility of the Applicant, (v) that E-LOAN has complied with all applicable Law and regulations applicable to its services under this Agreement, including, without limitation, Equal Credit Opportunity Act ("ECOA"), the Fair Credit Reporting Act ("FCRA"), and Regulation B. Trademarks . E-LOAN owns each of its logos, which will be utilized in the Program free and clear of all liens, encumbrances, and claims of any kind. WFS agrees to obtain E-LOAN's prior specific written permission and approval for each intended use of E-LOAN's trademark on marketing materials (whether written or electronic) and all forms. M. Privacy. E-LOAN shall adopt and maintain a comprehensive privacy policy with respect to its handling of the nonpublic financial information of individual consumers, including information submitted by consumers who submit Applications to E-LOAN via the Internet or otherwise; shall make such privacy policy available on its Internet websites; and shall comply in all respects with the provisions of such privacy policy. N. Web Site. Access to and use of E-LOAN's Web site by consumers does not require proprietary or special software provided by E-LOAN, and E-LOAN provides the services offered to consumers through its Web site without any warranty to consumers of guaranteed access, or that the Web site services will be uninterrupted, timely, secure, or error free, or that any particular results may be obtained from the use of the Web site services. In connection with E-LOAN's Web site, E-LOAN shall undertake all security procedures that are reasonably sufficient (i) to ensure that all transmissions of data between consumers, E-LOAN and WFS are authorized, authentic, and have not been garbled or made unintelligible (either to a machine or a human, as applicable) and (ii) to protect both consumers' and WFS's data, private information and business records from improper access. WFS is entitled to act on transaction information provided by Applicants, including Applications received by E-LOAN through its Web site, and made available to WFS. Compliance . All dealings with the Applicant(s) regarding completion and execution of the Loan Documents comply with all applicable federal and state Law and regulations for the protection of consumers or otherwise applicable. All disclosures and notices required by Law will be completed with true and correct information and the disclosures will contain no misrepresentations. Vehicle Title . With respect to the Private Party/Person to Person Purchase Program, as described in Exhibit A1, any Vehicle described in the Loan Documents, title to which is required to be evidenced by a certificate of title issued by the state motor vehicle division or agency, or any other bureau, agency or jurisdiction, shall (a) have valid certificates of title issued thereof for which E-LOAN shall apply or cause to be made, evidencing each Borrower's ownership of the Vehicle and that WFS's lien to secure payment of the Loan is noted on such title as a valid, first lien on the Vehicle; and (b) that such Vehicle will be covered by valid, effective physical damage insurance at the time of the closing of the Loan (as evidenced by a valid insurance card or binder or other similar proof of insurance); and (c) E-LOAN agrees to furnish evidence of the application for title with WFS shown as loss payee at the time of disbursement of the Loan proceeds; and (d) the certificate of title showing WFS as the lienholder shall be forwarded to WFS by E-LOAN or state DMV, as the case may be, within one hundred and twenty (120) days from the date of the Loan. Confidentiality Requirements . The Parties may provide each other with information, whether in writing or orally, concerning each Party or its respective Affiliates that is proprietary and Confidential to such Party, including, but not limited to, past, current or possible future products, services, projects, business operations, marketing ideas, objectives, methodology, strategy, financial data and results, borrower and applicant information, credit underwriting models or criteria, competitive advantages and disadvantages, processes, technology, specifications, and "Trade Secrets" (defined herein) (collectively " Proprietary and Confidential Information"); provided however , that the term "Proprietary and Confidential Information" does not include information (a) which is (or which becomes) generally available to the public for legitimate reasons other than as a result of disclosure in breach of this Agreement, (b) which has been lawfully disclosed by a third party who did not impose any restriction on disclosure, (c) which has been independently developed by a Party or was rightfully possessed prior to the execution of this Agreement, (d) which is required to be disclosed by Law or court order, provided that the disclosing Party will exercise reasonable efforts to notify the other Party prior to disclosure. Except as otherwise provided in this Agreement, each Party agrees it will not without the other Party's prior written consent (i) disclose the specific terms of this Agreement except that either Party may make such disclosures as appropriate to its Affiliates, auditors, consultants, or regulatory agencies, or as compelled by law and may disclose in general terms the relationship resulting from this Agreement, or (ii) disclose to any third party any Proprietary and Confidential Information of the other Party for so long as the pertinent information or data remains Proprietary and Confidential Information, except as required to perform its obligations under this Agreement or except with the express written consent of the other Party or pursuant to a subpoena, including without limitation, an administrative subpoena, a court order or other order or demand of a governmental or regulatory agency or body. Each Party will take reasonable precautions to assure that Proprietary and Confidential Information received from the other Party will be held in confidence and disclosed only to those employees, agents or contractors of the receiving Party who have a reason to know of this Agreement or the Proprietary and Confidential Information or whose duties reasonably relate to legitimate business purposes or to develop, implement and perform the transactions contemplated by this Agreement. Each Party also agrees, upon the request of the other Party, to return or destroy any such Proprietary and Confidential Information of the other Party and any copies or reproductions thereof upon expiration or termination of this Agreement. "Trade Secrets" means business or technical information, including but not limited to a formula, pattern, program, device, compilation of information, method, technique, process or underwriting guideline that (a) derives independent actual or potential commercial value from not being generally known or readily ascertainable through independent development or reverse engineering by persons who can obtain economic value from its disclosure or use; and (b) is subject to protection under federal or state copyright or patent laws. "Confidential Information" means all information that is not generally known and that: (i) is obtained by E-LOAN from WFS, or by WFS from E-LOAN, that is learned, discovered, developed, conceived, originated, or prepared by either party during the process of fulfilling this Agreement and (ii) relates directly to the business or assets of either party. The terms "Confidential Information" shall include, but shall not be limited to: applicants, borrowers, guarantors, credit underwriting criteria, risk management credit scoring cards, customer, customer lists, inventions, ideas, discoveries, trade secretes, and know-how; computer software code, designs, routines, algorithms, and structures; product information and development; research and development information; financial data and information; business plans and process; statistical data, all documentation and other tangible or intangible disclosures, models, information; and any other information of either party which should be known, by virtue of its positions to be kept confidential. Each part acknowledges that all Confidential Information received from the other party or the other party's affiliates is strictly confidential, end each party shall take reasonable steps to implement any and all procedures necessary to safeguard the confidentiality of such Confidential Information. All Confidential Information is and shall remain the sole property of the party submitting the same, and each party agrees to observe reasonable confidentiality with respect to the Confidential Information of the other party and, upon request, to return such Confidential Information to its owners upon any termination. 10. TERM AND Termination. A. Term. Unless this Agreement is terminated as provided below, this Agreement shall have an initial term of ninety (90) days commencing on the Effective Date, and shall automatically renew for successive one (1) year term periods. B. Termination. This Agreement may be terminated only as follows: (1) By either Party at any time, for reason or no reason upon forty-five (45) days prior written notice after the initial ninety (90) day term has expired. (2) At any time by the Parties' mutual consent; (3) By either Party for a material breach of this Agreement; provided, the non-breaching Party seeking to terminate this Agreement has provided written notice of such material breach to the other Party, and the breaching Party fails to cure such material breach to the reasonable satisfaction of the non-breaching Party within thirty (30) days after receipt of such notice, provided, that if the breaching Party is making a good faith, diligent effort to cure such breach, then such thirty (30) day period shall be extended, but in no event for longer than an additional thirty (30) days, unless otherwise agreed to by the non-breaching Party; By either Party, immediately without any notice, upon the commencement of any insolvency, bankruptcy, receivership, liquidation or similar proceeding against the other Party; or (5) In the event of fraud or misrepresentation by one Party, the other Party may immediately terminate this Agreement. C. Effect of Termination. If the nonbreaching Party terminates this Agreement pursuant to a breach by the other Party, such termination shall not be the sole and exclusive remedy of the nonbreaching Party. The termination of this Agreement shall not affect the rights and obligations of the parties with respect to Applications that have been transferred ("Pipeline Applications") prior to the effective date of termination, or Service and Marketing Fees paid or owing for Pipeline Applications. 11. Indemnification. Indemnification by E-LOAN . E-LOAN shall indemnify, defend and hold WFS and its Affiliates and their respective employees, officers, directors and stockholders (collectively, "WFS Indemnified Parties" ) harmless from and against any and all losses, damages, costs, expenses, liabilities, obligations and claims of any kind, (including, without limitation, reasonable attorneys' fees and other legal costs and expenses) which WFS Indemnified Parties may at any time suffer or incur, or become subject to, as a result of or in connection with the breach or the failure of E-LOAN to: (a) properly discharge any of its duties or obligations under this Agreement and/or Program; or (b) comply with any and all covenants, conditions, warranties, representations, terms, conditions and limitations contained in this Agreement and/or Program. Indemnification by WFS . WFS shall indemnify, defend and hold E-LOAN and its Affiliates and their respective employees, officers, directors and stockholders (collectively, "E-LOAN Indemnified Parties" ) harmless from and against any and all losses, damages, costs, expenses, liabilities, obligations and claims of any kind (including, without limitation, reasonable attorneys' fees and other legal costs and expenses) which E-LOAN Indemnified Parties may at any time suffer or incur, or become subject to, as a result of or in connection with the breach or failure of WFS to: a) properly discharge any of its duties or obligations under this Agreement, and/or Program or (b) comply with any and all covenants, conditions, warranties, representations, terms, conditions and limitations contained in this Agreement and/or Program. C. Indemnification Procedure; Cooperation. A Party entitled to be indemnified pursuant to this Section 11 (the "Indemnified Party") hereunder shall notify the Party liable for such indemnification (the " Indemnifying Party") in writing within thirty (30) days of notice or assertion of such claim(s). Subject to the right of the Indemnifying Party's right to defend in good faith against claims asserted by third parties (including employment of counsel), the Indemnifying Party shall respond to its obligations under this Section 11 within thirty (30) days after receipt of written notice thereof from the Indemnified Party. If any litigation, lawsuit or other proceeding ("Proceeding") is initiated against either Party by a person or entity other than the Parties in connection with the Program, both Parties agree to cooperate with the other in good faith in defending against such Proceeding. This Section 11 shall survive termination of this Agreement. 12. Survival. The expiration or termination of this Agreement shall not affect the rights, covenants, agreements, terms, indemnifications, remedies, representations, warranties and obligations of the Parties with respect to transactions and occurrences which take place prior to the effective date of termination, except as otherwise provided in this Agreement. 13. Public Announcements. E-LOAN and WFS each agree to consult with each other prior to any public announcement to news organizations relating to this Agreement and/or the business relationship created herein and will mutually approve in writing the timing, content and method of dissemination of any such public announcement. 14. Use of Logos. During the term of this Agreement, E-LOAN may, with WFS's prior written approval, use (on a non-exclusive basis) tradenames, trademarks, logos or service marks owned by WFS or one of its Affiliates (the "WFS's Marks") solely in connection with the promotion of the Program (including, without limitation, on marketing materials, advertising and related printed materials used in connection with the Program). E-LOAN agrees that it does not have and by reason of this Agreement shall not acquire any proprietary right or rights in or to the WFS's Marks. E-LOAN agrees not to use the WFS's Marks in any ways which would disparage WFS or any of its Affiliates, be injurious to WFS's reputation or the reputation of any of its WFS Affiliates, or cause WFS or any of its Affiliates to lose goodwill. 15. Amendments. Except for the WFS Credit Products and Exhibit B which may be amended at WFS's sole discretion and Exhibit C which may be amended to delete states at WFS's sole discretion the Parties agree that this Agreement, together with any addenda, schedules, exhibits or other documents attached hereto, may be amended from time to time in writing by mutual agreement of the Parties and no party shall be bound by any change, alteration, amendment, modification or attempted waiver of any of the provisions hereof unless in writing and signed by an authorized officer of the Party against whom it is sought to be enforced. In the event of any conflict between the terms of this Agreement and the summary Program Description on Exhibit A or A1, the terms of this Agreement shall control. 16. Notices. All notices required or permitted under this Agreement must be in writing and shall be deemed effectively given: (i) upon delivery, when delivered personally against receipt therefor; (ii) upon delivery when sent by certified mail, postage prepaid and return receipt requested; (iii) upon transmission, when transmitted by telecopier, facsimile, telex or other electronic transmission method, provided that receipt is confirmed and notice is sent by certified mail, postage prepaid and return receipt requested; or (iv) upon delivery, when sent by Federal Express or other nationally recognized overnight delivery service. Any such notice shall be sent to the Party to whom notice is intended to be given at its address as shown below: If to E-LOAN: E-Loan, Inc. 5875 Arnold Road Dublin, CA 94568 Attention: Curtis Kuboyama Facsimile Number: 925-803-3507 With a copy to Ed Giedgowd, E-LOAN's Counsel, at the same address. If to WFS: WFS Financial Inc 15750 Alton Parkway Irvine CA 92618 Attention: Mark Marty Facsimile Number: 949-754-4855 with a copy to: WFS Financial Inc 23 Pasteur Irvine CA 92618 Attention: Lidia Klingler Facsimile Number: 949-753-3085 17. Independent Contractor Relationship. The relationship between E-LOAN and WFS is that of independent contractors and shall not be construed as a joint venture, partnership or principal-agent relationship, and under no circumstances shall any of the employees of one Party be deemed to be employees of the other Party for any purpose. This Agreement shall not be construed as authority for either Party to act for the other in any agency or any other capacity or to make commitments of any kind for the account of or on behalf of the other, except as expressly set forth in this Agreement. 18. Provisions Severable. If any provision of this Agreement shall be or become wholly or partially invalid, illegal or unenforceable, such provision shall be enforced to the extent that its legal and valid and the validity, legality and enforceability of the remaining provisions shall in no way be affected or impaired thereby. 19. Waivers; Remedies are Cumulative. No failure or delay by a Party to insist upon the strict performance of any term or condition under this Agreement or to exercise any right or remedy available under this Agreement at law or in equity, and no course of dealing between the Parties, shall imply or otherwise constitute a waiver of such right or remedy, and no single or partial exercise of any right or remedy by any Party will preclude any other or further exercise thereof. All rights and remedies provided in this Agreement are cumulative and not alternative; and are in addition to all other available remedies at law or in equity.   20. Captions; Sections. The captions or headings in this Agreement are for convenience only and shall not be considered a part of or affect the construction or interpretation of any provision of this Agreement. Any reference to a Section in this Agreement shall refer to all paragraphs and subparagraphs within that Section. 21. No Third Party Beneficiaries. Except as otherwise provided in this Agreement, nothing in this Agreement, express or implied, is intended or shall be construed to create any rights in, or confer any benefits upon, any person or entity other than the Parties to this Agreement. 22. Independent Counsel and Interpretation. Each Party acknowledges that its legal counsel participated in the preparation and drafting of this Agreement, and that each has been or has had the opportunity to be represented by counsel of its own choice throughout all negotiations which preceded the execution of this Agreement, and that they have executed this Agreement with the consent and upon the advice of said counsel. Accordingly, it is agreed that any legal rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not apply to the interpretation of this Agreement or any addenda, amendments or exhibits thereto to favor any Party against the other. LOAN-SOLICIATION . From the date of this Agreement until the respective Loan with WFS is paid in full, E-LOAN agrees that it and its Affiliates will not directly solicit any Borrower to apply for, or directly offer to such Borrower any financial products, the proceeds of which could be used to pay off or refinance such Borrower's respective Loan with WFS, including, without limitation, the solicitation or offering of any loan, line of credit, retail installment contract, home equity loan or line of credit, or any other credit product. Miscellaneous. This Agreement: (i) shall be binding on, inure to the benefit of and be enforceable by the parties and their respective heirs, successors and valid assigns; (ii) shall be governed by, construed under and enforced in accordance with the laws of the State of California (without regard to conflict of law principles); (iii) may be executed in multiple counterparts and by facsimile, each of which shall be deemed an original but all of which together shall constitute one and the same instrument; (iv) (together with all Exhibits and Schedules hereto), each of which is hereby incorporated into this Agreement, constitutes the entire agreement between the Parties relating to the subject matter hereof and there are no representations, warranties or commitments except as set forth herein, and this Agreement supersedes all prior understandings, negotiations and discussions, written or oral, of the Parties relating to the transactions contemplated by this Agreement; and (v) may be assigned by either Party only with the prior written consent of the other Party, which shall not be unreasonably withheld or delayed, provided , that such written consent shall not be required if a Party desires to assign this Agreement (a) pursuant to a reorganization or a sale of all or substantially all of the stock or assets of the assignor, or (b) to an Affiliate or successor which assumes and can fulfill all of the assigning Party's responsibilities hereunder. 25. NON SOLICITATION. During the term of this Agreement and for twelve (12) months thereafter, E-LOAN shall not, directly or indirectly, solicit any employee of WFS for employment with E-LOAN or with any other person, firm, company or corporation. During the term of this Agreement and for twelve (12) months thereafter, WFS shall not, directly or indirectly, solicit any employee of E-LOAN for employment with WFS or with any other person, firm, company or corporation. ATTORNEYS' FEES . If any action at law or in equity, including an action for declaratory relief, is brought to enforce or interpret the provisions of this Agreement, the prevailing party will be entitled to reasonable attorneys' fees, which may be set by the court in the same action or in a separate action brought for that purpose, in addition to any other relief to which that party may be entitled. IN WITNESS WHEREOF, the parties have executed this Financial Services Agreement effective as of the date first written above.   E-LOAN, INC. WFS FINANCIAL INC By: By: Name: Name: Title: Title: Date Date:   E-LOAN, INC. WFS FINANCIAL INC By: By: Name: Name: Title: Title: Date Date:       EXHIBIT A PROGRAM DESCRIPTION REFINANCE AND END OF TERM LEASE PURCHASE PROGRAM   [*] EXHIBIT A1 PROGRAM DESCRIPTION PRIVATE PARTY/PERSON TO PERSON PURCHASE PROGRAM [*] EXHIBIT B WFS FINANCIAL ELIGIBILITY CRITERIA NOTE: The Underwriting Guidelines outlined in this Exhibit are to be used as guidelines for determining which Applicant's are eligible for approval consideration. Traditional credit judgment criteria such as stability, probability of a skip hazard, etc. still apply - in other words, even though an Application may meet all of the qualifying criteria as described below for a particular program, it does not mean that the Application will be automatically approved, except as listed below under Superpreferred Pre-Approval Requirements. SCHEDULE A [*]           Exhibit B may be amended at WFS's sole discretion. Program Parameters: SCHEDULE B [*]                     Exhibit B may be amended at WFS's sole discretion. EXHIBIT C LIST OF STATES   Alabama Arizona California Colorado Connecticut Florida Georgia Idaho Illinois Indiana Iowa Kansas Kentucky Maryland Massachusetts Michigan Mississippi Missouri Nebraska Nevada New Hampshire New Mexico New York North Carolina Ohio Oklahoma Oregon Pennsylvania Rhode Island South Carolina Tennessee Texas Utah Virginia Washington West Virginia Wisconsin Wyoming                                 Exhibit C may be amended to delete states at WFS's sole discretion. EXHIBIT D PROGRAM MARKETING AND SERVICE FEE   WFS shall pay E-LOAN for each loan entered into between WFS and Borrower pursuant to the following Schedule C. On or before the 15th day of each month, WFS shall pay E-LOAN the aggregate Program Marketing and Service Fees for all Loans made in the prior calendar month pursuant to this Agreement. SCHEDULE C Program and Marketing Service Fee Per Loan Conversion Percentage [*] [*]     During the first ninety (90) days from the date the loan is entered into between WFS and Borrower (the "recapture period"), E-LOAN shall refund to WFS the Program Marketing and Service Fee paid to E-LOAN prorated based on the actuarial method if (i) the Borrower prepays the Loan in full before maturity, (ii) the Borrower defaults, (iii) a bankruptcy action is filed by or against Borrower or (iv) WFS repossess the vehicle, whether due to default in the terms of the Loan or by a voluntary repossession at the request of the Borrower.        

EXHIBIT 10.3k TERMINATION PROTECTION AGREEMENT   AGREEMENT effective June 23, 2000 between Harcourt General, Inc. and Michael F. Panutich (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 23, 2000 (the "Effective Date") and shall remain in effect until June 22, 2002 (the "Term"); provided, however, that commencing with June 23, 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 4.09% 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 23rd day of June, 2000. HARCOURT GENERAL, INC. /s/ Richard A. Smith             By: Richard A. Smith Title: Chairman of the Board /s/ Michael F. Panutich             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) 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

CATERPILLAR INC. 1996 STOCK OPTION AND LONG-TERM INCENTIVE PLAN (Amended and Restated as of 06/07/2000) Section 1.  Purpose     The Caterpillar Inc. 1996 Stock Option and Long-Term Incentive Plan ("Plan") is designed to attract and retain outstanding individuals as directors, officers and key employees of Caterpillar Inc. and its subsidiaries (collectively, the "Company"), and to furnish incentives to such individuals through awards based upon the performance of the Company and its stock. To this end, the Plan provides for grants of stock options, restricted stock, and performance awards, or combinations thereof, to non-employee directors, officers and other key employees of the Company, on the terms and subject to the conditions set forth in the Plan. Section 2.  Shares Subject to the Plan 2.1  Shares Reserved for Issuance     Twenty-four million shares of Company common stock ("Shares") shall be available for issuance under the Plan either from authorized but unissued Shares or from Shares acquired by the Company, including Shares purchased in the open market. An additional four million Shares authorized but unissued under prior Company stock option plans shall be available for issuance under this Plan. 2.2  Stock Splits/Stock Dividends     In the event of a change in the outstanding Shares of the Company by reason of a stock dividend, recapitalization, merger, consolidation, split-up, combination, exchange of shares, or similar event, the Compensation Committee ("Committee") of the Company's Board of Directors ("Board") shall take any action, which, in its discretion, it deems necessary to preserve benefits under the Plan, including adjustment to the aggregate number of Shares reserved for issuance under the Plan, the number and option price of Shares subject to outstanding options granted under the Plan and the number and price of Shares subject to other awards under the Plan. 2.3  Reacquired Shares     If Shares issued pursuant to the Plan are not acquired by participants because of lapse, expiration or termination of an award, such Shares shall again become available for issuance under the Plan. Shares tendered upon exercise of an option by a Plan participant may be added back and made available solely for future grants under the Plan. Section 3.  Administration     The Committee shall have the authority to grant awards under the Plan to officers and other key employees of the Company. Except as limited by the express provisions of the Plan or by resolutions adopted by the Board, the Committee also shall have the authority and discretion to interpret the Plan, to establish and revise rules and regulations relating to the Plan, and to make any other determinations that it believes necessary or advisable for administration of the Plan.     The Committee shall be composed solely of members of the Board that are outside directors, as that term is defined in Section 162(m) of the Internal Revenue Code. The Committee shall have no authority with respect to non-employee director awards under the Plan. 1 -------------------------------------------------------------------------------- Section 4.  Stock Options 4.1  Company Employees     (a)  Eligibility     The Committee shall determine Company officers and employees to whom options shall be granted, the timing of such grants, and the number of shares subject to the option; provided that the maximum number of Shares upon which options may be granted to any employee in any calendar year shall be 400,000.     (b)  Option Exercise Price     The exercise price of each option shall not be less than 100% of the fair market value of Shares underlying the option at the time the option is granted. The fair market value for purposes of determining the exercise price shall be the mean between the high and low prices at which Shares are traded on the New York Stock Exchange the day the option is granted. In the event this method for determining fair market value is not practicable, fair market value shall be determined by such other reasonable method as the Committee shall select.     (c)  Option Exercise     Options shall be exercisable in such installments and during such periods as may be fixed by the Committee at the time of grant. Options that are not incentive stock options as defined in Section 4.1(f) of the Plan shall not be exercisable after the expiration of ten years from the date of grant.     Payment of the exercise price shall be made upon exercise of all or a portion of any option. Such payment shall be in cash or by tendering Shares having a fair market value equal to 100% of the exercise price. The fair market value of Shares for this purpose shall be the mean between the high and low prices at which Shares are traded on the New York Stock Exchange on the date of exercise. Upon exercise of an option, any applicable taxes the Company is required to withhold shall be paid to the Company. Shares to be received upon exercise may be surrendered to satisfy withholding obligations.     (d)  Termination of Employment     The Committee may require a period of continued employment before an option can be exercised. That period shall not be less than one year, except that the Committee may permit a shorter period in the event of termination of employment by retirement or death.     Termination of employment with the Company shall terminate remaining rights under options then held; provided, however, that an option grant may provide that if employment terminates after completion of a specific period, the option may be exercised during a period of time after termination. That period may not exceed sixty months where termination of employment is caused by retirement or death or sixty days where termination results from any other cause. If death occurs after termination of employment but during the period of time specified, such period may be extended to not more than sixty-six months after retirement, or thirty-eight months after termination of employment for any other cause. In the event of termination within two years after a Change of Control as defined in Section 7.2 of the Plan, options shall be exercisable for a period of sixty months following the date of termination or for the maximum term of the option, whichever is shorter. Notwithstanding the foregoing, the Committee may change the post-termination period of exercisability of an option provided that change does not extend the original maximum term of the option.     (e)  Transferability of Options (i)  Except as otherwise permitted in Section 4.1(e)(ii), options shall not be transferable other than by will or the laws of descent and distribution or pursuant to a qualified domestic relations order as defined by the Internal Revenue Code or the Employee Retirement Income Security Act. Options 2 -------------------------------------------------------------------------------- are exercisable during the holder's lifetime only by the holder, unless the holder becomes incapacitated or disabled, in which case the option may be exercised by the holder's authorized representative. A holder may file with the Company a written designation of beneficiaries with the authority to exercise options in the event of the holder's death.      (ii)  Notwithstanding the provisions of Section 4.1(e)(i), and in addition to the permissible transfers under that provision, options granted to persons at the level of Vice President and above, as well as directors of this corporation and persons retired from those positions, may be transferred to any one or more "Permitted Transferees," as long as those options are not incentive stock options as defined below. Options granted to employees below the level of Vice President may be transferred upon prior approval of the Company's Director of Compensation and Benefits pursuant to the terms of this section.      (iii)  For purposes of Section 4.1(e)(ii), the term "Permitted Transferees" shall mean the individual to whom the option is granted; the lineal descendants of the individual to whom the option is granted; the spouses of the lineal descendants of the individual to whom the option is granted; the estate (and any trust that serves a distributive function of an estate) of the individual to whom the option is granted; and all trusts, corporations, partnerships, limited liability companies and other entities in which, directly or indirectly, but for the exercise of a power of appointment or the death of the survivor of the individuals who are Permitted Transferees, each owner of an equitable interest is an individual who is a Permitted Transferee.     (f)  Incentive Stock Options     Incentive stock options, as defined in Section 422 of the Internal Revenue Code, may be granted under the Plan. The decision to grant incentive stock options to particular persons is within the Committee's discretion. Incentive stock options shall not be exercisable after expiration of ten years from the date of grant. The amount of incentive stock options vesting in a particular year cannot exceed $100,000 per option recipient, based on the fair market value of the options on the date of grant; provided that any portion of an option that cannot be exercised as an incentive stock option because of this limitation may be converted by the Committee to another form of option. The Board may amend the Plan to comply with Section 422 of the Internal Revenue Code or other applicable laws and to permit options previously granted to be converted to incentive stock options. 4.2  Non-Employee Directors     (a)  Terms     Options with a term of ten years and one day are granted to each non-employee director for 4,000 Shares, effective as of the close of each annual meeting of stockholders at which an individual is elected a director or following which such individual continues as a director. Options granted to non-employee directors shall become exercisable by one-third at the end of each of the three successive one-year periods since the date of grant. The exercise price of each option shall be 100% of the fair market value of Shares underlying the option on the date of grant.     (b)  Termination of Directorship     An option awarded to a non-employee director may be exercised any time within 60 months of the date the director terminates such status. In the event of a director's death, the director's authorized representative may exercise the option within 60 months of the date of death, provided that if the director dies after cessation of director status, the option is exercisable within 66 months of such cessation. In no event shall an option awarded to a non-employee director be exercisable beyond the expiration date of that option. 3 -------------------------------------------------------------------------------- Section 5.  Restricted Stock 5.1  Company Employees     (a)  Eligibility     The Committee may determine whether restricted stock shall be awarded to Company officers and employees, the timing of award, and the conditions and restrictions imposed on the award.     (b)  Terms     During the restriction period, the recipient shall have a beneficial interest in the restricted stock and all associated rights and privileges of a stockholder, including the right to vote and receive dividends, subject to any restrictions imposed by the Committee at the time of grant.     The following restrictions will be imposed on Shares of restricted stock until expiration of the restriction period: (i)  The recipient shall not be entitled to delivery of the Shares;      (ii)  None of the Shares issued as restricted stock may be transferred other than by will or by the laws of descent and distribution; and      (iii)  Shares issued as restricted stock shall be forfeited if the recipient terminates employment with the Company, except for termination due to retirement after a specified age, disability, death or other special circumstances approved by the Committee.     Shares awarded as restricted stock will be issued subject to a restriction period set by the Committee of no less than two nor more than ten years. The Committee, except for restrictions specified in the preceding paragraphs, shall have the discretion to remove any or all of the restrictions on a restricted stock award whenever it determines such action appropriate. Upon expiration of the restriction period, the Shares will be made available to the recipient, subject to satisfaction of applicable tax withholding requirements. 5.2  Non-Employee Directors     (a)  On January 1 of each year, 400 Shares of restricted stock shall be granted to each director who is not currently an employee of the Company. The stock will be subject to a restriction period of three years from the date of grant. During the restriction period, the recipient shall have a beneficial interest in the restricted stock and all associated rights and privileges of a stockholder, including the right to vote and receive dividends.     The following restrictions will be imposed on restricted stock until expiration of the restricted period: (i)  The recipient shall not be entitled to delivery of the Shares;      (ii)  None of the Shares issued as restricted stock may be transferred other than by will or by the laws of descent and distribution; and      (iii)  Shares issued as restricted stock shall be forfeited if the recipient ceases to serve as a director of the Company, except for termination due to death, disability, or retirement under the Company's Directors' Retirement Plan.     Upon expiration of the restriction period, the Shares will be made available to the recipient, subject to satisfaction of applicable tax withholding requirements.     (b)  Each January 1st, 350 shares of restricted stock, in addition to shares described in Section 5.2(a), shall be awarded to each director who is not currently and has not been an employee of the Company. Shares awarded under this Section 5.2(b) will be held in escrow until the director terminates service with 4 -------------------------------------------------------------------------------- the Company. During the restriction period, the recipient shall have a beneficial interest in the restricted stock and all associated rights and privileges of a stockholder except as discussed below.     The following restrictions will be imposed on restricted stock awarded under this Section 5.2(b) until it is made available to the recipient: (i)  The recipient shall not receive dividends on the shares, but an amount equal to such dividends will be credited to the director's stock equivalent account in the Company's Directors' Deferred Compensation Plan;      (ii)  The recipient shall not be entitled to delivery of the shares;      (iii)  None of the shares awarded may be transferred other than by will or by the laws of descent and distribution; and      (iv)  The right to receive shares shall be subordinate to the claims of general creditors of the Company.     Upon termination of service, restricted shares will be made available to the recipient subject to satisfaction of applicable tax withholding requirements; provided, however, that if the recipient has not served on the Board for at least five years at the time of such termination, all restricted shares awarded under this Section 5.2(b) shall be forfeited.     Pursuant to termination of the Company's Directors' Retirement Plan effective December 31, 1996, each director continuing in office was awarded an amount of restricted stock equal to the accumulated value of past pension accruals as determined by the Company's actuary. Those shares will be subject to the same restrictions as shares awarded annually pursuant to this Section 5.2(b). Section 6.  Performance Awards 6.1  Eligibility and Terms     The Committee may grant awards to officers and other key employees ("Performance Awards") based upon Company performance over a period of years ("Performance Period"). The Committee shall have sole discretion to determine persons eligible to participate, the Performance Period, Company performance factors applicable to the award ("Performance Measures"), and the method of Performance Award calculation.     At the time the Committee establishes a Performance Period for a particular award, it shall also establish Performance Measures and targets to be attained relative to those measures ("Performance Targets"). Performance Measures may be based on any of the following factors, alone or in combination, as the Committee deems appropriate: (i) return on assets; (ii) return on equity; (iii) return on sales; (iv) total shareholder return; (v) cash flow; (vi) economic value added; and (vii) net earnings. Performance Targets may include a minimum, maximum and target level of performance with the size of Performance Awards based on the level attained. Once established, Performance Targets and Performance Measures shall not be changed during the Performance Period; provided, however, that the Committee may eliminate or decrease the amount of a Performance Award otherwise payable to a participant. Upon completion of a Performance Period, the Committee shall determine the Company's performance in relation to the Performance Targets for that period and certify in writing the extent to which Performance Targets were satisfied. 6.2  Payment of Awards     Performance Awards may be paid in cash, Shares of restricted stock (pursuant to terms applicable to restricted stock awarded to Company employees as described in the Plan) or a combination thereof, as determined by the Committee. Performance Awards shall be made not later than 90 days following the end 5 -------------------------------------------------------------------------------- of the relevant Performance Period. The fair market value of a Performance Award payment to any individual employee in any calendar year shall not exceed $2.5 million. The fair market value of Shares to be awarded shall be determined by the average of the high and low price of Shares on the New York Stock Exchange on the last business day of the Performance Period. Federal, state and local taxes will be withheld as appropriate. 6.3  Termination     To receive a Performance Award, the participant must be employed by the Company on the last day of the Performance Period. If a participant terminates employment during the Performance Period by reason of death, disability or retirement, a payout based on the time of employment during the Performance Period shall be distributed. Participants employed on the last day of the Performance Period, but not for the entire Performance Period, shall receive a payout prorated for that part of the Performance Period for which they were participants. If the participant is deceased at the time of Performance Award payment, the payment shall be made to the recipient's designated representative. Section 7.  Election to Receive Non-Employee Director Fees in Shares     Effective April 8, 1998, non-employee directors shall have the option of receiving all or a portion of their annual retainer fees, as well as fees for attendance at meetings of the Board and committees of the Board (including any Committee Chairman stipend), in the form of Shares.     The number of Shares that may be issued pursuant to such election shall be based on the amount of cash compensation subject to the election divided by the fair market value of one Share on the date such cash compensation is payable. The fair market value shall be the mean between the high and low prices at which shares are traded on the New York Stock Exchange on payable date.     Shares provided pursuant to the election shall be held in book-entry form by the Company on behalf of the non-employee director. Upon request, the Company shall deliver Shares so held to the non-employee director. While held in book-entry form, the Shares shall have all associated rights and privileges, including voting rights and the right to receive dividends. Section 8.  Change of Control 8.1  Effect on Grants and Awards     Unless the Committee shall otherwise expressly provide in the agreement relating to a grant or award under the Plan, upon the occurrence of a Change of Control as defined below: (i) all options then outstanding under the Plan shall become fully exercisable as of the date of the Change of Control; (ii) all terms and conditions of restricted stock awards then outstanding shall be deemed satisfied as of the date of the Change of Control; and (iii) all Performance Awards for a Performance Period not completed at the time of the Change of Control shall be payable in an amount equal to the product of the maximum award opportunity for the Performance Award and a fraction, the numerator of which is the number of months that have elapsed since the beginning of the Performance Period through the later of (A) the date of the Change of Control or (B) the date the participant terminates employment, and the denominator of which is the total number of months in the Performance Period; provided, however, that if this Plan shall remain in force after a Change of Control, a Performance Period is completed during that time, and the participant's employment has not terminated, this provision (iii) shall not apply. 8.2  Change of Control Defined     For purposes of the Plan, a "Change of Control" shall be deemed to have occurred if:     (a)  Any person becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 15 percent or more of the combined voting 6 -------------------------------------------------------------------------------- power of the Company's then outstanding common stock, unless the Board by resolution negates the effect of this provision in a particular circumstance, deeming that resolution to be in the best interests of Company stockholders;     (b)  During any period of two consecutive years, there shall cease to be a majority of the Board comprised of individuals who at the beginning of such period constituted the Board;     (c)  The shareholders of the Company approve 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) less than fifty percent 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)  Company shareholders approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of its assets. Section 9.  Amendment and Termination     The Board may terminate the Plan at any time, except with respect to grants and awards then outstanding. The Board may amend the Plan without shareholder approval, unless such approval is necessary to comply with applicable laws, including provisions of the Exchange Act or Internal Revenue Code. Section 10.  Regulatory Compliance     Notwithstanding any other provision of the Plan, the issuance or delivery of any Shares may be postponed for such period as may be required to comply with any applicable requirements of any national securities exchange or any requirements under any other law or regulation applicable to the issuance or delivery of such Shares. The Company shall not be obligated to issue or deliver any Shares if such issuance or delivery shall constitute a violation of any provision of any law or regulation of any governmental authority or national securities exchange. Section 11.  Effective Date     The Plan shall be effective upon its approval by the Company's stockholders at the 1996 Annual Meeting of Stockholders. 7 --------------------------------------------------------------------------------

______________                                                                                                                                      ________________ WARRANT NO.                                                                                                                                      NUMBER OF SHARES                                     THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE UNITED                                     STATES SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE                                     SOLD, HYPOTHECATED OR OTHERWISE TRANSFERRED OR                                     DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION, UNLESS                                     AN EXEMPTION FROM THE REQUIREMENT OF SUCH REGISTRATION                                     IS AVAILABLE UNDER THE CIRCUMSTANCES AT THE TIME OBTAINING. VOID AFTER 5:00 P.M. DECEMBER 31, 2003 PEASE OIL AND GAS COMPANY COMMON STOCK PURCHASE WARRANT         PEASE OIL AND GAS COMPANY, a NEVADA corporation (“Pease” or the “Company”), hereby certifies that, __________________, with an address of ________________________, _______, _____________, or ___ permitted assigns, for valuable consideration received, is entitled, subject to the terms and conditions herein set forth, to purchase from the Company up to _____ fully paid and nonassessable shares of Common Stock, $0.01 par value per share, of the Company, at the per share purchase price of $0.50 per share (the “Purchase Price”), at any time or from time to time on or after the date hereof and up to 5:00 p.m. December 31, 2003 (the “Expiration Date”). The number and character of such shares of Common Stock are subject to adjustment as provided herein.         1. Definitions. As used herein, unless the context otherwise requires, the following terms have the following respective meanings:           (a) “Act” shall mean the Securities Act of 1933, as amended.           (b) “Additional Shares of Common Stock” shall mean all shares (including treasury shares) of Common Stock issued or sold (or, pursuant to Section 3.7 hereof, 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 issuable pursuant to this Warrant.           (c) “Adjusted Exercise Price” shall have the meaning specified in Section 3.2 hereof.           (d) “Company” means Pease Oil and Gas Company or any corporation which shall succeed to or assume the obligations of Pease Oil and Gas Company hereunder.           (e) “Common Stock” shall mean the Common Stock, par value $0.10 per share, of the Company and any stock into which such common stock shall have been changed or any stock resulting from any reclassification of such common stock, and shall include all other stock of any class (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 of any shares entitled to preference.           (f) “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 Common Stock, other than any securities issuable pursuant to this Warrant.           (g) “Market Price”, as used with reference to any share of stock on any specified date, shall mean:   (i) if such stock is listed and registered on any national securities exchange or traded on The Nasdaq Stock Market (“Nasdaq”) or the OTC Bulletin Board (“OTCBB”), (A) the last reported sale price on such exchange or Nasdaq or OTCBB of such stock on the business day immediately preceding the specified date, or (B) if there shall have been no such reported sale price of such stock on the business day immediately preceding the specified date, the average of the last reported sale price on such exchange or on Nasdaq or the OTCBB on (x) the day next preceding the specified date for which there was a reported sale price and (y) the day next succeeding the specified date for which there was a reported sale price; or   (ii) if such stock is not at the time listed on any such exchange or traded on Nasdaq or the OTCBB but is traded on the over-the-counter market as reported by the National Quotation Bureau or other comparable service, (A) the average of the closing bid and asked prices for such stock on the business day immediately preceding the specified date, or (B) if there shall have been no such reported bid and asked prices for such stock on the business day immediately preceding the specified date, the average of the last bid and asked prices on (x) the day next preceding the specified date for which such information is available and (y) the day next succeed ing the specified date for which such information is available; or   (iii) if clauses (i) and (ii) above are not applicable, the fair value per share of such stock as determined in good faith and on a reasonable basis by the Board of Directors of the Company and, if requested, set forth in a certificate delivered to the holder of this Warrant upon the exercise hereof.           (h) “Options” shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire either Common Stock or Convertible Securities.           (i) “Other Securities” shall mean any stock and other securities of the Company or any other person (corporate or otherwise) which the holders of this Warrant at any time shall be entitled to receive, or shall have received, upon the exercise of this Warrant, in lieu of or in addition to the Common Stock, or which at any time shall be issuable or shall have been issued to holders of the Common Stock in exchange for, in addition to or in replace ment of the Common Stock or Other Securities pursuant to Section 3.5 or otherwise.           (j) “Purchase Price” shall mean $0.50 per share, subject to adjustment as provided herein.         2. Exercise of Warrant.         2.1. Manner of Exercise.           (a) This Warrant may be exercised by the holder hereof, in whole or in part (but not as to fewer than 10,000 shares of the Common Stock unless, at the time of exercise, this Warrant entitles the holder to purchase fewer than 10,000 shares of the Common Stock), on any business day on or after the date hereof and before the Expiration Date, 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 its office in Grand Junction, Colorado, and, except as otherwise provided in Section 2.1 (b), accompanied by payment, by certified or official bank check payable to the order of the Company, in the amount obtained by multiplying (x) the number of shares of the Common Stock (without giving effect to any adjustment therein) designated in such form of subscription (or such reasonable facsimile) by (y) the Purchase Price, and such holder shall thereupon be entitled to receive the number of shares of the Common Stock determined as provided hereunder.           (b) The exercise price of this warrant may be paid, at the election of the holder in accordance with Section 2.1 (a) by delivering to the Company fully paid shares of the Company's common stock, which shall be valued at the Market Price on the day preceding the delivery and the value of the shares delivered may be used for the exercise of this Warrant at the Purchase Price.         2.2. When Exercise Effective. Each exercise of this Warrant shall be deemed to have been effected 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 2.1, and the person(s) in whose name(s) the certificate(s) for shares of the Common Stock (or Other Securities) that are to be issued upon such exercise in accordance with Section 2.3 shall be deemed the holder(s) of record thereof at such time.         2.3. Delivery of Stock Certificates, etc. As soon as practicable after the exercise of this Warrant in full or in part in accordance herewith the Company, at its expense (including the payment by it of any applicable issue taxes), will cause to be issued in the name of and delivered to the holder hereof, or as such holder (upon payment by such holder of any applicable transfer taxes) may direct,           (a) a certificate or certificates, marked with an appropriate legend referring to the terms of this Warrant and any applicable restrictions on such shares imposed by the Federal or any state securities laws, for the number of full shares of the Common Stock (or Other Securities) to which such holder shall be entitled upon such exercise plus, in lieu of any fractional share to which such holder would otherwise be entitled, cash in an amount equal to the same fraction of the Market Price of one full share of the Common Preferred Stock on the business day next preceding the date of such exercise, and           (b) in case such exercise is in part only, a new Warrant or Warrants of like tenor, calling in the aggregate on the face or faces thereof for the number of shares of the Common Stock equal (without giving effect to any adjustment therein) to the number of such shares called for on the face of this Warrant minus the number of shares designated by the holder upon such exercise as provided in Section 2.1.         3. Common Stock Issuable Upon Exercise..         3.1. General. The number of shares of the Common Stock which the holder of this Warrant shall be entitled to receive upon the exercise hereof or, if securities or other property in addition to or in lieu of the Common Stock shall by reason of the operation of the provisions of this Section be issuable upon such exercise, the amount and kind of such securities or other property, shall be adjusted or determined as provided in this Section 3.         3.2. Adjusted Exercise Price. The number of shares of the Common Stock which the holder of this Warrant shall be entitled to receive upon the exercise hereof shall be determined by multiplying the number of shares of the Common Stock which, but for the provisions of this Section 3, would otherwise be issuable upon such exercise, as designated by the holder hereof pursuant to Section 2.1, by the fraction of which the numerator is the per share Purchase Price and the denominator is the per share Adjusted Exercise Price (as herein defined) in effect on the date of such exercise. The per share Adjusted Exercise Price of the Common Stock shall initially be the Purchase Price (as defined in Section 1) and shall be adjusted and readjusted from time to time as provided in this Section 3 (and, as so adjusted or readjusted, shall remain in effect until a further adjustment or readjustment thereof is required by this Section 3).         3.3. 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 on the Common Stock payable in Common Stock, or effect a subdivision of the outstanding shares of the Common Stock into a greater number of shares of the Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock), then, in any such event, the per share Adjusted Exercise Price per share shall be adjusted effective as of the close of business on (i) the record date for the determination of shareholders entitled to receive such dividend if such dividend is in fact paid, or (ii) the day immediately preceding the day upon which such subdivision shall become effective (any such day, as the case may be, shall be referred to herein as the “Subdivision Effective Date”), by multiplying the per share Adjusted Exercise Price in effect immediately prior to the Subdivision Effective Date by the fraction of which (x) the numerator shall be the number of shares of the Common Stock outstanding immediately prior to the Subdivision Effective Date and (y) the denominator shall be the number of shares of the Common Stock outstanding immediately prior to the Subdivision Effective Date plus the number of shares of the Common Stock issuable upon the payment of such dividend or the consummation of such subdivision, as the case may be.         3.4. Adjustments for Combinations, etc. In case the outstanding shares of the Common Stock shall be combined or consolidated, by reclassification or otherwise, into a lesser number of shares of Common Stock, the Adjusted Exercise Price shall be adjusted, effective as of the close of business on the day immediately preceding the day upon which such combination or consolidation is effective (the “Combination Effective Date”), by multiplying the per share Adjusted Exercise Price in effect immediately prior to the Combination Effective Date by the fraction of which (x) the numerator shall be the number of shares of the Common Stock outstanding immediately prior to the Combination Effective Date and (y) the denominator shall be the number of shares of the Common Stock outstanding immediately after the Combination Effective Date.         3.5. Adjustments for Consolidation, Merger, Sale of Assets, Reorganization, etc. In case the Company, after the date hereof, (a) shall consolidate with or merge into any other person and shall not be the continuing or surviving corporation of such consolidation or merger, or (b) shall permit any other person to consolidate with or merge into the Company and the Company shall be the continuing or surviving person but, in connection with such consolidation or merger, the Common Stock shall be changed into or exchanged for stock or other securities or property of any other person, or (c) shall effect a capital reorganization or reclassification of the Common Stock (other than a reclassification subject to Sections 3.3 or 3.4), then, and in each such case, proper provision shall be made so that the holder of this Warrant, upon the exercise hereof at any time after the consummation of such consolidation, merger, reorganization or reclassification, shall be entitled to receive, in lieu of the Common Stock (or Other Securities) issuable upon such exercise prior to such consummation, the stock and other securities and property to which such holder would have been entitled upon such consummation if such holder had so exercised this Warrant immediately prior thereto, subject to adjustments (subsequent to such corporate action) as nearly equivalent as possible to the adjustments provided for in this Section 3.         4. No Dilution or Impairment. The Company will not, by amendment of its articles of organization or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holder of this Warrant against dilution or other impairment.         5. Notices of Record Date, etc. In the event of           (a) any taking by the Company 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 or other distribution, or any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right, or           (b) any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company or any transfer of all or substantially all the assets of the Company to any other person or any consolidation or merger involving the Company and any other person, or           (c) any voluntary or involuntary dissolution, liquidation or winding-up of the Company, the Company will give to the holder of this Warrant a notice specifying (i) the date or expected date on which any such record is to be taken for the purpose of such dividend, distribution or right, and stating the amount and character of such dividend, distribution or right, and (ii) the date or expected date on which any such reorganization, reclassification, recapitalization, transfer, consolidation, merger, dissolution, liquidation or winding-up is to take place and the time, if any such time is to be fixed, as of which the holders of record of the Common Stock (or Other Securities) shall be entitled to exchange their shares of the Common Stock (or Other Securities) for securities or other property deliverable upon such reorganization, reclassification, recapitaliza tion, transfer, consolidation, merger, dissolution, liquidation or winding-up. Unless otherwise required by law to be given sooner, such notice shall be mailed within a reasonable time prior to the date therein specified.         6. Reservation of Stock, etc. The Company will at all times reserve and keep available out of its authorized but unissued Common Stock, solely for issuance and delivery upon the exercise of this Warrant, the full number of shares of Common Stock (or Other Securities) then issuable upon the exercise of this Warrant. All shares of the Common Stock issuable upon the exercise of this Warrant shall be duly authorized, and when issued and paid for in full, validly issued, fully paid and non-assessable with no liability on the part of the holders thereof.         7. Registration Rights.           (a) Definitions. For purposes of this Section 7, the following terms shall have the following respective meanings:   (i) “Commission” shall mean the United States Securities and Exchange Commission or any other Federal agency at the time administering the Act.   (ii) The term “holder or holders of Registrable Stock” shall mean the holders of Common Stock or Other Securities issued pursuant to this Warrant.   (iii) The terms “register,” “registered” and “registration” refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the Act, and the declaration or ordering of effectiveness of such registration statement or document by the Commission.   (iv) The term "Registration Period" shall mean the period commencing on the date hereof and ending (a) if this Warrant shall expire without having been exercised in whole or in part, the Expiration Date or (b) if this Warrant shall have been exercised in whole or in part, at such time as all shares of Registrable Stock have been sold by the initial holder or can be sold publicly without registration under the Act.   (v) The term "Registrable Stock" means (a) the shares of Common Stock issued or issuable upon the exercise of this Warrant, and (b) any Other Securities issued or issuable pursuant to this Warrant; provided, however, that shares of Registrable Stock shall cease to be Registrable Stock if they are sold or transferred pursuant to a registered public offering or other transaction which does not result in restrictions on resale being imposed on the transfer by virtue of Federal or state securities laws; and provided further that Registrable Stock shall cease to be Registrable Stock if the holder could sell or transfer such securities held by him in one or more transactions pursuant to Rule 144 promulgated under the Act.           (b) Registration.   (i) The Company shall use its best commercial efforts to file, by April 15, 2001, and shall use its best commercial efforts to cause to become effective as soon as practicable, a registration statement on Form S-3, or if Form S-3 is not then available, another appropriate form, covering all the Registrable Stock (the "Initial Registration"). In the event such registration is not so declared effective or does not include all Registrable Stock, a holder of Registrable Stock shall have the right to require by notice in writing that the Company register all or any part of the Registrable Stock held by such holder (a Demand Registration") and the Company shall thereupon effect such registration in accordance herewith (which may include adding such shares to an existing shelf registration). The parties agree that if the holder of Registrable Stock demands registration of less than all of the Registrable Stock, the Company, at its option, may nevertheless file a registration statement covering all of the Registrable Stock. If such registration statement is declared effective with respect to all Registrable Stock and the Company is in compliance with its obligations under Subsection (c) hereof, the demand registration rights granted pursuant to this Subsection (b) shall cease. If such registration statement is not declared effective with respect to all Registrable Stock the demand registration rights described herein shall remain in effect until all Registrable Stock have been registered under the Act. The Company shall provide holders of Registrable Stock reasonable opportunity to review any such registration statement or amendment or supplement thereto prior to the filing thereof, but in no event shall such period exceed seven (7) days. If the Registrable Stock is registered initially on a form other than Form S-3, the Company shall register the Registrable Stock on Form S-3 as soon as use of such form is permissible.   (ii) The Company shall not be obligated to effect Demand Registration under Subsection (b)(i) if all of the Registrable Stock held by the holder of Registrable Stock which are demanded to be covered by the Demand Registration are, at the time of such demand, included in an effective registration statement and the Company is in compliance with its obligations under Subsection (c) hereof.   (iii) The Company may suspend the effectiveness of any such registration effected pursuant to this Subsection (b) in the event, and for such period of time as, such a suspension is required by the rules and regulations of the Securities and Exchange Commission (“SEC”). The Company will use its best efforts to cause such suspension to terminate at the earliest possible date.           (c) Covenants of the Company with Respect to Registration. In connection with any registration under this Section 7, the Company shall, as expeditiously as is reasonably possible:   (i) Prepare and file with the Commission a registration statement with respect to the Participating Holders' Registrable Stock and use its best reasonable efforts to cause such registration statement to become effective.   (ii) Prepare and file with the Commission such amendments and supplements to such registration statement and prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Act with respect to the disposition of all securities covered by such registration statement.   (iii) Furnish to the Participating Holders such numbers of copies of a prospectus, including, if applicable, a preliminary prospectus, in conformity with the requirements of the Act, and such other documents as the selling shareholders may reasonably request in order to facilitate the disposition of Registrable Stock owned by the Participating Holders.   (iv) Use its best reasonable efforts to register and qualify the securities covered by such registration statement under such other securities or blue sky laws of such jurisdictions within the United States as shall be reasonably requested by the Participating Holders; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions.   (v) In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter of such offering. The Participating Holders shall also enter into and perform their obligations under such an agreement.   (vi) Notify the Participating Holders, at any time when a prospectus relating to Registrable Stock covered by such registration statement is required to be delivered under the Act, of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing.   (vii) Furnish to the Participating Holders, on the date that shares of Registrable Stock are delivered to the underwriters for sale in connection with a registration pursuant to this Section 7, if such securities are being sold by underwriters, or, on the date that the registration statement with respect to such securities becomes effective, (i) an opinion as to matters of law only, dated such date, of counsel representing the Company for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering, addressed to the underwriters, if any, and to the Participating Holders and (ii) a letter dated such date, from the independent certified public accountants of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, addressed to the underwriters, and to the Participating Holders.           (d) Costs and Expenses. The Company shall pay all costs, fees and expenses in connection with all registration statements filed under this Section 7 including, without limitation, the Company's legal and accounting fees, printing expenses and blue sky fees and expenses, but not including the fees and expenses of counsel for the Participating Holders in connection with such registration. However, the Company shall not pay for underwriting discounts and commissions and underwriters' expenses allocable to the Registrable Stock being registered or state transfer taxes.           (e) Indemnification.   (i) The Company shall indemnify each Participating Holder under this Agreement, its officers and directors and any person controlling it within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, against any loss, claim, damage, expense or liability (including without limitation all expenses reasonably incurred in investigating, preparing, or defending against any claim whatsoever, such expenses to be reimbursed by the Company as they are incurred) to which it may become subject under the Act, the Exchange Act or otherwise, arising out of or based upon (i) any untrue statement or alleged untrue statement of a material fact contained in any registration statement or prospectus or any amendments or supplements thereto in which Registrable Stock is included or in any application, statement or other document filed by the Company with the Commission or any securities exchange or in any jurisdiction in connection with qualifying such shares under the securities laws thereof, or (ii) the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading, unless such statement or omission is made in reliance upon and in conformity with written information furnished to the Company by or on behalf of such Participating Holder or an underwriter expressly for use in any such registration statement or other document.   (ii) Each Participating Holder shall, as a condition to such registration of Registrable Stock, agree to indemnify the Company, its officers and directors and any person controlling the Company within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, against any loss, claim, damage or expense or liability (including without limitation all expenses reasonably incurred in investigating, preparing or defending against any claim whatsoever, such expenses to be reimbursed by the undersigned as they are incurred) to which they may become subject under the Act, the Exchange Act or otherwise, arising out of or based upon (i) any untrue statement or alleged untrue statement of a material fact contained in any registration statement or prospectus or any amendments or supplements thereto in which Registrable Stock is included or in any application, statement or other document filed by the Company with the Commission or any securities exchange or in any jurisdiction in connection with qualifying such shares under the securities laws thereof, or (ii) the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading, provided in each case that such statement or omission is made in reliance upon and in conformity with written information furnished to the Company by or on behalf of such Participating Holder expressly for use in any such registration statement or other document, or (iii) any misuse by the Participating Holder of any prospectus included in the registration statement or any violation of the Act by the Participating Holder in connection with the sale or distribution of his or her Registrable Stock under the registration statement.   (iii) Promptly upon receipt by a party claiming indemnification hereunder of notice of the commencement of any action involving a claim referred to above, such indemnified party will, if a claim in respect thereof is to be made against a party which may be required to indemnify such party hereunder, give written notice to the latter of the commencement of such action. In case any such action is brought against an indemnified party, the indemnifying party shall be entitled to participate in and to assume the defense of such action, to the extent that it may wish, with counsel reasonably satisfactory to such indemnified party. Except as set forth herein, the indemnified party and any party cooperating in the defense of such claim shall not settle or compromise any such claim or admit liability without the express written consent of the indemnifying party. The indemnified party shall have the right to be represented by an advisory counsel and accountants, at its own expense, and the indemnified party shall be kept fully informed of such action, suit or proceeding at all stages thereof whether or not the indemnified party is so represented. After a period of thirty days following the date the written notice of such claim was given to the indemnifying party the indemnified party may settle any such claim (and the amount of any such settlement shall be subject to indemnification hereunder) unless within such thirty-day period the indemnifying party shall have provided the indemnified party with notice and evidence to the indemnified party's satisfaction that the indemnifying party reasonably disputes such claim and has the financial ability to meet its indemnification obligations hereunder. Notwithstanding the foregoing, the indemnified party may immediately cause to be paid or discharged any asserted claim the nonpayment of which would have an immediate substantial adverse impact on the indemnified party and any claim which the indemnifying party has not disputed within thirty days of notice as provided above.   (iv) If the indemnification provided for in this Section 7(e) is unavailable or insufficient to hold harmless an indemnified party under such subsection in respect of any losses, claims, damages or liabilities or action in respect thereof or referred to therein, then each indemnifying party shall in lieu of indemnifying such indemnified party contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or actions in such proportion as is appropriate to reflect the relative fault of the Company, on the one hand, and the Participating Holders, on the other, in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or actions as well as any other relevant equitable considerations, including the failure to give the notice required under such subsections. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact relates to information supplied by the Company on the one hand, or the Participating Holders, on the other hand, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Participating Holders agree that it would not be just and equitable if contribution pursuant to this Section 7(e)(iv) were determined by pro rata allocation or by any other method of allocation which did not take account of the equitable considerations referred to above in this subsection. No person guilty of fraudulent misrepresentations (within the meaning of Section 11(f) of the Securities Act), shall be entitled to contribution from any person who is not guilty of such fraudulent misrepresentations.   (v) The obligations of the Company and the Participating Holders under this Section 7(e) shall survive the completion of any offering of Registrable Stock in a registration statement under this Section 7.   (vi) The rights of indemnification contained in this Section 7 shall not be deemed to be the exclusive remedy of the parties hereto and such rights shall be in addition to any other rights or remedies which any party hereto may have at law or equity.           (f) Assignment of Registration Rights. The undersigned's rights set forth in this Section 7 shall automatically be deemed assigned to any transferee or assignee of this Warrant or shares of Common Stock or Other Securities issuable hereunder, provided that immediately following such transfer the further disposition of such securities by the transferee or assignee is restricted under the Act; provided however, that, the termination of registration rights in respect of any shares of Registrable Stock shall be binding upon any transferee of such shares. Upon the request of any such holder, the Company will confirm in writing to any transferee of such holder's Registrable Stock the Company's continuing obligation to afford such transferee the benefits of the Company's agreements contained in this Section 7, but no failure of the Company to confirm such obligations shall in any way impair such transferee's rights under this Section 7.         8. Substitution of Warrants.         8.1. Exchange of Warrants. Subject to the provisions appearing at the top of the first page of this Warrant concerning, inter alia, the sale, transfer, encumbrance or other disposition of this Warrant, upon surrender or exchange of this Warrant, properly endorsed, to the Company, the Company at its expense will issue 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 Common Stock called for on the face or faces of the Warrant or Warrants so surrendered.         8.2. Replacement of Warrant. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of any such loss, theft or destruction, upon delivery of an indemnity agreement reasonably satisfactory to the Company, or, in the case of any such mutilation, upon surrender and cancellation of such Warrant, the Company at its expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.         9. Ownership of Warrant. Until this Warrant is transferred on the books of the Company, the Company may treat the person in whose name this Warrant is issued as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary, except that, if and when this Warrant is properly assigned in blank, the Company may (but shall not be obligated to) treat the bearer hereof as the absolute owner of this Warrant for all purposes, notwithstanding any notice to the contrary. A Warrant, if properly assigned, may be exercised to the extent provided herein by a new holder without first having a new Warrant issued.         10. Notices, etc. All notices and other communications from the Company to the holder of this Warrant or from the holder of this Warrant shall be delivered personally, by facsimile (if confirmed and followed by delivery by first class mail), reputable overnight courier service, or mailed by first class registered or certified mail, postage prepaid, to the Company at 751 Horizon Court, Suite 203, P. O. Box 60219, Grand Junction, Colorado 81506-8758, Attn: President, or to the holder at such address as may have been furnished to the Company in writing by such holder, or, until an address is so furnished, to and at the address of the last holder of this Warrant who has so furnished an address to the Company. Any such notice shall be deemed to have been given on the date of personal delivery, facsimile, delivery to a reputable overnight courier service or deposit in the mail.         11. Warrant Holder Not a Shareholder. Holder shall not, by virtue of anything contained in this Agreement or otherwise, prior to exercise of this Warrant, be entitled to any right whatsoever, either in law or equity, of a shareholder of the Company, including without limitation, the right to receive dividends or to vote or to consent or to receive notice as a shareholder in respect of the meetings of shareholders or the election of directors of the Company or any other matter; provided however that all holders of Warrants will be entitled to notice if: (a) the Company grants holders of its Common Stock rights to purchase any shares of capital stock or any other rights, or (b) the Company authorizes a reclassification, capital reorganization, consolidation, merger or sale of substantially all of its assets.         12. Nontransferable. This Warrant is nontransferable without the prior consent of the Company. Any such transfer shall be made in accordance with Section 8.1 above.         13. Miscellaneous. The Company may from time to time supplement or amend this Warrant without the approval of the holder in order to cure any ambiguity or to be correct or supplement any provision contained herein which may be defective or inconsistent with any other provision, or to make any other provisions in regard to matters or questions herein arising hereunder which the Company may deem necessary or desirable and which shall not materially adversely affect the interest of the holder. This Warrant and any term hereof may be amended, changed, waived, discharged or terminated only by an instrument in writing signed by the Company and consented to in writing by the holder of this Warrant. If for any reason any provision, paragraph or term of this Warrant is held to be invalid or unenforceable, all other valid provisions herein shall remain in full force and effect and all terms, provisions and paragraphs of this Warrant shall be deemed to be severable. This Warrant shall be construed and enforced in accordance with and governed by the laws of the state of Colorado applicable to contracts made and to be performed entirely therein. The headings in this Warrant are for reference purposes only and shall not limit or otherwise affect the meaning hereof. Dated as of: ___________, 2000.                                                                              PEASE OIL AND GAS COMPANY                                                                              a Nevada corporation ATTEST                                                                              By: /s/ Patrick J. Duncan                                                                                          Patrick J. Duncan, President FORM OF SUBSCRIPTION [TO BE SIGNED ONLY UPON EXERCISE OF THE WARRANT] To: PEASE OIL AND GAS COMPANY         The undersigned, the holder of the within Warrant, hereby irrevocably elects to exercise the purchase right represented by such Warrant for, and to purchase thereunder, ___________* shares of the Common Stock of PEASE OIL AND GAS COMPANY and herewith makes payment of $ therefor, 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 the name of the holder                                                                                     as specified on the face of the                                                                                     Warrant) --------------------------------------------------------------------------------                                                                                     (Address) __________ * Insert the number of shares called for on the face of the Warrant (or, in the case of a partial exercise, the portion thereof as to which the 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 the Warrant, may be deliverable upon exercise. FORM OF ASSIGNMENT [TO BE SIGNED ONLY UPON TRANSFER OF THE WARRANT]           For value received, the undersigned hereby sells, assigns and transfers unto _______________________ the right represented by the within Warrant to purchase _____________ shares of the Common         Stock of PEASE OIL AND GAS COMPANY to which the within Warrant relates, and appoints Attorney to transfer such right on the books of PEASE OIL AND GAS COMPANY, with full power of substitution in the premises. Dated: -------------------------------------------------------------------------------- --------------------------------------------------------------------------------                                                                                     (Signature must conform in all                                                                                     respects to the name of the holder                                                                                     as specified on the face of the                                                                                     Warrant) --------------------------------------------------------------------------------                                                                                     (Address) Signed in the presence of: __________

EXHIBIT 10.3n TERMINATION PROTECTION AGREEMENT AGREEMENT effective June 19, 2000 between Harcourt General, Inc. Robert 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 19, 2000 (the "Effective Date") and shall remain in effect until June 18, 2002 (the "Term"); provided, however, that commencing with June 19, 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 4.55% 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 19th day of June, 2000. HARCOURT GENERAL, INC. /s/ Richard A. Smith             By: Richard A. Smith Title: Chairman of the Board /s/ Robert 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) 70% 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 LOAN AND SECURITY AGREEMENT PREVIEW SYSTEMS, INC. --------------------------------------------------------------------------------     This LOAN AND SECURITY AGREEMENT (this "Agreement") dated August 4, 2000, between SILICON VALLEY BANK, a California-chartered bank ("Bank") with its principal place of business at 3003 Tasman Drive, Santa Clara, CA 95054 and with a loan production office located at 11000 SW Stratus, Suite 170, Beaverton, OR 97008 and Preview Systems, Inc., a Delaware corporation ("Borrower") with its principal place of business located at 1195 West Fremont Boulevard, Number 2001, Sunnyvale, California 94087, 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  Revolving Advances.       (a) Bank will make Advances not exceeding (i) the Committed Revolving Line minus the Cash Management Services sublimit set out in Section 2.1.4 below, minus (ii) the amount of all outstanding Letters of Credit (including drawn but unreimbursed Letters of Credit), and minus (iii) the FX Reserve. 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 that reliance.     (c) Unless terminated per the terms of this Agreement, the Committed Revolving Line terminates on the Revolving Maturity Date, when all Advances are immediately payable.     2.1.2  Letters of Credit.  Bank will issue or have issued Letters of Credit for Borrower's account not exceeding (i) the Committed Revolving Line minus (ii) the outstanding principal balance of the Advances, minus (iii) the Cash Management Services sublimit set out in Section 2.1.4 below, and minus (iv) the FX Reserve, but the face amount of outstanding Letters of Credit (including drawn but unreimbursed Letters of Credit and any Letter of Credit Reserve) may not exceed $2,000,000.00. Each Letter of Credit will expire no later than 180 days after the Revolving Maturity Date provided Borrower's Letter of Credit reimbursement obligation is secured by cash on terms acceptable to Bank at any time upon the earlier of either the termination of this Agreement pursuant to its terms or after the Revolving Maturity Date if such date is not extended by Bank.     2.1.3  Foreign Exchange Sublimit.  If there is availability under the Committed Revolving Line, then Borrower may enter into foreign exchange forward contracts with the Bank under which Borrower commits to purchase from or sell to Bank a set amount of foreign currency more than one business day after the contract date (the "FX Forward Contract"). Bank will subtract 10% of each outstanding FX Forward Contract from the foreign exchange sublimit which is a maximum of $1,000,000.00 (the "FX 1 -------------------------------------------------------------------------------- Reserve"). The total FX Forward Contracts at any one time may not exceed 10 times the amount of the FX Reserve. Bank may, without notice, cease extending any additional FX Forward Contracts if an Event of Default or an event which, with notice or the passage of time or both, will become an Event of Default occurs. Bank may terminate the FX Forward Contracts then-outstanding if an Event of Default described in Section 8.4 or Section 8.5 occurs; in the event any other Event of Default occurs, Bank may terminate the FX Forward Contracts then-outstanding unless Borrower provides cash collateral to Bank in form and substance satisfactory to Bank and subject to no other Liens or claims in an amount equal to 30% of each outstanding FX Forward Contract.     2.1.4  Cash Management Sublimit.  Borrower may use up to $1,000,000.00 for Bank's Cash Management Services, which may include merchant services, direct deposit of payroll, business credit card, and check cashing services identified in the Cash Management Services Agreement (the "Cash Management Services"). All amounts payable to Bank under the Cash Management Services Agreement will be treated as an Advance under the Line of Credit.     2.2  Overadvances.  If Borrower's Obligations under Sections 2.1.1, 2.1.2 and 2.1.3 exceed the Committed Revolving Line, Borrower must immediately pay in cash to Bank the excess.     2.3  Interest Rate; Payments.       (a)  Interest Rate.  Advances accrue interest on the outstanding principal balance at a per annum rate equal to the Prime Rate. After an Event of Default, Obligations accrue interest at 5 percent per annum 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 first day of each month. Bank may debit any of Borrower's deposit accounts including Account Number 3300098893 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.     2.4  Fees.  Borrower will pay to Bank:     (a)  Unused Fee.  A fee (the "Unused Fee") on the average unused Committed Revolving Line amount during the applicable Unused Fee Calculation Period (defined below), computed at a per annum rate at a rate equal to 1/2% per annum of such average unused Committed Revolving Line amount. The Unused Fee will start to accrue on the Closing Date and will be due and payable in arrears on the first day of each calendar month (and on any date that the Committed Revolving Line is reduced and on the Maturity Date) for the immediately preceding month (or portion of a month) (each month or portion of a month for which the Unused Fee is payable under this Agreement is an "Unused Fee Calculation Period"), beginning with the first of those dates after the Closing Date; 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.     2.5  Cancellation of Agreement By Borrower.  Provided an Event of Default has not occurred and is continuing, Borrower shall have the right to cancel the Committed Revolving Lineprior to the Revolving Maturity Date subject to the following terms and conditions:     (a)  Notice.  Any such early cancellation of Committed Revolving Line shall be on at least ten (10) days' advance written notice to Bank and shall be effective only on and as of the first day of any month during the term hereof; 2 --------------------------------------------------------------------------------     (b)  Payment of Advances, Etc.  Except as expressly set out in this Section 2.5, Borrower shall pay in full all outstanding Advances and/or Obligations owed to Bank as of the effective date of the early cancellation;     (c)  Payment of Fees, Etc.  Borrower shall pay in full all accrued portions of the Unused Fee, together with all other fees and charges otherwise due Bank pursuant to the terms of this Agreement, as of the effective date of the early cancellation.     (d)  Letters of Credit.  Not later than the effective date of the cancellation of Committed Revolving Line, Borrower shall either retire any outstanding Letters of Credit or comply with the cash security requirements pertaining to outstanding Letters of Credit as provided in paragraph 2.1.2 above.     (e)  FX Forward Contracts.  Not later than the effective date of the cancellation of the Committed Revolving Line, Borrower shall either retire any outstanding FX Forward Contracts or continue to perform pursuant to paragraph 2.1.3 above, unless any of same are terminated by Bank as provided in said paragraph. Notwithstanding anything else contained herein, any FX Forward Contracts outstanding after cancellation of the Committed Revolving Line shall be subject to the collateral requirements imposed by paragraph 2.1.3 above as though an Event of Default had occurred. From and after the date of early cancellation of the Committed Revolving Line,, and except for outstanding Letters of Credit and continuing FX Forward Contracts not terminated, unless otherwise agreed in writing, Bank shall thereafter have no further commitments or obligations to Borrower under this Agreement. Notwithstanding the foregoing, Borrower's obligations under the terms of this Agreement, including but not limited to the grant of Collateral hereunder, shall remain in full force and effect until such time as all Obligations thereunder have been fully and finally paid. 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, financial statements, certificates, assurances and fees required under the terms of this Agreement, including such additional agreements, documents, financial statements, certificates and assurances as it may reasonably request to accomplish the terms of this Agreement.     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 may 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 in all material respects. 4   CREATION OF SECURITY INTEREST     4.1  Grant of Security Interest.  Borrower grants 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. Notwithstanding the foregoing, the security interest granted herein does not extend to and the term "Collateral" does not include any license or rights arising under any contract permitting Borrower's use of Intellectual Property to the extent (i) the granting of a security interest in it would be contrary to applicable law, or (ii) that such rights are nonassignable by their terms (but only to the extent such 3 -------------------------------------------------------------------------------- prohibition is enforceable under applicable law, including, without limitation, Section 9318(4) of the Code) without the consent of the licensor or other party (but only to the extent such consent has not been obtained). Except as disclosed on the Schedule, Borrower is not a party to, nor is bound by, any license or other agreement the loss of which, individually or in the aggregate, could reasonably be expected to have a materially adverse effect on Borrower's business or operations and that prohibits or otherwise restricts Borrower from granting a security interest in Borrower's interest in such license or agreement or any other property. Without prior notice to Bank, Borrower shall not enter into, or become bound by, any such license or agreement which is reasonably likely to have a material impact on Borrower's business or financial condition. Borrower shall take such steps as Bank requests to obtain the consent of, or waiver by, any person whose consent or waiver is necessary for such licenses or rights under contracts to be deemed "Collateral" and for Bank to have a security interest in it that might otherwise be restricted or prohibited by law or by the terms of any such license or agreement, whether now existing or entered into in the future. If the 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 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 and Other Assets.       (a) 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.     (b) Borrower is the sole owner of the Intellectual Property, except for non-exclusive licenses granted to its customers in the ordinary course of business and exclusive distribution rights for Borrower's or its Subsidiaries' products granted to a distributor within a specific sales territory in Borrower's ordinary course of business. The Intellectual Property is free of Liens except for (i) the rights of licensors and licensees described in the Schedule attached hereto and (ii) subparagraphs (e) and (f) of the definition of Permitted Liens set forth hereinafter. No part of the Intellectual Property has been judged invalid or unenforceable, in whole or in part, and no unresolved claim has been made that any part of the Intellectual Property violates the rights of any third party, in each case to the extent that the adverse decision(s) or claim(s) could reasonably be expected to cause a Material Adverse Change.     5.3  Litigation.  Except as shown in reports filed with the Securities and Exchange Commission which have been delivered to the Bank on or before the date of this Agreement, there are no actions or proceedings pending or, to Borrower's knowledge, to the knowledge of Borrower's Responsible Officers and legal counsel, 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 4 -------------------------------------------------------------------------------- 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 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 and for which Borrower maintains adequate reserves on Borrower's Books in accordance with GAAP, and will deliver to Bank, on demand, appropriate certificates attesting to the payment or the contest and reserves maintained. 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 reasonably be expected to 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 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 45 days after the last day of each fiscal quarter Borrower's Form 10-Q filed with the Securities and Exchange Commission; (ii) as soon as available, but no later than 90 days after the end 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 acceptable to Bank; (iii) within 5 days of filing, copies of all statements, reports and notices made available to Borrower's security holders or to holders of any Subordinated Debt (but non-material, one-time information provided 5 -------------------------------------------------------------------------------- in fulfillment of individual, specific requests by individual security holders or to holders of any Subordinated Debt not otherwise provided or otherwise required by law or agreement to be provided need not be automatically provided to Bank), and all reports on Form 10-K and 8-K filed with the Securities and Exchange Commission; (iv) a prompt report of any legal actions pending or, to Borrower's knowledge, to the knowledge of Borrower's Responsible Officers and legal counsel, threatened against Borrower or any Subsidiary that could reasonably be expected to result in damages or costs to Borrower or any Subsidiary of $100,000 or more; (v) prompt notice of any material adverse change in the composition of the Intellectual Property or the Collateral or knowledge of an event that materially adversely affects the value of the Intellectual Property or the Collateral; and (vi) budgets, sales projections, operating plans or other financial information Bank requests.     (b) Within 45 days after the last day of each quarter, Borrower will deliver to Bank with the quarterly 10-Q reports a Compliance Certificate signed by a Responsible Officer in the form of Exhibit C.     (c) Bank has the right to audit Borrower's Accounts at Borrower's expense, but the audits will be conducted no 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 $100,000.     6.4  Taxes.  Borrower will make, and cause each Subsidiary to make, timely payment of all material federal, state, and local taxes or assessments except those being contested in good faith and for which Borrower maintains adequate reserves on Borrower's Books in accordance with GAAP, and will deliver to Bank, on demand, appropriate certificates attesting to the payment or the contest and reserves maintained.     6.5  Insurance.  Borrower will keep its business and the Collateral insured for risks and in amounts as is usual and customary for businesses such as Borrower. Insurance policies will be in a form, with companies, and in amounts that are satisfactory to Bank exercising reasonable commercial discretion. All property policies will have a lender's loss payable endorsement showing Bank as a loss payee and all liability policies will show the Bank as an additional insured and provide that the insurer must give Bank at least 10 days notice before canceling its policy for failure to pay premiums and 20 days notice before canceling its policy for any other reason. 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. If no Event of Default or event which, with notice or passage of time or both will become an Event of Default has occurred and is continuing, proceeds payable under any casualty policy will, at Borrower's option, be payable to Borrower to replace the property subject to the claim, provided that any such replacement property shall be deemed Collateral in which Bank has been granted a first priority security interest. If an Event of Default or event which, with notice or passage of time or both will become 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 quarter, unless otherwise noted:     (a)  Quick Ratio.  A ratio of Quick Assets to Current Liabilities of at least 3.0 to 1.0.     (b)  Tangible Net Worth.  A Tangible Net Worth plus Subordinated Debt of at least $60,000,000.00. 6 --------------------------------------------------------------------------------     6.8  Maintenance of Intellectual Property Rights.  Borrower will: (i) protect, defend and maintain the validity and enforceability of the Intellectual Property, provided however, that Borrower shall not be so obligated under this clause if Borrower's board of directors has abandoned use of such Intellectual Property or otherwise noted in its minutes that it has determined not to protect, defend and maintain the validity and enforceability of the Intellectual Property; (ii) promptly advise Bank in writing of material infringements of the Intellectual Property; and (iii) 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 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 of (i) Inventory in the ordinary course of business; (ii) non-exclusive licenses and similar arrangements for the use of the property of Borrower or its Subsidiaries in the ordinary course of business; (iii) exclusive distribution rights for Borrower's or its Subsidiaries' products granted to a distributor within a specific sales territory in Borrower's ordinary course of business; (iv) worn-out, obsolete or surplus Equipment; (v) defaulted Accounts to a collection agency in the ordinary course of business; or (vi) Permitted Investments other than investments in Subsidiaries so long as such Transfers are in the ordinary course of Borrower's business and are for full and fair consideration or, to the extent that reasonable commercial practice dictates, consideration which is fair and commercially reasonable in the circumstances. For purposes of this Section, encumbrances will not be considered to be a "Transfer," but are governed by Section 7.5 below.     7.2  Changes in Business, Ownership 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 have a change in its ownership of greater than 25%. 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) Borrower is the surviving entity, (ii) such transactions do not result in a decrease of more than 25% of Tangible Net Worth, and (iii) 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.  Except for Permitted Liens, (i) create, incur, or allow any Lien on any of its property except for non-exclusive licenses granted to its customers in the ordinary course of business and exclusive distribution rights for Borrower's or its Subsidiaries' products granted to a distributor within a specific sales territory in Borrower's ordinary course of business, or (ii) assign or convey any right to receive income, including the sale of any Accounts, or permit any of its Subsidiaries to do so or (iii) permit Bank's first priority security interest in the Collateral to change (the similar provisions contained in the definition of "Permitted Liens" being expressly retained). Create, incur, or allow any Lien on any of its Intellectual Property, except for (i) the rights of licensors and licensees described in the Schedule attached hereto and (ii) subparagraphs (e) and (f) of the definition of Permitted Liens set forth hereinafter; 7 -------------------------------------------------------------------------------- Borrower shall execute a separate negative pledge agreement with respect to such Intellectual Property in form and substance satisfactory to Bank. Create, incur, or allow any Lien on any of its cash, except that Borrower may create, incur, or allow Liens on cash in the form of cash security deposits pursuant to a lease of real property or equipment of up to $150,000.00 with respect to any single Lien and up to $1,000,000.00 in the aggregate with respect to all Liens outstanding at any one time.     7.6  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.     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; provided, however, that this provision shall not prohibit Borrower from making capital contributions to any wholly-owned Subsidiary so long as such capitalization is in the ordinary course of Borrower's business, is commercially reasonable in the circumstances and would not otherwise cause an Event of Default or event which, with notice or passage of time or both, would become an Event of Default.     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 payment or collateralization of 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 any of the foregoing actions 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 3 days after its 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 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 in the 10 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 of the prospect of repayment of any portion of the Obligations occurs; or (ii) a material impairment of the value (other than normal depreciation) or priority of Bank's security interests in the Collateral occurs;     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 8 -------------------------------------------------------------------------------- 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  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 reasonably be expected to cause a Material Adverse Change;     8.7  Judgments.  If a money judgment(s) in the aggregate of at least $100,000 is rendered against Borrower and is unsatisfied and unstayed for 10 days (but no Credit Extensions will be made before the judgment is stayed or satisfied);     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 communication 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 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 9 -------------------------------------------------------------------------------- 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 in the Collateral 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 Credit Extensions terminates.     9.3  Accounts Collection.  When an Event of Default or an event which, with notice or the passage of time or both will become 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. When an Event of Default or an event which, with notice or the passage of time or both will become an Event of Default occurs and continues, 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, 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 not caused solely by the gross negligence or willful misconduct of Bank.     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. 10 -------------------------------------------------------------------------------- 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 ARISING OUT OF SUCH LOAN DOCUMENTS OR TRANSACTIONS. 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  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 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 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.     12.6  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, are 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.     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 present or prospective business relations 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 in 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. 11 --------------------------------------------------------------------------------     12.9  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 any and right, title and interest of Borrower of any nature in and to all 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, in each case whether now or later existing, created, acquired or held.     "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; provided, however, that for purposes of a grant of Collateral hereunder, the term "Borrower's Books" may not include non-transferable items as set out in Section 4.1 above, but shall in any event include Borrower's information contained in such media.     "Business Day" is any day that is not a Saturday, Sunday or a day on which the Bank is closed.     "Cash Management Services" are defined in Section 2.1.4.     "Closing Date" is the date of this Agreement.     "Code" is the California Uniform Commercial Code.     "Collateral" is the property described on Exhibit A.     "Committed Revolving Line" is a Credit Extension of one or more Advances aggregating up to $5,000,000.00 in principal amount at any time outstanding. The maximum amount of the Committed Revolving Line may be adjusted in accordance with Section 2.1.2 above.     "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 12 -------------------------------------------------------------------------------- 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 any and right, title and interest of Borrower of any nature in and to 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 Advance, Letter of Credit, Exchange Contract or any other extension of credit by Bank for Borrower's benefit.     "Current Liabilities" are the aggregate amount of Borrower's Total Liabilities which mature within one (1) year.     "Equipment" is any and right, title and interest of Borrower of any nature in and to all present and future machinery, equipment, tenant improvements, furniture, fixtures, vehicles, tools, parts and attachments.     "ERISA" is the Employment Retirement Income Security Act of 1974, and its regulations.     "FX Forward Contract" is defined in Section 2.1.3.     "FX Reserve" is defined in Section 2.1.3.     "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 similar relief.     "Intellectual Property" is any and right, title and interest of Borrower of any nature in and to any of the following, now or later existing, created, acquired or held:     (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;     (c) All design rights, including such rights which may be available to Borrower now or later;     (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 any and right, title and interest of Borrower of any nature in and to present and future inventory, 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 13 -------------------------------------------------------------------------------- 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 any 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.     "Mask Works" are any and right, title and interest of Borrower of any nature in and to any mask works or similar rights available for the protection of semiconductor chips, now owned or later acquired.     "Maturity Date" is the Revolving 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 any and right, title and interest of Borrower of any nature in and to any patents, patent applications and like protections, including improvements, divisions, continuations, renewals, reissues, extensions and continuations-in-part of the same, now owned or later acquired.     "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 incurred in the ordinary course of business;     (e) Indebtedness secured by Permitted Liens;     (f)  Contingent indebtedness arising from endorsements of negotiable instruments for deposit or collection or similar transactions in the ordinary course of Borrower's business;     (g) Obligations under any interest rate currency or commodity swap agreement, interest rate cap or collar agreement or other agreement or arrangement designed to protect Borrower or its Subsidiaries against fluctuation in interest rates, currency exchange rates or commodity prices, provided that, at the time such obligations are entered into, such agreements or arrangements are for bona fide hedging operations and not for speculation;     (h) Indebtedness with respect to surety, appeal, indemnity, performance or similar bonds in the ordinary course of Borrower's business; and     (i)  Extensions, renewals or refinancings of the Indebtedness described in clause (b) above provided that the principal amount of such Indebtedness does not increase and such other terms of the amended Indebtedness are not materially less favorable to Borrower or its Subsidiary than the terms in effect as of the date of this Agreement. 14 --------------------------------------------------------------------------------     "Permitted Investments" are:     (a) Investments shown on the Schedule and existing on the Closing Date;     (b) Investments permitted by the investment policy of Borrower delivered to Bank on or before the date of this Agreement or, if any changes to the investment policy of Borrower are hereafter duly approved by the board or directors of Borrower, in any subsequent investment policy which is the most recent investment policy of Borrower delivered to Bank with a certificate of a Responsible Officer to the effect that such investment policy has been duly approved by the board of directors of Borrower and is then in effect;     (c) Investments consisting of the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of Borrower;     (d) 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;     (e) 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 (e) shall not apply to Investments of Borrower in any Subsidiary;     (f)  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 $100,000 in the aggregate in any fiscal year; and     (g) Investments consisting of loans to employees, officers or directors to purchase equity securities of Borrower or its Subsidiaries and other loans to employees, officers or directors in the ordinary course of Borrower's business; provided, however, that except with respect to such loans as are in effect on the date of this Agreement and more fully described on the Schedule, such loans shall not be in an aggregate principal amount in excess of $1,000,000 to any one employee, officer or director, and no such loan shall be for a term of more than 12 months.     "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 Borrower's Books in accordance with GAAP, if they have no priority over any of Bank's security interests;     (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, if the Lien is confined to the property and improvements, replacements and the proceeds of the Equipment;     (d) Liens on Equipment acquired or held by Borrower or its Subsidiaries in support of debt financing the acquisition of the Equipment other than purchase money financing so long as the financing is (i) incurred and funded not more than 90 days after the purchase of the Equipment by Borrower or one of its Subsidiaries, (ii) the Lien is confined to the Equipment financed, and (iii) 100% of the net funds obtained in the financing is used to pay down any amounts outstanding under this Agreement;     (e) Leases or subleases and licenses or sublicenses granted by Borrower in the ordinary course of Borrower's business, if the leases, subleases, licenses and sublicenses permit granting Bank a security interest; 15 --------------------------------------------------------------------------------     (f)  Leases or subleases and licenses or sublicenses granted to Borrower by others in the ordinary course of Borrower's business, so long as the lease, sublease, license or sublicense and any claim arising thereunder are confined to the direct subject matter of the lease, sublease, license or sublicense, and if the assets lease or licensed are personal property and the loss of the use thereof could reasonably be expected to have a materially adverse effect on Borrower's business or operations, the leases, subleases, licenses and sublicenses permit granting Bank a security interest;     (g) Liens incurred in the extension, renewal or refinancing of the indebtedness secured by Liens described in (a) through (d), 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;     (h) Liens arising from judgments, decrees or attachments in circumstances not constituting an Event of Default under Section 8.4 or 8.7; and     (i)  Liens of carriers, mechanics, materialmen, and vendors imposed by law and incurred by Borrower in the ordinary course of its business with respect to obligations which are not delinquent or are being contested in good faith and for which Borrower maintains adequate reserves on Borrower's Books in accordance with GAAP and on which no attachment, seizure or levy has issued.     "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 August 4, 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, 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.     "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 plus Subordinated Debt.     "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 any and right, title and interest of Borrower of any nature in and to any trademark and service mark rights, registered or not, applications to register and registrations and like protections, 16 -------------------------------------------------------------------------------- and the entire goodwill of the business of Borrower connected with the trademarks, in each case whether now owned or later acquired. UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE 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 BORROWER TO BE ENFORCEABLE. BORROWER:       PREVIEW SYSTEMS, INC.           By:                     --------------------------------------------------------------------------------       Title:                     --------------------------------------------------------------------------------       SILICON VALLEY BANK           By:                     --------------------------------------------------------------------------------       Title:                     --------------------------------------------------------------------------------     17 -------------------------------------------------------------------------------- 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, 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 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. Notwithstanding the foregoing, the security interest granted herein does not extend to, and the term "Collateral" does not include, any license or rights arising under any contract from a third party permitting Borrower's use of copyrights, trademarks, patents, mask works, trade secrets, intellectual property rights in computer software and computer software products, and design rights (collectively, "Intellectual Property Rights"), in each case to the extent (and only to the extent) that (i) the granting of a security interest in it would be contrary to applicable law, or (ii) that such rights are nonassignable by their terms (but only to the extent such prohibition is enforceable under applicable law, including, without limitation, Section 9318(4) of the Uniform Commercial Code) without the consent of the licensor or other party (but only to the extent such consent has not been obtained). BORROWER HAS AGREED NOT TO CREATE, INCUR, OR ALLOW LIENS ON ITS PROPERTY EXCEPT IN LIMITED CIRCUMSTANCES. NOTWITHSTANDING ANYTHING ELSE CONTAINED HEREIN, BORROWER HAS AGREED NOT TO CREATE, INCUR, OR ALLOW ANY LIENS ON ANY OF ITS INTELLECTUAL PROPERTY RIGHTS, INCLUDING BUT NOT LIMITED TO 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; 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; MASK WORK OR SIMILAR RIGHTS AVAILABLE FOR THE PROTECTION OF SEMICONDUCTOR CHIPS, NOW OWNED OR HEREAFTER ACQUIRED; CLAIMS FOR DAMAGES BY WAY OF ANY PAST, PRESENT AND FUTURE INFRINGEMENT OF ANY OF THE FOREGOING.     Borrower and Bank are parties to that certain Negative Pledge Agreement, whereby Borrower, in connection with Bank's loan or loans to Borrower, has agreed, among other things, not to sell, transfer, assign, mortgage, pledge, lease, grant a security interest in or encumber any of its Intellectual Property without Bank's prior written consent. -------------------------------------------------------------------------------- EXHIBIT B LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., P.S.T. TO: CENTRAL CLIENT SERVICE 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 Borrower's representations and warranties in the Loan and Security Agreement are true, correct and complete in all material respects on the date of the telephone request for and Advance confirmed by this Borrowing Certificate; but those representations and warranties expressly referring to another date shall be true, correct and complete in all material respects as of that 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)         -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- EXHIBIT C COMPLIANCE CERTIFICATE TO:   SILICON VALLEY BANK       FROM:       --------------------------------------------------------------------------------            The undersigned authorized officer of                       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 -------------------------------------------------------------------------------- 10-Q   Quarterly within 45 days   Yes   No Annual (CPA Audited)   FYE within 90 days   Yes   No 10-K 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     3.0:1.0       :1.0   Yes   No   Minimum Tangible Net Worth   $ 60,000,000   $         Yes   No Comments Regarding Exceptions: See Attached. Sincerely,       --------------------------------------------------------------------------------         SIGNATURE       --------------------------------------------------------------------------------         TITLE       --------------------------------------------------------------------------------         DATE       --------------------------------------------------------------------------------         BANK USE ONLY       Received by:  --------------------------------------------------------------------------------         AUTHORIZED SIGNER       Date:  --------------------------------------------------------------------------------           Verified:  --------------------------------------------------------------------------------         AUTHORIZED SIGNER       Date:  --------------------------------------------------------------------------------           Compliance Status:     Yes     No         --------------------------------------------------------------------------------     -------------------------------------------------------------------------------- PREVIEW SYSTEMS, INC. SCHEDULE OF EXCEPTIONS PERMITTED INDEBTEDNESS AND PERMITTED LIENS Lease Commitments --------------------------------------------------------------------------------   Lease Number --------------------------------------------------------------------------------   Monthly Payment --------------------------------------------------------------------------------   Begin Date --------------------------------------------------------------------------------   End Date --------------------------------------------------------------------------------   Copelco (Muratec Fax)       135.00   11/9/98   11/9/01   Copelco (Minolta 3050 Copier)       325.00   12/15/96   12/15/01   Copelco (Minolta 5050 Copier)       515.00   1/15/98   11/20/02   First Corp. (equipment)   91009019   1,102.00   10/4/97   8/4/00   First Corp. (equipment)   91009020   771.00   1/5/98   11/5/00   First Corp. (equipment)   91009021   1,075.00   1/5/98   11/5/00   First Corp. (equipment)   91009022   1,308.00   3/24/98   3/24/01   First Corp.—Preview Systems (equipment)   91310601   944.00   12/9/98   11/1/01   First Corp.—Preview Systems (equipment)   91310602   1,221.00   12/17/98   11/1/01   First Corp.—Preview Systems (equipment)   91310603   3,394.00   1/8/99   2/8/02   First Corp.—Preview Systems (equipment)   91310604   2,252.00   3/9/99   2/9/02   First Corp.—Preview Systems (equipment)   91310605   1,815.00   6/4/99   4/4/02   Toshiba America Info Sys (Copier Cupertino)       735.66   12/06/99   11/06/02   1000 Broadway Bldg Ltd (Portland Office)       29,436.00   3/1/98   12/31/02   Interwoven (Sunnyvale Office)       99,500.00   1/15/00   8/31/03   Interwoven (Furniture Rental)       3,430.00   1/15/00   8/31/03   Regus (UK Office)       5,500.00   7/3/00   9/3/00   Regus (UK Office)       15,000.00   9/4/00   3/3/01   Kinetic (UK Office)       4,000.00   11/15/99   8/31/01     Other Permitted Indebtedness/ Permitted Liens --------------------------------------------------------------------------------       Loan Date --------------------------------------------------------------------------------       Amount --------------------------------------------------------------------------------       Payment --------------------------------------------------------------------------------       Maturity Date --------------------------------------------------------------------------------     Silicon Valley Bank-Term Loan   11/2/98   472,154.00   13,115.00   11/2/98 Balance @ 6/30/00 is 222,969 Hellman-purchase of patent   4/17/99   500,000.00   25,000/qtr   11/3/98 Balance @ 6/30/00 is 283,786 Other Permitted Liens Material License Agreements (4.1) Cooperation Agreement between the Renewable Security Services Group of Intel Corp. and Preview Systems Inc. dated September 14, 1999 OEM Master License Agreement between Portland Software Inc. and RSA Data Security Inc. dated July 15, 1996 (assigned to Preview Systems Inc. September 3, 1999) OEM Master License Agreement between Portland Software Inc. and RSA Data Security Inc. dated May 2, 1997 (assigned to Preview Systems Inc. September 3, 1999) Software License and Development Agreement between Preview Systems Inc. and PACE Anti-Piracy dated January 15, 1999 Software License Agreement between Lucent Technologies and Preview Systems Inc. dated January 21, 2000 AAC Patent License Agreement between AT&T Corp., Dolby Laboratories Licensing Corporation, Fraunhofer-Gesellschaft, zur Forderund der angewandtern Forschung, Sony Corporation and Review Systems Inc. dated June 29, 2000 Development, Marketing and Support Agreement between Microsoft Corporation and Preview Systems Inc. dated December 5, 1999 -------------------------------------------------------------------------------- Lease Deposits over $150,000 (7.5)   Interwoven   $298,000 1/2 cash, 1/2 standby letter of credit   PERMITTED INVESTMENTS     Loans to Officers --------------------------------------------------------------------------------   Loan Date --------------------------------------------------------------------------------   Amount --------------------------------------------------------------------------------   Interest Rate --------------------------------------------------------------------------------   Maturity Date --------------------------------------------------------------------------------   Vincent Pluvinage   7/5/99   812,475.00   5.32 % 7/5/02   Brad Solso   7/6/99   974,970.00   5.32 % 7/6/02   Vincent Pluvinage   1/2/98   25,000.00   6.00 % 6/6/01   Vincent Pluvinage   10/14/97   25,000.00   6.00 % 5/27/01   Vincent Pluvinage   12/31/97   75,000.00   6.00 % 6/6/01           1,912,445.00           Cash Management Accounts (investments made pursuant to Corporate Investment Policy)   Morgan Stanley Dean Witter                   Solomon Smith Barney                   Robertson Stephens                   Other Permitted Investments --------------------------------------------------------------------------------   # of Shares --------------------------------------------------------------------------------               e-Academy   1,000,000   Common Stock owned outright, issued as part of license deal in 1999 Supertracks, Inc.   209,000   Warrants to purchase preferred shares @ $.56 per share, issues as part of strategic alliance agreement. Preview Systems International   1,000   Purchased for $250,000 to establish international holding company for UK branch operation --------------------------------------------------------------------------------

EMPLOYMENT AGREEMENT      This Employment Agreement (the “Agreement”), is made and entered into this 27th day of June, 2000, by and between Credit Management Solutions, Inc., a Delaware corporation with principal offices located at 135 National Business Parkway, Annapolis Junction, Maryland 20701 (the “Company”), and Miles Grody (the “Executive”). WITNESSETH      WHEREAS, the Company has a need for the Executive’s personal services in an executive capacity; and      WHEREAS, the Executive possesses the necessary strategic, financial, planning, operational and managerial skills necessary to fulfill those needs; and      WHEREAS, the Executive and the Company desire to enter into a formal Employment Agreement to fully recognize the contributions of the Executive to the Company and to assure continuous harmonious performance of the affairs of the Company.      NOW, THEREFORE, in consideration of the mutual promises, terms, provisions, and conditions contained herein, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows: 1. Definitions. For purposes of this Agreement, the following capitalized terms shall have the following meanings:      a. “Affiliate” means any person or entity (i) that directly or indirectly owns more than fifty percent (50%) of the Voting Stock (as defined below) of the Company, or (ii) more than fifty percent (50%) of the Voting Stock of which is directly or indirectly owned by the Company, or (iii) more than fifty percent (50%) of the Voting Stock of which is directly or indirectly owned by another person or entity that directly or indirectly owns more than fifty percent (50%) of the Voting Stock of the Company.      b. “Change of Control” of a company means the occurrence of any of the following:        (i) any “person,” as such term is currently used in Section 13(d) of the Securities Exchange Act of 1934, becomes a “beneficial owner,” as such term is currently used in Rule 13d-3 promulgated under that Act of fifty percent (50%) or more of the Voting Stock of the company;        (ii) a majority of the Board of Directors of the company consists of individuals other than Incumbent Directors, which term means the members of the Board on the date hereof; provided that any individual becoming a director subsequent to such date whose election or nomination for election was supported by two-thirds of the directors who then comprised the Incumbent Directors shall be considered to be an Incumbent Director; --------------------------------------------------------------------------------        (iii) the Board of Directors of the company adopts any plan of liquidation providing for the distribution of all or substantially all of the company’s assets;        (iv) all or substantially all of the assets or business of the company are disposed of in any one or more transactions pursuant to a merger, consolidation or other transaction (unless the shareholders of the company immediately prior to such merger, consolidation or other transaction beneficially own, directly or indirectly, in substantially the same proportion as they owned the Voting Stock of the company, all of the Voting Stock or other ownership interests of the entity or entities, if any, that succeed to the business of the company); provided, however, that this subsection (iv) shall not apply in the event of a merger or consolidation of the Company with an Affiliate; or        (v) the company combines with another company and is the surviving corporation but, immediately after the combination, the shareholders of the company immediately prior to the combination hold, directly or indirectly, fifty percent (50%) or less of the Voting Stock of the combined company, (there being excluded from the number of shares held by such shareholders, but not from the Voting Stock of the combined company, any shares received by affiliates of such other company in exchange for securities of such other company); provided, however, that this subsection (v) shall not apply in the event of a combination of the Company with an Affiliate.      c. “Good Reason” means any of the following events:        (i) a reduction in annual Salary (as defined below);        (ii) a failure by the Company, or Affiliate by which the Executive is employed, to provide fringe benefits comparable to those offered to the Executive’s peer executives;        (iii) the failure of the Company, or Affiliate by which the Executive is employed, to obtain by operation of law or otherwise the assumption of its obligations to perform this Agreement from any successor to all or substantially all of the assets of the Company or such Affiliate; or        (iv) a relocation of the Executive’s worksite to a location which increases the distance from the Executive’s home to his worksite by more than fifty (50) miles.       “Good Reason Upon Change In Control” means any of the following events provided the event occurs either (i) less than eighteen (18) months after a Change in Control of the Company, or an Affiliate if the Executive is employed at that time by such Affiliate or the Company, or (ii) during the one-hundred and eighty (180) day or shorter time period between (x) the execution by Company (or such Affiliate) and a third party of a letter of intent or term sheet reflecting the terms of such Change in Control, or receipt by the Company (or such Affiliate) of a written offer from a third party reflecting such Change in Control, and (y) the effective date of such Change in Control: --------------------------------------------------------------------------------   (A) any of the events which constitute Good Reason under Section 1(c) above;   (B) a material diminution in the Executive’s duties or responsibilities; provided that a diminution shall not be deemed to have occurred solely because that Executive no longer has duties and responsibilities for a particular Affiliate as long as the Executive continues to have the same level, type and scope of duties and responsibilities as he had prior to the Change in Control; or   (C) the assignment to the Executive of duties that materially impair his ability to perform the duties normally assigned to a person of his title and position at a corporation of the size and nature of the Company or Affiliate by which the Executive is employed (as applicable).      e. “Voting Stock” means the issued and outstanding capital stock or other securities of any class or classes having general voting power under ordinary circumstances, in the absence of contingencies, to elect the directors of a corporation.      f. “Termination Without Cause Upon Change in Control” means termination of the Executive’s employment without “Cause” (as defined in Section 5(a) below) either (i) less than eighteen (18) months after a Change in Control of the Company , or an Affiliate if the Executive is employed at that time by such Affiliate or the Company, or (ii) during the one-hundred and eighty (180) day or shorter time period between (x) the execution by Company (or such Affiliate) and a third party of a letter of intent or term sheet reflecting the terms of such Change in Control, or receipt by the Company (or such Affiliate) of a written offer from a third party reflecting such Change in Control, and (y) the effective date of such Change in Control. 2. Position.      The Company hereby agrees to continue to employ the Executive to serve in the role of President and Chief Executive Officer of CMSI Systems, Inc. The Company reserves the right to change the Executive’s title, duties and/or responsibilities, and to reassign the Executive to or from any Affiliate. The Executive accepts such employment upon the terms and conditions set forth herein, and further agrees to perform to the best of his abilities the duties generally associated with his position, as well as such other duties as may be reasonably assigned by the Board of Directors of the Company (the “Board”), the Chief Executive Officer or President of the Company, and, if the Executive is employed by an Affiliate, the Chief Executive Officer, President or Board of Directors of such Affiliate. The Executive shall perform his duties diligently and faithfully and shall devote his full business time and attention to such duties. Each party’s rights and obligations under this Section 2 are subject to Section 5 below. 3. Term of Employment and Renewal.      The term of the Executive’s employment under this Agreement (the “Term”) will commence on the date of this Agreement (the “Effective Date”) and continue until terminated in accordance with Section 5 below. -------------------------------------------------------------------------------- 4. Compensation and Benefits.      (a) Salary. Commencing on the Effective Date, the Company agrees to pay the Executive a base salary at an annual rate of one hundred and seventy-five thousand Dollars ($175,000), payable in such installments as is the policy of the Company (the “Salary”), but no less frequently than monthly. Thereafter, the Company shall evaluate the Executive’s Salary from time to time and make adjustments, in its discretion, subject to the rights and obligations set forth in Section 5 below.      (b) Bonus. In its sole discretion, the Company may make the Executive eligible to receive bonuses based on criteria to be determined by the Company and issued to the Executive in writing, in which event the Executive shall be entitled to receive such bonuses in accordance with such criteria.      (c) Benefits. The Executive shall be entitled to participate in all employee benefit plans which the Company provides or may establish from time to time for the benefit of its employees, including, without limitation, group life, medical, surgical, dental and other health insurance, short and long-term disability, deferred compensation, profit-sharing and similar plans. The Executive shall also be entitled to one hundred eighty four (184) hours of paid leave per year of employment, plus sick leave in accordance with standard Company policy. Two-thirds of any unused portion of such paid leave shall be considered to be vacation and, therefore, shall be paid to the Executive upon his cessation of employment with the Company. The Company will provide term life insurance for the Executive with benefits equal to his annual Salary, up to a maximum of four hundred thousand dollars ($400,000). The Company may also purchase one or more “key man” insurance policies on the Executive’s life, each of which will be payable to and owned by the Company. The Company, in its sole discretion, may select the amount and type of key man life insurance purchased, and the Executive will have no interest in any such policy. The Executive will cooperate with the Company in securing this key man insurance, by submitting to all required medical examinations, supplying all information and executing all documents required in order for the Company to secure the insurance.      (d) Stock Options. In the sole discretion of the Board, the Company may from time to time issue the Executive stock option grants under the Company’s stock option plan and a stock option agreement, in which event the Executive shall be entitled to such options in accordance with such plan and agreement(s), subject however to the provisions of this Agreement regarding stock options.      (e) Expenses. The Company shall pay or reimburse the Executive for all reasonable out-of-pocket expenses actually incurred by the Executive during the Term in performing services hereunder, provided that the Executive properly accounts for such expenses in accordance with the Company’s policies. The Company shall pay the Executive an automobile allowance of no less than five hundred dollars ($500) per month through normal payroll procedures, and such allowance shall be reported as income on the Executive’s year-end W-2 form. The Executive shall be responsible for submitting automobile expense reimbursement requests to the extent he wishes to convert any portion of the allowance to an expense reimbursement. The Company shall reimburse the Executive for cellular telephone expenses associated with business use. -------------------------------------------------------------------------------- 5. Termination and Severance; Certain Events.      (a) Termination by the Company for Cause. Notwithstanding anything to the contrary in this Agreement, the Company may terminate the Executive’s employment for Cause at any time, upon written notice to the Executive setting forth in reasonable detail the nature of such Cause. For purposes of this Agreement, “Cause” is defined as (i) the Executive’s continued failure to perform his duties (other than due to physical incapacity or illness) after thirty (30) days’ written notice and opportunity to cure; (ii) the Executive’s conviction of any felony; (iii) the Executive’s material misrepresentation of his professional qualifications; (iv) willful or reckless conduct by the Executive injurious to the Company or any Affiliate; or (v) the Executive’s commission of fraud or malfeasance. Upon the termination for Cause of the Executive’s employment, the Company and its Affiliates shall have no further obligation or liability to the Executive other than for Salary earned prior to the date of termination and any accrued but unused vacation.      (b) Termination by the Company Without Cause. Notwithstanding anything to the contrary in this Agreement, the Executive’s employment hereunder may be terminated at any time without Cause by the Company upon fourteen (14) days’ written notice to the Executive, provided, however, that if the Company terminates the Executive’s employment without Cause the Company shall (i) pay the Executive on the effective date of termination all earned and unpaid Salary, earned and unpaid bonuses, and accrued and unused vacation; (ii) continue to pay the Executive the Salary and shall provide medical, life and disability coverage, under the same conditions as exist at the time of termination, for a six (6) month period beginning on the effective date of the termination; and (iii) notwithstanding anything to the contrary in any stock option agreement, any unvested stock options granted to the Executive shall accelerate and vest in full on the effective date of termination, and the Executive may exercise such options at any time up to two-hundred and seventy (270) days after the effective date of termination of his employment. As a condition of receiving such benefits pursuant to this Agreement, the Executive shall execute and deliver to the Company prior to his receipt of such benefits a general release substantially in the form attached hereto as Exhibit A, provided the Company executes such release and delivers an executed counterpart to the Executive. Notwithstanding anything to the contrary in this Section 5(b), if the termination constitutes a Termination Without Cause Upon Change in Control, then the Executive shall receive the benefits set forth in Section 5(d) below rather than as set forth in this Section 5(b).      (c) Termination by the Executive. Notwithstanding anything to the contrary in this Agreement, the Executive may terminate his employment hereunder upon thirty (30) days written notice to the Company provided that the Company may pay the Executive his Salary in lieu of any portion of such notice period. The Executive may also terminate his employment hereunder after giving the Company written notice no more than thirty (30) days after the occurrence of an event which constitutes Good Reason, in which event the Company shall (i) pay the Executive on the effective date of termination all earned and unpaid Salary, earned and unpaid bonuses, and accrued and unused vacation; (ii) continue to pay the Executive the Salary and shall provide medical, life and disability coverage, under the same conditions as exist at the time of termination, for a six (6) month period beginning on the effective date of the termination, provided the Company executes such release and delivers an executed counterpart to the Executive; and (iii) notwithstanding anything to the contrary in any stock option agreement, any unvested stock options granted to the Executive shall accelerate and vest in full on the effective date of termination, and the Executive may exercise such options at any time up to two-hundred and seventy (270) days after the effective date of termination of his employment. As a condition of receiving such benefits pursuant to this Agreement, the Executive shall execute and deliver to the Company prior to his receipt of such benefits a general release substantially in the form attached hereto as Exhibit A, provided the Company shall execute such release and deliver an executed counterpart to the Executive. Notwithstanding anything to the contrary in this Section 5(c), if the Executive terminates his employment for Good Reason Upon Change in Control, then the Executive shall receive the benefits set forth in Section 5(d) below rather than as set forth in this Section 5(c). --------------------------------------------------------------------------------      (d) Termination By Company or Executive After Change in Control. Notwithstanding anything to the contrary in this Agreement, in the event of a Termination Without Cause Upon Change in Control, or termination by the Executive for Good Reason Upon Change in Control, the Company shall provide the Executive the following benefits: (i) all earned and unpaid Salary and bonuses; (ii) all accrued and unused vacation; (iii) a lump sum payment equal to 2.99 times the Executive’s average annual cash compensation during the previous five (5) years (or, if the Executive has been employed by the Company for a shorter period, then the average during such shorter period); (iv) notwithstanding anything to the contrary in any stock option agreement, upon the Executive acknowledging in a signed writing the surrender of all his rights to vested and unvested stock options granted to him by the Company, a lump sum equal to the difference between the exercise price of such stock options and the higher of (x) the fair market value of the option shares on the effective date of the termination, or (y) the highest effective price paid for the Company’s common stock by any acquirer in connection with the Change in Control; (v) medical, life and disability coverage for a period of twelve (12) months after the effective date of the termination, or until the Executive receives comparable coverage from another employer, whichever occurs first; and (vi) all accrued retirement and deferred compensation plans vest in full. Items (i) through (iv) shall be paid to the Executive within twenty (20) days after the effective date of the termination. As a condition of receiving such benefits pursuant to this Agreement, the Executive shall execute and deliver to the Company prior to his receipt of such benefits a general release substantially in the form attached hereto as Exhibit A, provided the Company shall execute such release and deliver an executed counterpart to the Executive.      (e) Death. In the event of the Executive’s death during the Term of this Agreement, the Executive’s employment hereunder shall immediately and automatically terminate, and the Company shall (i) pay the Executive’s estate or beneficiaries within a reasonable period after the effective date of termination all earned, unpaid Salary, all earned, unpaid bonuses and all accrued unused vacation; and (ii) notwithstanding anything to the contrary in any stock option agreement, any unvested stock options granted to the Executive shall accelerate and vest in full on the effective date of termination. As a condition of receiving such benefits pursuant to this Agreement, the recipient(s) of benefits under this subsection shall execute and deliver to the Company prior to receipt of such benefits a general release substantially in the form attached hereto as Exhibit A, provided the Company shall execute such release and deliver an executed counterpart to such recipient(s). --------------------------------------------------------------------------------       Disability. Notwithstanding anything to the contrary in the Agreement, the Company may terminate the Executive’s employment hereunder, upon written notice to the Executive, in the event that the Executive becomes disabled during the Term through any condition of either a physical or psychological nature and, as a result, is, with or without reasonable accommodation, unable to perform the essential functions of the services contemplated hereunder for (a) a period of ninety (90) consecutive days, or (b) for shorter periods aggregating one hundred twenty (120) days during any twelve (12) month period during the Term. Any such termination shall become effective upon mailing or hand delivery of notice that the Company has elected its right to terminate under this subsection 5(f), and the Company shall (i) pay the Executive on the effective date of termination all earned, unpaid Salary; (ii) pay the Executive on the effective date of termination all earned, unpaid bonuses; (iii) pay the Executive on the effective date of termination all accrued unused vacation; (iv) continue to pay the Executive the Salary and shall provide medical, life and disability coverage, under the same conditions as exist at the time of termination, for a six (6) month period beginning on the effective date of the termination, and (v) notwithstanding anything to the contrary in any stock option agreement, any unvested stock options granted to the Executive shall accelerate and vest in full on the effective date of termination. As a condition of receiving such benefits pursuant to this Agreement, the Executive shall execute and deliver to the Company prior to his receipt of such benefits a general release substantially in the form attached hereto as Exhibit A, provided the Company shall execute such release and deliver an executed counterpart to the Executive.      (f) Certain Events. Notwithstanding anything to the contrary in any stock option plan or agreement, in the event of a Change in Control of the Company, or Affiliate by which the Executive is employed, all unvested stock options in the Company granted to the Executive shall accelerate and vest in full upon the Change in Control. As a condition of the foregoing benefit, the Executive agrees that, if so requested by the Company, or such Affiliate, prior to the Change in Control, he shall continue to be employed by the Company or such Affiliate for a period of one (1) year, subject to all of the other terms and conditions of this Agreement, and if he fails to satisfy such obligation he shall pay to the Company as liquidated damages a sum equal to the difference between the exercise price of such stock options and the higher of (x) the fair market value of the option shares on the effective date of the Change in Control, or (y) the highest effective price paid for the Company’s common stock by any acquirer in connection with the Change in Control. As a further condition of the foregoing benefit, the Executive shall execute and deliver to the Company prior to his receipt of such benefit a general release of claims up to the date of the Change in Control, substantially in the form attached hereto as Exhibit A, provided the Company shall execute such release and deliver an executed counterpart to the Executive.      (g) Tax Deductability. If it is determined by the Company or the Internal Revenue Service that any payment or benefit received or deemed received by the Executive from the Company (pursuant to this Agreement or otherwise) is or will become subject to any excise tax under Section 4999 of the Internal Revenue Code, and, therefore, that the Company will not be entitled to a federal tax deduction in connection with such payments and benefits or any portion thereof, then such payments and/or benefits shall be reduced, in a form and amount agreed to by the parties in good faith, in the amount necessary to allow the Company a federal tax deduction in connection with all payments and benefits provided to the Executive. -------------------------------------------------------------------------------- 6. Choice of Law.      The validity, interpretation and performance of this Agreement shall be governed by, and construed in accordance with, the internal law of Maryland, without giving effect to conflict of law principles. 7. Miscellaneous.      (a) Assignment; Delegation. The Executive acknowledges and agrees that the rights and obligations of the Company under this Agreement may be assigned by the Company to any successors in interest. The Executive further acknowledges and agrees that the Company may delegate performance of its obligations to any Affiliate provided that the Company shall retain liability for any breach of its obligations under this Agreement. The Executive further acknowledges and agrees that this Agreement is personal to the Executive and that the Executive may not assign or delegate any rights or obligations hereunder.      (b) Withholding. All payments required to be made by the Company to the Executive under this Agreement shall be subject to withholding taxes, social security and other payroll deductions in accordance with the Company’s policies applicable to employees of the Company at the Executive’s level.      (c) Entire Agreement. This Agreement, the Executive’s employee nondisclosure/noncompetition agreement with the Company, and any stock option agreement(s) between the parties, set forth the entire agreement between the parties on the subject matter contained herein and supersede any prior communications, agreements and understandings, written or oral, with respect to the terms and conditions of the Executive’s employment.      (d) Amendments. Any attempted modification of this Agreement will not be effective unless signed by an officer of the Company and the Executive.      (e) Waiver of Breach. The Executive understands that a breach of any provision of this Agreement may only be waived by an officer of the Company. The waiver by the Company of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach.      (f) Severability. If any provision of this Agreement should, for any reason, be held invalid or unenforceable in any respect by a court of competent jurisdiction, then the remainder of this Agreement, and the application of such provision in circumstances other than those as to which it is so declared invalid or unenforceable, shall not be affected thereby, and each such provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law. --------------------------------------------------------------------------------      (g) Notices. Any notices, requests, demands and other communications provided for by this Agreement shall be in writing and shall be effective when delivered (i) in hand by private messenger, or (ii) by a nationally known and reputable overnight mail service, as follows (or to such other address as either party shall designate by notice in writing to the other in accordance herewith):   If to the Company:   135 National Business Parkway Annapolis Junction, MD 20701 Attn: CEO With a copy to General Counsel   If to Executive:   __________________________   __________________________   __________________________   __________________________      (h) Survival. The Executive and the Company agree that certain provisions of this Agreement shall survive the expiration or termination of this Agreement and the termination of the Executive’s employment with the Company. Such provisions shall be limited to those within this Agreement which, by their express and implied terms, obligate either party to perform beyond the termination of the Executive’s employment or termination of this Agreement.      (i) Arbitration of Disputes. Any controversy or claim arising out of this Agreement or any aspect of the Executive’s relationship with the Company including the cessation thereof shall be resolved by arbitration in accordance with the then existing Employment Dispute Resolution Rules of the American Arbitration Association, in Washington, D.C., and judgment upon the award rendered may be entered in any court having jurisdiction thereof. The parties shall split equally the costs of arbitration, except that each party shall pay its own attorneys’ fees. The parties agree that the award of the arbitrator shall be final and binding.      (j) Rights of Other Individuals. This Agreement confers rights solely on the Executive and the Company. This Agreement is not a benefit plan and confers no rights on any individual or entity other than the undersigned.      (k) Headings. The parties acknowledge that the headings in this Agreement are for convenience of reference only and shall not control or affect the meaning or construction of this Agreement. --------------------------------------------------------------------------------      (l) Advice of Counsel. The Executive and the Company hereby acknowledge that each party has had adequate opportunity to review this Agreement, to obtain the advice of counsel with respect to this Agreement, and to reflect upon and consider the terms and conditions of this Agreement. The parties further acknowledge that each party fully understands the terms of this Agreement and has voluntarily executed this Agreement. The Company shall pay the legal fees and costs incurred by the Executive in connection with the negotiation and preparation of this Agreement, upon the presentation of invoices in appropriate form.      IN WITNESS WHEREOF, the undersigned have duly executed this Agreement as of the day and year set forth below.           EXECUTIVE CREDIT MANAGEMENT SOLUTIONS, INC. __________________________________ By: ______________________________ Title:_____________________________ Dated:________________________, 2000 Dated:________________________, 2000 -------------------------------------------------------------------------------- EXHIBIT A SEPARATION AGREEMENT AND GENERAL RELEASE      This Separation Agreement and General Release (“Agreement”) is made and entered into this ____ day of _____, _____, by and between Credit Management Solutions, Inc. (hereinafter the “Company” or “Employer”) and [EMPLOYEE NAME] (“Employee”) (hereinafter collectively referred to as the “Parties”), and is made and entered into with reference to the following facts. RECITALS      WHEREAS, Employee was hired by the Company on or about ________, as a ____________; and      WHEREAS, the Company and Employee have agreed to terminate their employment relationship effective ______, ____; and      WHEREAS, the Parties have entered into a written employment agreement, dated _________ (the “Employment Agreement”), under which Employee is entitled to certain severance benefits conditioned upon his/her execution of this Agreement; and      WHEREAS, the Parties each desire to resolve any potential disputes which exist or may exist arising out of Employee’s employment with the Company and/or the termination thereof.      NOW THEREFORE, in consideration of the covenants and promises contained herein, the Parties hereto agree as follows: AGREEMENT      1. Agreement By the Employee. In exchange for the payments described in paragraph 2 below, Employee agrees to the following: (a) that his/her employment with the Company is terminated effective _________, ____ (hereinafter the “Termination Date”); and (b) to be bound by the terms of this entire Agreement.      2. Agreement By the Company. In exchange for Employee’s agreement to be bound by the terms of this entire Agreement, including but not limited to the Release of Claims in paragraph 3, the Company agrees to provide Employee with a severance benefits as provided for in the Employment Agreement.      Employee acknowledges that, absent this Agreement, s/he has no legal, contractual or other entitlement to the consideration set forth in this paragraph and that the amount set forth in this paragraph constitute valid and sufficient consideration for Employee’s release of claims and other obligations set forth herein. --------------------------------------------------------------------------------      3. The Company and its divisions, subsidiaries, affiliates, parents, related entities, hereby expressly waive, release, acquit and forever discharge Employee and his agents, attorneys, representatives, successors, heirs and assigns (hereinafter collectively referred to as “Employee Releasees”), from any and all claims, demands, and causes of action which Employee has or claims to have, whether known or unknown, of whatever nature, which exist or may exist on Employee’s behalf from the beginning of time up to and including the date of this Agreement. As used in this paragraph 3, “claims,” “demands,” and “causes of action” include, but are not limited to, claims based on contract, whether express or implied, fraud, stock fraud, defamation, wrongful termination, estoppel, equity, tort, retaliation, intellectual property, personal injury, spoliation of evidence, emotional distress, public policy, wage and hour law, statute or common law, claims for severance pay, claims related to stock options and/or fringe benefits, claims for attorneys’ fees, vacation pay, debts, accounts, compensatory damages, punitive or exemplary damages, liquidated damages, and any and all claims arising under any federal, state, or local statute, law, or ordinance prohibiting discrimination on account of race, color, sex, age, religion, sexual orientation, disability or national origin, including but not limited to, the Age Discrimination in Employment Act, Title VII of the Civil Rights Act of 1964 as amended, the Americans with Disabilities Act, the Family and Medical Leave Act or the Employee Retirement Income Security Act; provided, however, that, this release does not include any claim, demand or cause of action arising out of Executive’s malfeasance, fraud, embezzlement, intentional torts, breach of his duties under his employee nondisclosure/noncompetition agreement with the Company, violation of any other duties with respect to confidential or proprietary information or intellectual property (including without limitation patents, copyrights, trade secrets and trademarks), noncompetition, nonsolicitation or loyalty, or violation of the Company’s employee policies, including without limitation its Human Resources and securities trading policies.      4. Last Date of Employment. It is understood and agreed that Employee’s last date of employment with Employer is _________, ____. --------------------------------------------------------------------------------      5. Receipt of Wages and Other Compensation. Employee acknowledges and agrees that, prior to his/her execution of this Agreement, s/he has received payment for all wages, salary, bonuses, accrued vacation, and all other compensation owed to Employee by the Company.      6. Company Property/Proprietary Information. Employee agrees to continue to abide by the terms of his employee nondisclosure/noncompetition agreement with the Company, the terms of which are incorporated herein by reference.      7. Acceptance of Agreement/[Revocation]. This Agreement was received by Employee on ______, ____. Employee may accept this Agreement by returning a signed original to the Company. This Agreement shall be withdrawn if not accepted in the above manner on or before _____.      8. Non-Admission of Liability. The Company denies any wrongdoing whatsoever in connection with its dealings with Employee, including but not limited to Employee’s employment and termination. It is expressly understood and agreed that nothing contained in this Agreement shall constitute or be treated as an admission of any wrongdoing or liability on the part of the Company or the Employee.      9. No Filing of Claims. Employee represents and warrants that s/he does not presently have on file, and further represents and warrants that s/he will not hereafter file, any claims, charges, grievances or complaints against any of the Releasees (defined above) in or with any administrative, state, federal or governmental entity, agency, board or court, or before any other tribunal or panel or arbitrators, public or private, based upon any actions or omissions by the Releasees occurring prior to the date of this Agreement.      10. Ownership of Claims. Employee represents and warrants that s/he is the sole and lawful owner of all rights, title and interest in and to all released matters, claims and demands referred to herein. Employee further represents and warrants that there has been no assignment or other transfer of any interest in any such matters, claims or demands which she may have against the Releasees.      11. Confidentiality. Employee understands and agrees that this Agreement, and the matters discussed in negotiating its terms, are entirely confidential. It is therefore expressly understood and agreed that Employee will not reveal, discuss, publish or in any way communicate any of the terms, amount or fact of this Agreement to any person, organization or other entity, with the exception of his/her immediate family members and professional representatives, unless required by subpoena or court order. Employee further agrees that s/he will not, at any time in the future, make any statements to any third parties that disparage any of the Releasees personally or professionally.      12. Tax Indemnification. It is understood and agreed that Employee is liable for all tax obligations, if any, with respect to the settlement payments provided for herein. Employee agrees to indemnify, defend and hold harmless Employer from any and all taxes, assessments, penalties, loss, costs, attorneys’ fees, expenses or interest payments that Employer may at any time incur by reason of any demand, proceeding, action or suit brought against Employer arising out of or in any manner related to any local, state or federal taxes allegedly due from Employee in connection with this Agreement.      13. Maryland Law Applies. This Agreement, in all respects, shall be interpreted, enforced and governed by and under the laws of the State of Maryland. Any and all actions relating to this Agreement shall be filed and maintained in the federal and/or state courts located in the State of Maryland, and the parties consent to the jurisdiction of such courts. In any action arising out of this Agreement, or involving claims barred by this Agreement, the prevailing party shall be entitled to recover all costs of suit, including reasonable attorneys’ fees. --------------------------------------------------------------------------------      14. Successors and Assigns. The Parties expressly understand and agree that this Agreement, and all of its terms, shall be binding upon their representatives, heirs, executors, administrators, successors and assigns.      15. Consultation with Counsel. Employee acknowledges that s/he has been advised to consult with legal counsel of her choice prior to execution and delivery of this Agreement.      16. Integration. Except as otherwise specifically provided for, this Agreement constitutes an integrated, written contract, expressing the entire agreement between the Parties with respect to the subject matter hereof. In this regard, Employee represents and warrants that s/he is not relying on any promises or representations which do not appear written herein. Employee further understands and agrees that this Agreement can be amended or modified only by a written agreement, signed by all of the Parties hereto.      17. Counterparts. This Agreement may be executed in separate counterparts and by facsimile, and each such counterpart shall be deemed an original with the same effect as if all Parties had signed the same document.      18. Headings. The headings in each paragraph herein are for convenience of reference only and shall be of no legal effect in the interpretation of the terms hereof.      19. Severability. If any provision in this Agreement is held to be invalid, the remainder of this Agreement shall not be affected by such a determination.      20. Voluntary Agreement. EMPLOYEE UNDERSTANDS AND AGREES THAT S/HE MAY BE WAIVING SIGNIFICANT LEGAL RIGHTS BY SIGNING THIS AGREEMENT, AND REPRESENTS THAT S/HE HAS ENTERED INTO THIS AGREEMENT KNOWINGLY AND VOLUNTARILY, WITH A FULL UNDERSTANDING OF AND IN AGREEMENT WITH ALL OF ITS TERMS.      IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on the dates provided below. DATED: _____________________,____ CREDIT MANAGEMENT SOLUTIONS, INC. By: __________________________ Its: __________________________ DATED: _____________________, ____ [EMPLOYEE NAME] __________________________

EXHIBIT 10.2 AMENDMENT NUMBER ONE TO THE CHANGE OF CONTROL AGREEMENT BETWEEN GEORGIA-PACIFIC CORPORATION AND DONALD L. GLASS, DATED MARCH 15, 1999           WHEREAS, the Board of Directors of Georgia-Pacific Corporation (the "Board") desires to amend the Change of Control Agreement between Georgia-Pacific Corporation and Donald L. Glass, dated March 15, 1999 ("Agreement") to expand the definition of "Change of Control".           NOW THEREFORE, the Board hereby amends the Agreement as follows:                     1.    Section 1(c) of the Agreement is amended by adding the following to the end thereof: "(v)    Consummation of the Transaction as defined in the Board Resolution approving Project Forest dated July 18, 2000 and as contemplated in the Agreement and Plan of Merger by and among Plum Creek Timber Company, Inc., Georgia-Pacific Corporation, and the Spincos (as defined therein) dated July 18, 2000."

QuickLinks -- Click here to rapidly navigate through this document REDACTED VERSION CLINICAL MANUFACTURE AND SUPPLY AGREEMENT     THIS AGREEMENT (the "Agreement") is entered into on September 1, 2000 by and between ABC Laboratories, Inc., of Columbia, Missouri ("ABC") and NeoRx Corporation, of Seattle, Washington ("NeoRx"). WITNESSETH     WHEREAS, ABC desires to manufacture 166Ho-DOTMP at the radiopharmaceutical manufacturing facility located in Columbia, Missouri (the "Facility"); and     WHEREAS, NeoRx desires that ABC manufacture and supply to and on behalf of NeoRx, and ABC is willing to manufacture and supply, certain quantities of holmium-166 1,4,7,10-tetraazacyclododecane-1,4,7,10-tetra-methylenephosphonic acid (166Ho-DOTMP) (the "Product") for NeoRx's use in clinical trials, all in accordance with the terms and conditions set forth in this Agreement;     NOW THEREFORE, in consideration of the foregoing promises and agreements set forth herein, the parties agree as follows: AGREEMENT I.  Scope of Work     (A)  Processing Responsibilities.  ABC will (1) manufacture, analyze, package in dosage form, and inspect and label (collectively "Process") Product at the Facility in accordance with cGMP and the Product specifications set forth on Exhibit A (which is incorporated herein by reference, unless NeoRx Quality Assurance approves (on a per batch basis) any deviation in batch test result(s) from Product specifications and releases the Product batch for administration to a patient. In order to meet this responsibility ABC must [*]. (2) maintain records regarding the Product in conformity with cGMP, and (3) supply the Product to NeoRx in such doses as NeoRx may order from ABC in accordance with this Agreement as allowable by MURR HP.     (B)  Additional Responsibilities.  In addition to the responsibilities stated in clause (A) above, ABC agrees that it will have the responsibilities listed on Exhibit B (which is incorporated herein by this reference) with respect to Processing the Product. [*] designates portions of this document that have been omitted pursuant to a request for confidential treatment filed separately with the Commission. II.  Purchase Orders     (A)  Purchase Orders.  NeoRx will deliver to ABC by the close of business on Monday of each week during the term of this Agreement, a written or electronic purchase order for the number of full or partial batches, and whether each batch is a [*], that NeoRx desires to purchase for delivery during the following calendar week. Each purchase order will also specify the delivery dates and the number doses of Product that are to be shipped to each location. Each dose shall be shipped in such manner, and to such location, as directed by NeoRx and permitted by MURR HP.     (B)  Contradictory Provisions.  To the extent any purchase order, or related invoice, contains any provisions contrary to the terms of this Agreement, such contrary provisions shall have no force or effect and the terms of this Agreement shall control. 21 -------------------------------------------------------------------------------- III.  Fees     (A)  Milestone Payments.  NeoRx agrees that it will pay to ABC the milestone payment as described in Exhibit C (which is incorporated herein by this reference).     (B)  Reimbursable Expenses.  NeoRx shall reimburse ABC for the expenses listed on Exhibit D. The parties acknowledge that NeoRx may request an increase to its production capacity at the Facility in order to timely Process the amount of Product contemplated by the Parties in this Agreement. To facilitate the timely scaling of ABC's production capacity, NeoRx agrees that it will reimburse ABC for labor expenses at a rate of [*] and [*] incurred by ABC; provided, however, that ABC will pay for changes in cask design and cask construction required to scale up the Process with the acknowledgement by both parties that ABC will obtain ownership of those specific cask and cask construction modifications at the conclusion of this agreement. ABC agrees that it must obtain NeoRx's prior written consent prior to incurring any expense not listed on Exhibit D for which it intends to seek reimbursement from NeoRx.     (C)  Batch Fee.  For each batch of Product processed by ABC during the term of this Agreement, NeoRx shall pay to ABC a fee of (1) [*], (2) [*], and (3) [*]. The price per batch includes the cost of labor, material and overhead to manufacture and test the finished vials of Product, but is exclusive of the cost of 166 holmium chloride, DOTMP, MURR radiation safety oversight and production supervision, and shipping expenses all of which shall be paid by NeoRx separately.     (D)  Minimum Purchases.  During the period from the effective date of this agreement until December 22, 2000, NeoRx agrees to purchase a minimum of [*].     (E)  MURR Radiation Safety Oversight and Production Supervision Fees.  NeoRx shall pay to ABC a fee of [*] that ABC manufactures product at NeoRx's request.     (F)  Facility Lease Fees.  During the term of this contract NeoRx shall pay to ABC a fee of [*], [*], and [*] to Process Product. IV.  Billing And Payment Terms     ABC shall invoice NeoRx bi-weekly for any Product Processed and supplied to or on behalf of NeoRx in response to purchase orders during the two weeks prior to the date of each invoice. NeoRx shall pay for such Product within thirty (30) days of its receipt of such invoice. All invoices that remain unpaid after sixty (60) days of NeoRx's receipt thereof shall accrue interest at the rate of 1.5% per month. ABC shall reference the applicable purchase orders on all invoices. If NeoRx disagrees for any reason with an amount of an invoice, NeoRx shall notify ABC in writing of such a disagreement within ten (10) business days of receipt of such invoice, and the parties shall promptly endeavor to resolve the dispute in good faith. V.  Shipping Terms     NeoRx will be responsible for the shipment of the Product. NeoRx, in consultation with ABC, shall arrange for the shipment of the Product from the Facility to NeoRx, or such other location as determined by NeoRx. NeoRx shall be responsible for the payment of all shipping charges (including, without limitation, freight, handling, insurance and all other transportation-related items associated with such shipments). NeoRx shall make all payments directly. VI.  Term And Termination     This Agreement will continue through December 31, 2002; provided, however, that either party may terminate this agreement after December 22, 2000 upon 30 days prior written notice; and provided, however, that either party may terminate this Agreement if the other party breaches any of 22 -------------------------------------------------------------------------------- its obligations hereunder and does not cure such breach within ten (10) days of written notice. Upon termination or expiration of this agreement or should NeoRx's cumulative batch fees (net of MURR charges) to ABC fall below [*] will be transferred from NeoRx to ABC; provided, however, that ABC will keep the Facility intact and permit NeoRx and FDA inspectors to access and inspect the Facility and Process to ensure that the Product is manufactured and released in accordance with cGMP and the Product specifications as set forth on Exhibit A through the year 2002. VII.  Miscellaneous     (A) Each party may receive information from the other party that the receiving party should reasonably believe is confidential. Each party will hold the other party's confidential information in confidence, including the terms of this Agreement, and will disclose such information to persons on a need to know basis only.     (B) This Agreement contains the entire understanding of the parties and supersedes all prior agreements and understandings, and may not be modified, nor any term waived, except by the unanimous written consent of the parties.     (C) The parties are acting as independent contractors and independent employers. Nothing herein shall be construed as creating a partnership, joint employer or agency relationship between the parties and no party shall have authority to bind the other in any respect.     (D) In the event any provision of this Agreement is held unenforceable under applicable law, the remainder of the Agreement shall remain valid.     (E) No patent, trademark, logo, copyright or other intellectual property rights are conveyed by this Agreement, and neither party shall have the right to use the other parties intellectual property for any purpose whatsoever without prior written consent.     (F) The parties acknowledge that the execution of this agreement relieves any perceived outstanding obligations associated with ABC quote #Jparkins.4E, "Design, Construction, and Validation of Processing Box for Phase III Clinical Manufacture of 166HoDOTMP".     (G) NeoRx agrees to take responsibility for payment of completion, shipping, and installation charges [*]. ABC will be held harmless for these payments.     (H) During the Term of this Agreement, neither Party shall make any press release or other disclosure of the terms of this Agreement without the prior written consent of the other Party.     (I) Each Party shall defend, indemnify, and hold harmless the other Party, its officers, agents, employees and Affiliates (collectively, the "Indemnified Party") from any third party loss, claim, action, damage, expense or liability (including defense costs and reasonable attorneys' fees) arising out of the Indemnifying Party's (a) breach, violation or non fulfillment of any of its covenant, agreements, representations or warranties under this Agreement, (b) handling, possession, or use of the Product, (c) negligence or willful misconduct, or (d) breach of any third party's trade secret right, except to the extent that such loss, claim, action, damage, expense or liability is based on, arises out of, or is due to the negligence or willful misconduct of, or breach of this Agreement by the Indemnified Party. 23 --------------------------------------------------------------------------------     IN WITNESS WHEREOF, each party has caused this Agreement to be executed by a duly authorized representative, effective on this date first set forth above.               NEORX CORPORATION   ABC LABORATORIES, INC.   By:       --------------------------------------------------------------------------------       By:       --------------------------------------------------------------------------------   Name:       --------------------------------------------------------------------------------       Name:       --------------------------------------------------------------------------------   Title:       --------------------------------------------------------------------------------       Title:       --------------------------------------------------------------------------------                             24 -------------------------------------------------------------------------------- EXHIBIT A Item Specifications     [*] 25 -------------------------------------------------------------------------------- EXHIBIT A (continued)     [*] 26 -------------------------------------------------------------------------------- EXHIBIT B ABC's ADDITIONAL RESPONSIBILITIES     (1) Be capable of Processing up to [*] of Product per week for delivery on Tuesday through Thursday of each such week as permitted by MURR HP     (2) Perform scale up of Process from [*] and be capable of Processing up to [*] Product per week for delivery on Tuesday through Thursday of each such week at NeoRx's request; provided, however, NeoRx provides a reasonable amount of time for ABC to complete the Process scale up as permitted by MURR HP.     (3) Perform all QA/QC release testing on each batch of Product as required pursuant to cGMP and the Product specifications set forth on Exhibit A.     (4) Maintain the manufacturing process and Facility in accordance with cGMP. ABC agrees that to evidence its compliance with this responsibility, ABC will conduct all of the following by September 4, 2000:     (a) Completion of technology transfer tasks as defined in protocol to be provided to ABC by NeoRx;     (b) IQ/OQ/PQ of all Process and analytical equipment and instrumentation except for [*] which will be completed as soon as reasonably possible;     (c) Process [*] that meets cGMP and all Product specifications set forth on Exhibit A. This responsibility can also be met if NeoRx Quality Assurance approves any deviation in batch test result(s) from Product specifications and releases the Product batch for administration to a patient.     (5) Procure, test, release, and maintain sufficient inventory of raw materials, manufacturing and QC components and reagents necessary to Process the Product in accordance with this Agreement, other than DOTMP and 166HoC13 which will be supplied by NeoRx and MURR, respectively.     (6) Make available to NeoRx and any applicable governmental agency all records relating to the manufacturing process and Facility as they relate to the Product.     (7) Permit NeoRx and FDA inspectors to access and inspect the Facility to ensure that the Product is being Processing in accordance with cGMP and the Product specifications as set forth on Exhibit A as permitted by MURR HP.     (8) Provide to NeoRx a certificate of analysis in the form as agreed to by the parties and in compliance with all laws, for each batch of Product, provided a certificate of analysis is proved to ABC Labs by MURR before production is complete.     (9) Dispose of all waste resulting from the manufacture of the Product. 27 -------------------------------------------------------------------------------- EXHIBIT C MILESTONE PAYMENTS     NeoRx will pay to ABC each of the following milestone payments upon ABC successfully completing (to NeoRx's reasonable satisfaction) the application milestone:     Payment:  [*]. Milestone: Validation, qualification, and technology transfer services upon demonstration of a [*] qualification batch meeting Product specifications set forth on Exhibit A. This responsibility can also be met if NeoRx Quality Assurance approves any deviation in batch test results(s) from Product specifications and releases the Product batch for administration to a patient.     Payment  [*] Milestone: Payment for HPLC software upon receipt of manufacturers invoice.     Payment  [*] Milestone: Payment for MURR HP upon execution of this agreement.     Payment:  [*]. Milestone: Execution of this agreement.     Payment:  [*]. Milestone: Complete resolution of any cGMP compliance deficiencies noted during the 8/22/00 NeoRx quality audit of ABC, and upon demonstration of 12 weeks of batch production suitable for patient dosing. 28 -------------------------------------------------------------------------------- EXHIBIT D REIMBURSABLE EXPENSES     (A) Packaging and Handling Fees. NeoRx shall reimburse ABC at a rate of [*] of Product. ABC shall provide a monthly invoice to NeoRx of these fees.     (B) Radiation Waste (Low Specific Activity) Fees. NeoRx shall reimburse ABC at a rate of [*] of low specific activity (Ho-166m) waste. ABC shall notify NeoRx in writing when each barrel is due for disposal.     (C) HPGe Detector Technical Support Fees. NeoRx shall reimburse ABC at a rate of [*] of MURR technical support required to service the HPGe Detector. ABC shall notify NeoRx in writing when MURR service is required.     (D) Maintenance and Repair of Equipment and Instrumentation. NeoRx shall reimburse ABC for maintenance and repair of the equipment and instrumentation listed on Exhibit E for the period that NeoRx maintains ownership of the listed equipment and instrumentation. 29 -------------------------------------------------------------------------------- EXHIBIT E EQUIPMENT AND INSTRUMENTATION [*] 30 -------------------------------------------------------------------------------- QUICKLINKS CLINICAL MANUFACTURE AND SUPPLY AGREEMENT EXHIBIT A Item Specifications EXHIBIT B ABC's ADDITIONAL RESPONSIBILITIES EXHIBIT C MILESTONE PAYMENTS EXHIBIT D REIMBURSABLE EXPENSES EXHIBIT E EQUIPMENT AND INSTRUMENTATION

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 10.29 Amendment To Atreve Software, Inc. 1997 Stock Option Plan The Atreve Software, Inc. 1997 Stock Option Plan is hereby amended effective March 29, 2000 as follows (the “Plan”): A.  A new Section 22 is added as follows: 22.   Definitions              “Cause” means (i) any act of personal dishonesty taken by the Participant in connection with his responsibilities as an employee and intended to result in substantial personal enrichment of the Participant, (ii) the conviction of a felony, (iii) a willful act by the Participant that constitutes gross misconduct and that is injurious to the Company, (iv) for a period of not less than thirty (30) days following delivery to the Participant of a written demand for performance from the Company that describes the basis for the Company’s belief that the Participant has not substantially performed his duties, continued violations by the Participant of the Participant’s obligations to the Company that are demonstrably willful and deliberate on the Participant’s part or (v) as otherwise provided in an option agreement.              “Change of Control” means the occurrence of any of the following:               (i)  Any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) becomes the “beneficial owner” (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the total voting power represented by the Company’s then outstanding voting securities entitled to vote generally in the election of directors;               (ii)  Any action or event occurring within a two-year period, as a result of which fewer than a majority of the directors are Incumbent Directors. “Incumbent Directors” shall mean directors who either (A) are directors of the Company as of the date hereof, or (B) are elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but shall not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company);               (iii)  The consummation of 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 or the entity that controls such surviving entity) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company, such surviving entity or entity that controls such surviving entity outstanding immediately after such merger or consolidation; or               (iv)  The consummation of the sale or disposition by the Company of all or substantially all of the Company’s assets. B.  A new Section 23 is added as follows: 23.   Termination of Service (Except by Death). Notwithstanding the exercise periods set forth in the Stock Option Agreement, exercise of an Option shall always be subject to the following:              If the Optionee is Terminated for any reason except death or Disability, then Optionee may exercise such Optionee’s Options only to the extent that such Options would have been exercisable upon the Termination Date no later than three (3) months after the Termination Date (or such shorter time period as may be specified in the Stock Option Agreement), but in any event, no later than the expiration date of the Options. Notwithstanding the foregoing, if the Company or any successor thereto terminates the Optionee’s employment without Cause within twelve months following a Change of Control, the Optionee’s Options, and restricted stock acquired upon exercise of the Optionee’s Options or otherwise granted under the Plan shall become 100% vested and exercisable; provided, -------------------------------------------------------------------------------- however, that no such acceleration shall occur in the event that it would preclude accounting for any business combination of the Company involving a Change of Control as a “pooling of interests.”              Notwithstanding any other provisions of the Plan or any Award Agreement or other related agreement, in the event that any payment or benefit received or to be received by the Optionee (whether pursuant to the terms of the Plan, any Award Agreement or other related agreement, or other plan, arrangement or agreement with the Company, any person whose actions result in a Change in Control or any person affiliated with the Company or such person) (all such payments and benefits being hereinafter called “Total Payments”) would be subject (in whole or part), to any excise tax imposed under Section 4999 of the Code (the “Excise Tax”), then, after taking into account any reduction in the Total Payments provided by reason of Section 280G of the Code in such other plan, arrangement or agreement, the payment or benefit received or to be received by the Optionee (whether pursuant to the terms of t he Plan, any Option Agreement, Restricted Stock Purchase Agreement or other related agreement) shall be reduced, to the extent necessary so that no portion of the Total Payments is subject to the Excise Tax but only if (A) the net amount of such Total Payments, as so reduced (and after subtracting the net amount of federal, state and local income taxes on such reduced Total Payments) is greater than or equal to (B) the net amount of such Total Payments without such reduction (but after subtracting the net amount of federal, state and local income taxes on such Total Payments and the amount of Excise Tax to which the Optionee would be subject in respect of such unreduced Total Payments).              Unless the Company and the Optionee otherwise agree in writing, any determination required under this Section shall be made in writing by the Company’s independent public accountants (the “Accountants”), whose determination shall be conclusive and binding upon the Optionee and the Company for all purposes. For purposes of making the calculations required by this Section, the Accountants 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 Code. The Company and the Optionee shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this Section. The Company shall bear all costs the Accountants may reasonably incur in connection with any calculations contemplated by thi s Section.

Second Amendment to Connecticut Natural Gas Corporation Union Employee Savings Plan Trust Agreement The Connecticut Natural Gas Corporation Union Employee Savings Plan Trust Agreement dated as of January 1, 1993 by and between Connecticut Natural Gas Corporation and Putnam Fiduciary Trust Company, as heretofore amended (the "Trust"), is hereby amended as follows effective as of April 25, 2000: 1. By adding the following new sentence after the first sentence of Section 3 of the Trust: "Each such eligible employee, former eligible employee or his beneficiary with an account balance under the Plan is sometimes herein referred to as a "Plan member"." 2. By deleting the phrase "securities issued by the Company" where it appears in the last sentence of Section 5 of the Trust and inserting in lieu thereof the phrase "securities issued by the Company or an affiliate". 3. By deleting the phrase "shares of stock of the Company" where it appears in the last sentence of the first paragraph of Section 6 of the Trust and inserting in lieu thereof the phrase "shares of stock of the Company or an affiliate". 4. By deleting the portion of the second sentence of Section 7 of the Trust up to and including the colon therein and inserting in lieu thereof the following: "Prior to the consummation of the merger (the "Merger") of CTG Resources, Inc. with and into Oak Merger Co. pursuant to the Agreement and Plan of Merger, dated as of June 29, 1999, by and among CTG Resources, Inc., Energy East Corporation and Oak Merger Co., such securities shall be common stock of CTG Resources, Inc., and on and after the date of the consummation of the Merger, such securities shall be common stock of Energy East Corporation or its successor or successors. Trust investments in such securities (referred to herein as "Company Stock") shall be subject to the following terms and conditions:" 5. By deleting the third sentence of Section 7(b) of the Trust and inserting in lieu thereof the following: "The Company hereby appoints as named fiduciaries solely with respect to the matters relating to Company Stock held in the Trust each Plan member who furnishes instructions to the Trustee on any such matter in accordance with Section 7(e), (f) or (g) hereof." 6. By deleting the first two sentences of the second paragraph of Section 7(c) of the Trust and inserting in lieu thereof the following: "The Trustee may purchase or sell Company Stock from or to the Company or an affiliate if the purchase or sale is for no more than adequate consideration (within the meaning of Section 3(18) of ERISA) and no commission is charged. To the extent that Company contributions under the Plan are to be invested in Company Stock, the Company or an affiliate may transfer Company Stock to the Trust in lieu of cash." 7. By deleting the fourth sentence of Section 7(e) of the Trust and inserting in lieu thereof the following: "The form shall show the number of full and fractional shares of Company Stock credited to the Plan member's accounts, whether or not vested, as of the record date established for such meeting." 8. By deleting the phrase "Compensation and Fringe Benefits Committee of the Board of Directors of the Company, which the Company hereby appoints as a named fiduciary solely with respect to the voting of such shares of Company Stock" where it appears in the last paragraph of Section 7(e) of the Trust and inserting in lieu thereof the phrase "Plan's Administrative Committee". 9. By adding a new paragraph at the end of Section 7(e) of the Trust and inserting in lieu thereof the following: "A Plan member's right to instruct the Trustee with respect to voting shares of Company Stock will not include rights concerning the exercise of any appraisal rights, dissenters' rights or similar rights granted by applicable law to the registered or beneficial holders of Company Stock. These matters will be exercised by the Trustee in accordance with the directions of the Plan's Administrative Committee." 10. By deleting Section 7(f) of the Trust and inserting in lieu thereof the following: "(f) Tender Offers/Conversion Election. Upon commencement of a tender offer for any Company Stock or in connection with the exercise of conversion rights in respect of the Merger, the Company shall notify each Plan member or cause each Plan member to be notified, and use its best efforts to timely distribute or cause to be distributed to Plan members the same information that is distributed to shareholders of the issuer of the Company Stock in connection with the tender offer or exercise of conversion rights, and after consulting with the Trustee shall provide at the Company's expense a means by which Plan members may direct the Trustee whether or not to tender or, in connection with the Merger, the form of merger consideration to be elected in respect of the Company Stock credited to their accounts (whether or not vested). The Company shall provide to the Trustee a copy of any material provided to Plan members and shall certify to the Trustee that the materials have been mailed or otherwise sent to Plan members. Each Plan member shall have the right to direct the Trustee to tender or not to tender or, in connection with the Merger, to elect a form of conversion consideration in respect of some or all of the shares of Company Stock credited to his accounts. Directions from a Plan member to the Trustee shall be communicated in writing or by facsimile or such similar means as is agreed upon by the Trustee and the Company. The Trustee shall tender or not tender shares or elect Merger conversion consideration in respect of Company Stock as directed by the Plan member. The Trustee shall not tender shares or elect Merger consideration in respect of Company Stock credited to a Plan member's accounts for which it has received no directions from the Plan members. The Trustee shall tender or not tender and shall elect Merger consideration in respect of the number of shares of Company Stock not credited to Plan members' accounts as directed by the Plan's Administrative Committee. A Plan member who has directed the Trustee to tender some or all of the shares of Company Stock credited to his accounts may, at any time before the tender offer withdrawal date, direct the Trustee to withdraw some or all of the tendered shares, and the Trustee shall withdraw the directed number of shares from the tender offer before the tender offer withdrawal deadline. A Plan member shall not be limited as to the number of directions to tender or withdraw that he may give to the Trustee. A direction by a Plan member to the Trustee to tender or convert shares of Company Stock credited to his accounts shall not be considered a written election under the Plan by the Plan member to withdraw or to have distributed to him any or all of such shares. The Trustee shall credit to each account of the Plan member from which the tendered or converted shares were taken the proceeds received by the Trustee in exchange for the shares of Company Stock tendered or converted from that account. Pending receipt of directions through the Administrator from the Plan member as to the investment of the proceeds of the tendered shares, the Trustee shall invest the proceeds as the Administrator shall direct. In the case of the conversion of Company Stock in connection with the Merger, cash proceeds received upon the conversion and any dividends paid on Company Stock during the Merger conversion consideration election transition period implemented under the Plan will be invested, notwithstanding any other provision of this Agreement to the contrary, as soon as practicable after receipt in the Putnam Stable Value Fund until the Plan member directs otherwise under the Plan." 11. By deleting Section 7(g) of the Trust and inserting in lieu thereof the following: "(g) General. With respect to all rights other than those covered in Section 7(e) or (f), the Trustee shall follow the directions of the Plan member as to Company Stock credited to his accounts, and if no such directions are received, the directions of the Plan's Administrative Committee. The Trustee shall have no duty to solicit directions from Plan members. With respect to all rights other than those covered in Section 7(e) or (f), in the case of Company Stock not credited to Plan members' accounts, the Trustee shall follow the directions of the Plan's Administrative Committee. All provisions of this Section 7 shall apply to any securities as a result of a conversion of Company Stock." IN WITNESS WHEREOF, the parties hereby execute this Second Amendment as of the 25th day of April, 2000.   CONNECTICUT NATURAL GAS CORPORATION By: S/ Jean S. McCarthy                                  PUTNAM FIDUCIARY TRUST COMPANY               By: S/ Tina Campbell                                     

ASSET PURCHASE AGREEMENT dated as of October 17, 2000 by and among AMERISTAR CASINO ST. CHARLES, INC., a Missouri corporation ("Purchaser"), AMERISTAR CASINOS, INC., a Nevada corporation ("ACI"), ST. CHARLES RIVERFRONT Station, INC., a Missouri corporation (the "Company"), and Station Casinos, Inc., a Nevada corporation ("Parent"), with respect to the assets of ST. CHARLES RIVERFRONT Station, INC., a Missouri corporation <page>TABLE OF CONTENTS This Table of Contents is not part of the Agreement to which it is attached but is inserted for convenience only. Page No. ASSET PURCHASE AGREEMENT * ARTICLE I SALE OF ASSETS AND CLOSING * 1.01    Assets * 1.02    Liabilities * 1.03    Purchase Price; Allocation * 1.04    Closing * 1.05    Determination of Surplus or Deficiency; Post-Closing Adjustment * 1.06    Prorations * 1.07    Further Assurances; Post-Closing Cooperation * 1.08    Third-Party Consents; ACI's Gaming Compliance Program * 1.09    Insurance Proceeds * ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND PARENT * 2.01    Corporate Existence * 2.02    Authority * 2.03    No Conflicts * 2.04    Governmental Approvals and Filings * 2.05    Financial Statements and Condition * 2.06    Taxes * 2.07    Legal Proceedings * 2.08    Compliance With Laws and Orders * 2.09    Benefit Plans; ERISA; Labor Matters * 2.10    Real Property * 2.11    Tangible Personal Property * 2.12    Contracts * 2.13    Licenses * 2.14    Affiliate Transactions * 2.15    Environmental Matters * 2.16    Labor Matters * 2.17    Brokers * 2.18    Absence of Certain Changes * 2.19    Sufficiency of and Title to the Assets * 2.20    Insurance * ARTICLE III REPRESENTATIONS AND WARRANTIES OF PURCHASER and aci * 3.01    Existence * 3.02    Authority * 3.03    No Conflicts * 3.04    Governmental Approvals and Filings * 3.05    Legal Proceedings * <page>3.06    Brokers * 3.07    Financing * 3.08    Purchaser's Gaming Licenses * ARTICLE IV COVENANTS OF THE COMPANY AND PARENT * 4.01    Regulatory and Other Approvals * 4.02    HSR Filings * 4.03    Investigation by Purchaser * 4.04    Conduct of Business * 4.05    Certain Restrictions * 4.06    Transition Period * 4.07    No Solicitation * 4.08    Title Insurance * 4.09    ACI's Gaming Compliance Program * 4.10    Fulfillment of Conditions * 4.11    Noncompetition * 4.12    No Solicitation * ARTICLE V COVENANTS OF PURCHASER * 5.01    Regulatory and Other Approvals * 5.02    HSR Filings * 5.03    Investigation by the Company * 5.04    No Solicitation * 5.05    Collection of Gaming Chips and Tokens * 5.06    Valet Parking * 5.07    Return of Books and Records * 5.08    Use of Transferred Intellectual Property * 5.09    Fulfillment of Conditions * ARTICLE VI CONDITIONS TO OBLIGATIONS OF PURCHASER * 6.01    Representations and Warranties * 6.02    Performance * 6.03    Officers' Certificates * 6.04    Orders and Laws * 6.05    Regulatory Consents and Approvals * 6.06    Consummation of Related Transaction * 6.07    Deliveries * 6.08    Title Insurance and Environmental Reports * 6.09    Consents. * 6.10    Absence of Material Adverse Effect * ARTICLE VII CONDITIONS TO OBLIGATIONS OF THE COMPANY * 7.01    Representations and Warranties * 7.02    Performance * 7.03    Officers' Certificates * 7.04    Orders and Laws * 7.05    Regulatory Consents and Approvals * 7.06    Consummation of Related Transaction * 7.07    Deliveries * <page>7.08    Required Consents * ARTICLE VIII TAX MATTERS AND POST-CLOSING TAXES * 8.01    Transfer Taxes and Transfer Fees * 8.02    Tax Indemnification * 8.03    Tax Cooperation * 8.04    Notification of Proceedings; Control * ARTICLE IX EMPLOYEE BENEFITS MATTERS * 9.01    Offer of Employment * 9.02    Welfare Plans -- Claims Incurred; Pre-Existing Conditions * 9.03    Vacation * 9.04    Service Credit * 9.05    Company's Benefit Plans * 9.06    COBRA Matters * ARTICLE X SURVIVAL OF REPRESENTATIONS * 10.01    Survival of Representations, Warranties, Covenants and Agreements * 10.02    No Other Representations * ARTICLE XI INDEMNIFICATION * 11.01    Other Indemnification * 11.02    Method of Asserting Claim * 11.03    Exclusivity * ARTICLE XII TERMINATION * 12.01    Termination * 12.02    Effect of Termination * ARTICLE XIII DEFINITIONS * 13.01    Defined Terms * 13.02    Construction of Certain Terms and Phrases * ARTICLE XIV MISCELLANEOUS * 14.01    Notices * 14.02    Entire Agreement * 14.03    Expenses * 14.04    Public Announcements * 14.05    Waiver * 14.06    Amendment * 14.07    Confidentiality * 14.08    No Third Party Beneficiary * 14.09    No Assignment; Binding Effect * 14.10    Headings * 14.11    Invalid Provisions * 14.12    Consent to Jurisdiction and Venue * 14.13    Governing Law * 14.14    Attorney's Fees * 14.15    Time of the Essence * <page>14.16    Counterparts * ARTICLE XV GUARANTEES * 15.01    Guarantee of the Company's Obligations * 15.02    Guarantee of Purchaser's Obligations * <page>SCHEDULES Section 1.01(a)(i) Owned Real Property Section 1.01(a)(ii) Real Property Leases Section 1.01(a)(iii) Planned Expansion Facility Materials Section 1.01(a)(v) Personal Property Leases Section 1.01(a)(vi) Business Contracts Section 1.01(a)(viii) Business Licenses Section 1.01(a)(ix) Vehicles and Vessels Section 1.01(a)(xiii) Transferred Intellectual Property Section 1.01(b)(xiv) Excluded Contacts Section 2.03 Conflicts Section 2.04 Governmental Approvals Section 2.05(a) Financial Statements Section 2.05(b) Changes in Condition Section 2.06(a) Tax Liens Section 2.06(b) Compliance with Tax Laws Section 2.07 Legal Proceedings Section 2.08 Compliance with Laws and Orders Section 2.09(a) Benefit Plans Section 2.09(e) Benefit Accrual Section 2.09(f) Collective Bargaining Agreements Section 2.09(g) Terminated Employees Section 2.10(a) Real Property Section 2.10(b) Liens Section 2.12(a) Contracts Section 2.12(b) Contract Violations Section 2.13 Licenses Section 2.15 Environmental Matters Section 2.18 Certain Changes Section 2.20 Insurance Section 3.04 Purchaser's Governmental Approvals Section 3.08 Purchaser's Gaming Licenses Section 6.09 Consents   EXHIBITS Exhibit A General Assignment and Bill of Sale Exhibit B Assumption Agreement Exhibit C Officer's Certificate of the Company Exhibit D Secretary's Certificate of the Company Exhibit E-1 Officer's Certificate of Purchaser Exhibit E-2 Officer's Certificate of ACI Exhibit F-1 Secretary's Certificate of Purchaser Exhibit F-2 Secretary's Certificate of ACI Exhibit G Intentionally Omitted Exhibit H Net Current Assets Calculation <page>ASSET PURCHASE AGREEMENT This ASSET PURCHASE AGREEMENT dated as of October 17, 2000 (the "Effective Date") is made and entered into by and among Ameristar Casino St. Charles, Inc., a Missouri corporation ("Purchaser"), Ameristar Casinos, Inc., a Nevada corporation ("ACI"), St. Charles Riverfront Station Corporation, a Missouri corporation (the "Company"), and Station Casinos, Inc., a Nevada corporation ("Parent"). Capitalized terms not otherwise defined herein have the meanings set forth in Section 13.01. WHEREAS, the Company owns and operates that certain riverboat gaming and entertainment facility known as "Station Casino St. Charles" located in St. Charles, Missouri (the "Business"); and WHEREAS, Parent and the Company have entered into that certain Asset Purchase Agreement dated as of July 19, 2000 with SC Opco, LLC, a Delaware limited liability company (the "July Agreement") pursuant to which the Company has agreed to sell the Business to SC Opco, LLC; and WHEREAS, the Company desires to enter into an agreement to sell, transfer and assign to Purchaser, and Purchaser desires to enter into an agreement to purchase and acquire from the Company, certain of the assets of the Company relating to the operation of the Business, and in connection therewith, Purchaser has agreed to assume certain of the liabilities of the Company relating to the Business, all on the terms set forth herein. NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SALE OF ASSETS AND CLOSING 1. Assets . Assets Transferred . On the terms and subject to the conditions set forth in this Agreement, the Company will sell, transfer, convey, assign and deliver to Purchaser, and Purchaser will purchase and pay for, at the Closing, all of the Company's right, title and interest in, and to all of the properties, assets and rights of every nature, kind and description, tangible and intangible (including goodwill), whether real, personal or mixed, whether accrued, contingent or otherwise, and whether now existing or hereafter acquired (other than the Excluded Assets) used primarily in connection with the Business, except as otherwise provided in Section 1.01(b) , as the same shall exist on the Closing Date including but not limited to such properties, assets and rights in the following categories (collectively with any proceeds and awards referred to in Section 1.09 , the " Assets "): <page>Real Property . The real property described in Section 1.01(a)(i) of the Disclosure Schedule , and all of the rights arising out of the ownership thereof or appurtenant thereto (the " Owned Real Property "), together with all buildings, structures, facilities, fixtures and other improvements thereto (the " Improvements ") and all transferable licenses, permits, approvals and qualifications relating to any Owned Real Property issued to the Company by any Governmental or Regulatory Authority; Real Property Leases and Agreements . Subject to Section 1.08, (A) the leases, subleases and licenses of real property and related guarantees described in Section 1.01(a)(ii)(A) of the Disclosure Schedule as to which the Company is the lessor, sublessor or licensor together with any agreements for use or occupancy of hotel rooms, banquet facilities or meeting rooms, and (B) the leases and subleases of real property described in Section 1.01(a)(ii)(B) of the Disclosure Schedule as to which the Company is the lessee, sublessee or licensee (including the land and buildings, improvements and structures and all appurtenances belonging thereto) (such real property, the " Leased Real Property "; and, together with the Owned Real Property, the " Real Property "); and all other rights, subleases, licenses, permits, deposits and profits appurtenant to or related to such leases, subleases and licenses described in this Section 1.01(a)(ii ) (the leases and agreements described in subclauses (A) and (B), the " Real Property Leases ") and all of the Company's interest (including the land and buildings, improvements and structures located thereon and all appurtenances belonging thereto) in those certain leases, subleases and licenses as to which the Company is the lessee, sublessee or licensee as described in Section 1.01(a)(ii)(B) of the Disclosure Schedule ; Accounts Receivable . All accounts receivable of the Company existing on the Closing Date and calculated as set forth on the schedule attached hereto as Exhibit H (the " Accounts Receivable "); Tangible Personal Property . All furniture, fixtures, equipment, machinery, consumables, inventory, merchandise, liquor, food, supplies, spare and replacement parts and other tangible personal property (including, without limitation, all Gaming Devices which shall be transferred through a Licensed Supplier in accordance with the rules and regulations of the Missouri Gaming Commission (the " Commission ")) used primarily in the conduct of the Business (the " Tangible Personal Property ") and all materials and items relating to the planned expansion facilities and listed in Section 1.01(a)(iii) of the Disclosure Schedule and all plans, drawings, specifications and models relating to the planned expansion of the physical facilities constituting the Business (the "Expansion Materials"); Personal Property Leases . Subject to Section 1.08 , (A) the leases or subleases of Tangible Personal Property described in Section 1.01(a)(v)(A) of the Disclosure Schedule as to which the Company is the lessor or sublessor and (B) the leases of Tangible Personal Property described in Section 1.01(a)(v)(B) of the Disclosure Schedule as to which the Company is the lessee or sublessee, together with any options to purchase the underlying property (the leases and subleases described in subclauses (A) and (B) , the " Personal Property Leases "); <page>Business Contracts . Subject to Section 1.08 , all Contracts (other than the Real Property Leases and the Personal Property Leases) to which the Company is a party, the terms of which permit assignment of the Company's interest therein or with respect to which all necessary consents to assignment of the Company's interest therein have been obtained prior to the Closing, and which are utilized primarily in the conduct of the Business, including, without limitation, Contracts described in Section 1.01(a)(vi) of the Disclosure Schedule and Contracts relating to suppliers, sales representatives, distributors, purchase orders, marketing arrangements and manufacturing arrangements (the " Business Contracts "); Prepaid Expenses . All prepaid expenses of the Company existing on the Closing Date and calculated as set forth on the schedule attached hereto as Exhibit H (the " Prepaid Expenses "); Licenses . To the extent transfer is permitted under applicable Laws and pursuant to the terms of such Licenses and subject to Section 1.08 , Licenses (including applications therefor) issued primarily in connection with the conduct of the Business, including, without limitation, the Licenses listed in Section 1.01(a)(viii) of the Disclosure Schedule (the " Business Licenses "); Vehicles and Vessels . All motor vehicles, boats and barges and related docking facilities owned or leased by the Company and used primarily in the conduct of the Business, all of which are listed in Section 1.01(a)(ix) of the Disclosure Schedule (the " Vehicles and Vessels "); Security Deposits . All security deposits deposited by or on behalf of the Company as lessee or sublessee under the Real Property Leases and the Personal Property Leases existing on the Closing Date and calculated as set forth on the schedule attached hereto as Exhibit H (the " Lessee Security Deposits "); Other Rights . All third party guarantees, warranties, indemnities and similar rights in favor of the Company with respect to any Asset, other than claims and recoveries under litigation of the Company against third parties (including, without limitation, the Company's pending insurance claim relating to the sinking of the Company's tent barge) arising out of or relating to events or conditions existing or occurring prior to the Transfer Time; Hotel and Entertainment Reservations . All security deposits or payments made to the Company prior to the Transfer Time with regard to any hotel and entertainment reservations for events following the Transfer Time; Intellectual Property . All of the Company's licensed products or processes, patents, copyrights, trademarks, service marks, service names, designs, know-how, processes, trade secrets, inventions, and other proprietary data (including, without limitation, all customer lists) used exclusively in the Business or exclusively in connection with the Assets (other than the trade names and logos described in Section <page>1.01(b)(ix) ) (the " Transferred Intellectual Property "), which Transferred Intellectual Property is listed in Section 1.01(a)(xiii) of the Disclosure Schedule ; and Books and Records . All Books and Records used primarily in the conduct of the Business or otherwise relating primarily to the Assets (including, without limitation, customer lists and customer data bases relating primarily to the Business (the " Business Customer Lists "), all Books and Records required by the Commission to be maintained at the Business, other than the Excluded Books and Records (the " Business Books and Records "). To the extent any of the Business Books and Records are items susceptible to duplication and are either (x) used in connection with any of the Company's or its Affiliates' businesses other than the Business or (y) are required by Law to be retained by the Company or its Affiliates, the Company may deliver photostatic copies or other reproductions from which, in the case of Business Books and Records referred to in clause (x), information solely concerning the Company's businesses other than the Business has been deleted. Subject to the terms and conditions hereof, at the Closing, the Assets shall be transferred or otherwise conveyed to Purchaser free and clear of all Liabilities, obligations, liens and encumbrances excepting only Assumed Liabilities and Permitted Liens which shall be payable by Purchaser only to the extent they are Assumed Liabilities. Excluded Assets . Notwithstanding anything in this Agreement to the contrary, the following assets and properties of the Company (the " Excluded Assets ") shall be excluded from and shall not constitute Assets: Cash . All cash (including checks received prior to the Transfer Time, whether or not deposited or cleared prior to the Transfer Time) including, without limitation, cage cash, slot fill, drop boxes, valet register, commercial paper, certificates of deposit and other bank deposits, treasury bills and other cash equivalents; Membership Interests . All of the Company's membership interests in Front Street Station, LLC; Insurance . Subject to Section 1.09 , life insurance policies of officers and other employees of the Company and all other insurance policies relating to the operation of the Business; Employee Benefit Plans . All assets owned or held by or under any Benefit Plans including assets held in trust or insurance contracts for the benefit of Benefit Plan participants or beneficiaries; Tax Refunds . All refunds or credits, if any, of Taxes due to or from the Company by reason of its ownership of the Assets or operation of the Business to the extent attributable to any time or period ending at or prior to the Transfer Time; <page>Excluded Books and Records . The minute books, stock transfer books and corporate seal of the Company and any other Books and Records relating primarily to the Excluded Assets or the Retained Liabilities except for the Business Customer Lists and such Books and Records required by the Commission to be maintained at the Business (the " Excluded Books and Records "); Litigation Claims . All rights (including indemnification) and claims and recoveries under litigation of the Company against third parties (other than rights, claims and recoveries acquired by Purchaser pursuant to Section  1.01(a)(xi) ), including, without limitation, the Company's pending insurance claim relating to the sinking of the Company's tent barge, arising out of or relating to events prior to the Transfer Time; Excluded Obligations . The rights of the Company in, to and under all Contracts of any nature, the obligations of the Company under which expressly are not assumed by Purchaser pursuant to Section 1.02(b) ; Trade Names and Logos . All of the Company's right, title and interest in, to and under the names "Station Casinos, Inc.", "Station Casino St. Charles", "The Feast", and "Boarding Pass Players Program", including any derivative names and related marks, designs or logos, except for the Transferred Intellectual Property; Gaming Chips and Tokens . All of the Company's gaming chips and tokens, including, without limitation, all (A) Gaming Device tokens not currently in circulation and (B) "reserve" chips, if any, not currently in circulation, except that at Purchaser's written election made at any time prior to the Closing Date (which election shall be subject to the prior approval of the Commission), such chips and tokens may be acquired by Purchaser at the Closing without further consideration; St. Charles Agreement . The Company's rights under the Agreement for Property Acquisitions, dated September 22, 1999 between the Company and the City of St. Charles, Missouri; Intellectual Property . All trade names, marks, designs, logos, domain names and websites other than the Transferred Intellectual Property; Rights under this Agreement . The Company's rights under this Agreement and the July Agreement; i. Signs. All of the Company's signs containing any trade name, mark, design or logo described in clause (ix) above, which Purchaser shall, at Purchaser's sole cost and expense and using reasonable care, not later than promptly following the expiration of any period that Purchaser is permitted to use such names, marks, designs or logos pursuant to Section 4.06 hereof, remove from the Real Property and Improvements thereto and place in a reasonably accessible location on the Real Property for prompt retrieval by the Company, together with all of the Company's right, title and interest therein, and as promptly as practicable, notify the Company and Parent that such signs have been removed and as to the location of such signs; provided, however, that other <page>than as expressly provided herein, Purchaser shall have no liability to the Company arising out of or resulting from Purchaser's performance of its removal, storage or other obligations with respect to such signs; Excluded Contracts . The Administrative Services Agreement between the Company and Parent; and The Excluded Real Property . The Real Property described in Section 1.01(b)(xvi) of the Disclosure Schedule . 2. Liabilities . Assumed Liabilities . In connection with the sale, transfer, conveyance, assignment and delivery of the Assets pursuant to this Agreement, on the terms and subject to the conditions set forth in this Agreement, Purchaser shall assume as of the Transfer Time and shall pay, perform and discharge when due the following Liabilities of the Company, in each case to the extent arising out of or relating to the Business or the Assets (x) in the case of items listed in subsections (i), (iii) and (iv) below, as the same shall accrue after the Transfer Time and (y) in the case of items listed in subsections (ii) and (v) through (ix) below, as the same shall exist at the Transfer Time (collectively, the " Assumed Liabilities "), and no other Liabilities: Real Property Lease Obligations . Subject to the provisions of Section 1.08 , all obligations of the Company under the Real Property Leases; Accounts Payable . All obligations of the Company with respect to accounts payable outstanding on the Closing Date and calculated as set forth on the Schedule attached hereto as Exhibit H , but excluding any Liability owed by the Company to any Affiliate of the Company (" Accounts Payable "); Personal Property Lease Obligations . Subject to the provisions of Section 1.08 , all obligations of the Company under the Personal Property Leases; Obligations under Contracts and Licenses . Subject to the provisions of Section 1.08 , all obligations of the Company under the Business Contracts and Business Licenses that constitute Assets; Accrued Expenses . All obligations of the Company with respect to accrued expenses outstanding on the Closing Date and calculated as set forth on Exhibit H attached hereto (" Accrued Expenses "); Returned Goods . All obligations of the Company for replacement of, or refund for, damaged, defective or returned goods, to the extent such goods are subject to full return privileges from the supplier thereof; Security Deposits . All outstanding obligations of the Company on the Closing Date with respect to any security deposit held by the Company as lessor or <page>sublessor under the Real Property Leases or Personal Property Leases calculated as set forth on Exhibit H attached hereto (the "Lessor Security Deposits"); Progressive Meters . All outstanding obligations of the Company on the Closing Date with respect to any progressive meter on any Gaming Device calculated as set forth on Exhibit H attached hereto; Reservations . All obligations of the Company with respect to entertainment reservations; and Post-Closing Liabilities . All Liabilities of the Business (other than Retained Liabilities) to the extent (A) resulting from events or conditions occurring following the Transfer Time or (B) arising out of the Assets and occurring after the Transfer Time. Retained Liabilities . All Liabilities of the Company other than Assumed Liabilities (the " Retained Liabilities ") shall be retained and paid, performed and discharged when due by the Company and Parent ( provided , that the Company shall have the ability to contest, in good faith, any such claim of liability asserted in respect thereof by any Person other than Purchaser and its Affiliates, so long as such contest does not result in a Lien upon any of the Assets): i. except to the extent any such liability is reflected on the Closing Date Balance Sheet as a current liability of the Business, any loss or liability of the Company of any nature or description, whether liquidated or contingent, to the extent (a) resulting from events or conditions which occurred or existed prior to the Transfer Time, or (b) arising out of or relating to the Excluded Assets (including those items identified as Retained Liabilities in Section 1.08); ii. any loss or liability relating to current or former employees of the Business (and their eligible dependents and beneficiaries), including with respect to employment or Benefit Plans, which accrued on or prior to the Transfer Time, except to the extent that such liability is reflected on the Closing Balance Sheet as a current liability of the Business; iii. all Liabilities with respect to gaming chips and tokens issued by the Company (but not progressive meters), except as provided otherwise herein; iv. all Liabilities related to Benefit Plans, except to the extent that such liability is reflected on the Closing Balance Sheet as a current liability of the Business; v. all Indebtedness (other than current accounts payable or accrued expenses of the Company incurred or accrued in the ordinary course of business, but only to the extent that the accrual for such payables and expenses has been properly reflected on the Closing Balance Sheet, and other than to the extent arising following the Transfer Time under Contracts that constitute Assets); vi. <page>any Liability, whether currently in existence or arising hereafter, owed by the Company to any of its Affiliates; vii. all Liabilities related to any fines or penalties imposed against the Company (or with respect to the Business or any Asset) by any Governmental or Regulatory Authority (including, without limitation, the Commission) prior to the Transfer Time; and viii. all other Liabilities of the Company other than the Assumed Liabilities. 3. Purchase Price; Allocation . Purchase Price . Subject to the adjustments set forth in Section 1.05 , the aggregate purchase price for the Assets shall be equal to One Hundred Sixty Million Dollars ($160,000,000) plus the amount of any Surplus or minus the amount of any Deficiency, in each case, as determined in accordance with Section 1.05 (the " Purchase Price "). Upon Closing, the Purchase Price shall be payable in immediately available United States funds at the Closing in the manner provided in Section 1.04 . Allocation of Purchase Price . Purchaser and the Company shall negotiate in good faith prior to the Closing Date and determine the allocation of the consideration paid by Purchaser for the Assets and the covenant not to compete contained in Section 4.11 hereof. Purchaser and the Company each agrees (i) that any such allocation shall be consistent with the requirements of Section 1060 of the Code and the regulations thereunder, (ii) to complete jointly and to file separately Form 8594 with its Federal income Tax Return consistent with such allocation for the tax year in which the Closing Date occurs and (iii) that no party will take a position on any income, transfer or gains Tax Return, before any Governmental or Regulatory Authority charged with the collection of any such Tax or in any judicial proceeding, that is in any manner inconsistent with the terms of any such allocation without the consent of the other party. 4. Closing . The Closing will take place at the offices of Milbank, Tweed, Hadley & McCloy LLP, 601 South Figueroa Street, 31st Floor, Los Angeles, California, or at such other place as Purchaser and the Company mutually agree, at 10:00  A.M. local time and shall be deemed to occur at 6:00 A.M., Central time, on the day immediately after the Closing Date (the "Transfer Time"). At the Closing, Purchaser will pay the Estimated Purchase Price by wire transfer of immediately available funds to such accounts as the Company may reasonably direct by written notice delivered to Purchaser at least two (2) Business Days before the Closing Date. Simultaneously, (a) the Company will assign and transfer to Purchaser all of its right, title and interest in and to the Assets (free and clear of all Liens, other than Permitted Liens) by delivery of (i) a General Assignment and Bill of Sale substantially in the form of Exhibit A hereto (the "General Assignment"), duly executed by the Company, (ii) general warranty deeds in proper statutory form for recording and otherwise in form and substance reasonably satisfactory to Purchaser conveying title to the Owned Real Property and (iii) such other good and sufficient instruments of conveyance, assignment and transfer, in form and substance reasonably acceptable to Purchaser's counsel, as shall be effective to vest in Purchaser good title <page>to the Assets (the General Assignment and the other instruments referred to in clauses (ii) and (iii) being collectively referred to herein as the "Assignment Instruments"), and (b) Purchaser will assume from the Company the due payment, performance and discharge of the Assumed Liabilities by delivery of (i) an Assumption Agreement substantially in the form of Exhibit B hereto (the "Assumption Agreement"), duly executed by Purchaser, and (ii) such other good and sufficient instruments of assumption, in form and substance reasonably acceptable to the Company's counsel, as shall be effective to cause Purchaser to assume the Assumed Liabilities as and to the extent provided in Section 1.02(a) (the Assumption Agreement and such other instruments referred to in clause (ii) being collectively referred to herein as the "Assumption Instruments"). At the Closing, there shall also be delivered to the Company and Purchaser the certificates and other contracts, documents and instruments required to be delivered under Articles VI and VII. 5. Determination of Surplus or Deficiency; Post-Closing Adjustment . b. On or before the seventh (7th) Business Day preceding the Closing Date, the Company shall, and Parent shall cause the Company to, prepare and deliver to Purchaser an interim balance sheet (the "Estimated Closing Balance Sheet") of the Company as of the close of business on the final day of the calendar month immediately preceding the calendar month during which the Closing Date occurs (the "Test Month"), together with a statement of the Company's Net Current Assets as of such date calculated in a manner consistent with the calculation set forth on Exhibit H attached hereto; provided that if the Closing Date occurs within the first seven (7) Business Days of a calendar month, the Estimated Closing Balance Sheet shall be as of the close of business on the final day of the second calendar month immediately preceding the calendar month during which the Closing Date occurs (in such case, the "Test Month"). The Estimated Closing Balance Sheet shall be accompanied by a certificate of the Chief Financial Officer of the Company to the effect that the Estimated Closing Balance Sheet presents fairly, in accordance with GAAP and the accounting practices of the Company applied on a consistent basis, the financial condition of the Company as of the close of business on the last day of the Test Month. The amount of Net Current Assets set forth in the Estimated Closing Balance Sheet shall be final and binding for purposes of determining the amount of any Surplus or Deficiency used in calculating the Purchase Price (the "Estimated Purchase Price"), unless Purchaser delivers a good faith written objection to the calculation of Net Current Assets at least three (3) Business Days prior to the anticipated Closing Date (the "Objection Notice"). The Company shall make available to Purchaser and its representatives the books, records and workpapers used to prepare the Estimated Closing Balance Sheet. In the event of an Objection Notice, the Company and Purchaser shall negotiate in good faith during the period preceding the Closing Date to resolve the dispute. If the dispute is not resolved by the specified Closing Date, Purchaser shall pay an Estimated Purchase Price based upon the amount of any Deficiency or Surplus, as applicable, resulting from the calculation of Net Current Assets set forth in the Estimated Balance Sheet. c. As promptly as practicable after the Closing Date, but in no event more than sixty (60) days after the Closing Date (such date on which the Closing Balance Sheet is delivered, the "Closing Financial Statements Delivery Date"), Purchaser will prepare and deliver to the Company and Parent a balance sheet of the Company as of the close of business on the <page>Closing Date (the "Closing Balance Sheet") and a calculation of Net Current Assets, in a manner consistent with the calculation set forth on Exhibit H attached hereto, from such Closing Balance Sheet. The Closing Balance Sheet shall be accompanied by a certificate of the Chief Financial Officer of Purchaser to the effect that the Closing Balance Sheet presents fairly, in accordance with GAAP and the accounting practices of the Company applied on a consistent basis, the financial condition of the Company as of the close of business on the Closing Date and that the Net Current Assets calculation was made in accordance with the terms of this Agreement. d. The Company and a firm of independent public accountants designated by the Company (the "Company's Accountant") will be entitled to reasonable access during normal business hours to the relevant records, personnel and working papers of the Purchaser to aid in their review of the Closing Balance Sheet and the calculation of Net Current Assets therefrom. The Closing Balance Sheet and the calculation of Net Current Assets therefrom shall be deemed to be accepted by the Company and shall be conclusive for the purposes of the adjustment described in Section 1.05(d) and (e) hereof except to the extent, if any, that the Company or Company's Accountant shall have delivered, within thirty (30) days after the Closing Financial Statements Delivery Date, a written notice to Purchaser setting forth objections thereto, specifying in reasonable detail any such objection (it being understood that any amounts not disputed as provided herein shall be paid promptly). If a change proposed by the Company is disputed by Purchaser, then Purchaser and the Company shall negotiate in good faith to resolve such dispute. If, after a period of thirty (30) days following the date on which the Company gives Purchaser notice of any such proposed change, any such proposed change still remains disputed, then Purchaser and the Company hereby agree that the Las Vegas, Nevada office of PriceWaterhouseCoopers LLP (the "Accounting Firm") shall resolve any remaining disputes. The Accounting Firm shall act as an arbitrator to make a determination with respect to the issues that are disputed by the parties, based on presentations by the Company and Purchaser, and by independent review of the Accounting Firm if deemed necessary in the sole discretion of the Accounting Firm, which determination shall be limited to only those issues still in dispute. The decision of the Accounting Firm shall be final and binding and shall be in accordance with the provisions of this Section 1.05(b). The fees and expenses of the Accounting Firm, if any, shall be paid equally by Purchaser and the Company. The date on which the Net Current Assets is finally determined pursuant to this Section 1.05 is referred to hereinafter as the "Determination Date." e. If the amount of Net Current Assets used to determine the Estimated Purchase Price pursuant to Section 1.05(a) above is greater than the amount set forth in the Closing Balance Sheet, the Company shall pay to Purchaser, as an adjustment to the Estimated Purchase Price, an aggregate amount equal to such excess. Any payments required to be made by the Company pursuant to this Section 1.05(d) shall be made within ten (10) days of the Determination Date by wire transfer of immediately available funds to an account designated by Purchaser. f. If the amount of Net Current Assets used to determine the Estimated Purchase Price pursuant to Section 1.05(a) above is less than the amount set forth in the Closing Balance Sheet, Purchaser shall pay to the Company, as an adjustment to the Estimated Purchase Price, an amount equal to such difference. Any payments required to be made by Purchaser <page>pursuant to this Section 1.05(e) shall be made within ten (10) days of the Determination Date by wire transfer of immediately available funds to an account designated by the Company. 6. Prorations . The following prorations relating to the Assets and the ownership and operation of the Business will be made as of the Transfer Time, with the Company liable to the extent such items relate to any time period prior to the Transfer Time and are Retained Liabilities and Purchaser liable to the extent such items relate to periods beginning with and subsequent to the Transfer Time or are Assumed Liabilities: b. Real estate taxes and assessments on or with respect to the Real Property, provided that proration with respect to Leased Real Property shall be based upon the amounts payable by the Company in respect to such taxes under the Real Property Leases. c. Rents, additional rents, taxes and other items payable by or to the Company under the Real Property Leases and Personal Property Leases. d. The amount of rents, taxes and charges for sewer, water, telephone, electricity and other utilities relating to the Real Property. e. All other items normally adjusted in connection with similar transactions. Except as otherwise agreed by the parties or with respect to amounts to adjustments to the Purchase Price made pursuant to Section 1.05, the net amount of all such prorations will be settled and paid on the Closing Date. If the Closing shall occur before a real estate tax rate is fixed, the apportionment of taxes shall be based upon the tax rate for the preceding year applied to the latest assessed valuation. 7. Further Assurances; Post-Closing Cooperation . b. Subject to the terms and conditions of this Agreement, at any time or from time to time after the Closing, at Purchaser's request and without further consideration, the Company shall execute and deliver to Purchaser such other instruments of sale, transfer, conveyance, assignment and confirmation, provide such materials and information and take such other actions as Purchaser may reasonably deem necessary or desirable in order more effectively to transfer, convey and assign to Purchaser, and to confirm Purchaser's title to, all of the Assets (including, without limitation, the delivery to Purchaser of fully executed Uniform Commercial Code amendment or termination statements relating to the Assets as Purchaser shall request), and, to the full extent permitted by Law, to put Purchaser in actual possession and operating control of the Business and the Assets and to assist Purchaser in exercising all rights with respect thereto, and otherwise to cause the Company to fulfill its obligations under this Agreement. c. Following the Closing, the Company and Purchaser will afford the other party, its counsel and its accountants, during normal business hours, reasonable access to the books, records and other data relating to the Business in its possession with respect to periods prior to the Closing and the right to make copies and extracts therefrom, to the extent that such access may be reasonably required by the requesting party in connection with (i) the preparation of Tax Returns, (ii) the determination or enforcement of rights and obligations under this <page>Agreement, (iii) compliance with the requirements of any Governmental or Regulatory Authority including without limitation the Commission, (iv) the determination or enforcement of the rights and obligations of any party to this Agreement and (v) in connection with any actual or threatened Action or Proceeding. Further, the Company and Purchaser agree for a period extending six (6) years after the Closing Date not to destroy or otherwise dispose of any such books, records and other data unless such party shall first offer in writing to surrender such books, records and other data to the other party and such other party shall not agree in writing to take possession thereof during the ten (10) day period after such offer is made. d. If, in order properly to prepare its Tax Returns, other documents or reports required to be filed with Governmental or Regulatory Authorities or its financial statements or to fulfill its obligations hereunder, it is necessary that the Company or Purchaser be furnished with additional information, documents or records relating to the Business not referred to in paragraph (b) above, and such information, documents or records are in the possession or control of the other party, such other party shall use its commercially reasonable efforts to furnish or make available such information, documents or records (or copies thereof) at the recipient's request, cost and expense. e. Notwithstanding anything to the contrary contained in this Section, if the Company and Purchaser are in an adversarial relationship in litigation or arbitration, the furnishing of information, documents or records in accordance with paragraphs (b) and (c) of this Section shall be subject to applicable rules relating to discovery. 8. Third-Party Consents; ACI's Gaming Compliance Program . b. To the extent that any Real Property Lease, Personal Property Lease, Business Contract or Business License is not assignable without the consent of another party, this Agreement shall not constitute an assignment or an attempted assignment thereof if such assignment or attempted assignment would constitute a breach thereof or a default thereunder. The Company and Purchaser shall use commercially reasonable efforts to obtain the consent of such other party to the assignment of any such Real Property Lease, Personal Property Lease, Business Contract or Business License to Purchaser in all cases in which such consent is required for such assignment, provided, however, that in the event any such consent, other than any required consent of the Commission or any consent that is listed in Section 6.09 of the Disclosure Schedule (each a "Required Consent"), is not obtained on or prior to the Closing Date, such event shall not cause the Closing to be delayed or constitute a default by the Company of any obligation hereunder or result in a reduction of the Purchase Price. If any such consent, other than a Required Consent, shall not be obtained, the Company shall cooperate with Purchaser in any reasonable arrangement designed to provide for Purchaser the benefits intended to be assigned to Purchaser under the relevant Real Property Lease, Personal Property Lease, Business Contract or Business License, including enforcement at the cost and for the account of Purchaser of any and all rights of the Company against the other party thereto arising out of the breach or cancellation thereof by such other party or otherwise, provided that if Purchaser does not receive the benefits intended to be assigned to Purchaser pursuant to a Real Property Lease, Personal Property Lease, Business Contract or Business License because a consent is not obtained and an arrangement transferring such benefit is not entered into, such Real Property <page>Lease, Personal Property Lease, Business Contract or Business License, as applicable, shall constitute an Excluded Asset and the obligations pursuant thereto shall constitute a Retained Liability. c. In the event that any background investigation with respect to any party (and its respective owners and management) to any Real Property Lease, Personal Property Lease or Business Contract to which Purchaser will become a party by virtue of the consummation of the transactions contemplated hereby results in a finding by ACI that such party is an "Unsuitable Person" (as defined in ACI's Gaming Compliance Program in the form provided to Parent), then such Real Property Lease, Personal Property Lease or Business Contract shall not be assumed by Purchaser and shall constitute an Excluded Asset and a Retained Liability. ACI shall notify Parent and the Company no later than forty-five (45) days following the Effective Date if such investigation reveals that any such party is an "Unsuitable Person," which notice shall specify the identity of the person that has been determined to be unsuitable and shall also indicate if any person that is subject to a background investigation required pursuant to ACI's Gaming Compliance Program has not responded to inquiries made pursuant to such background investigation. 9. Insurance Proceeds . If any of the Assets is destroyed or damaged or taken in condemnation following the Effective Date, the insurance proceeds or condemnation award with respect thereto shall be an Asset. At the Closing, the Company shall pay or credit to Purchaser any such insurance proceeds or condemnation awards received by it on or prior to the Closing (along with the amount of any deductible or retention withheld therefrom) and shall assign to or assert for the benefit of Purchaser all of its rights against any insurance companies, Governmental or Regulatory Authorities and others with respect to such damage, destruction or condemnation. As and to the extent that there is available insurance under policies maintained by the Company and its Affiliates, predecessors and successors in respect of any Assumed Liability, except for any such insurance proceeds with respect to which the insured is directly or indirectly self-insured or has agreed to indemnify the insurer, the Company shall cause such insurance to be applied toward the payment of such Assumed Liability. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND PARENT The Company and Parent hereby jointly and severally represent and warrant to Purchaser as follows as of the Effective Date and as of the Closing Date, except, to the extent any such representation or warranty is made as of a specified date earlier than the Closing Date, such earlier date: 1. Corporate Existence . b. The Company is a corporation duly incorporated, validly existing and in good standing under the Laws of the State of Missouri, and has full corporate power and authority to conduct its business as and to the extent now conducted and to own, use and lease its <page>Assets and enter into and perform this Agreement and consummate the transactions contemplated hereby. Subsidiaries . The Company does not have any subsidiaries, other than Front Street Station, LLC, or any other equity investment in any entity, nor does it own any other securities with respect to any entity, other than Front Street Station, LLC. Front Street Station, LLC does not own any assets or conduct any operations related to the Business or otherwise. 2. Authority . The execution and delivery by the Company of this Agreement, and the performance by the Company and Parent of their obligations hereunder, have been duly and validly authorized by the Board of Directors and the stockholder of the Company and the Board of Directors of Parent, no other action on the part of the Company or Parent or their stockholders being necessary. This Agreement has been duly and validly executed and delivered by the Company and Parent and constitutes a legal, valid and binding obligation of the Company and Parent enforceable against the Company and Parent in accordance with its terms, except to the extent such enforceability (a) may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to creditors' rights generally, and (b) is subject to general principles of equity. 3. No Conflicts . Except as set forth in Section 2.03 of the Disclosure Schedule, the execution, delivery and performance by the Company of this Agreement do not and the consummation of the transactions contemplated hereby will not: b. conflict with or result in a violation or breach of any of the terms, conditions or provisions of the articles of incorporation or bylaws (or other comparable charter documents) of the Company; c. subject to obtaining the consents, approvals and actions, making the filings and giving the notices disclosed in Section 2.04 of the Disclosure Schedule, conflict with or result in a violation or breach of any term or provision of any Law or Order applicable to the Company or any of the Assets (other than such conflicts, violations or breaches (i) which could not in the aggregate reasonably be expected to materially and adversely affect the validity or enforceability of this Agreement or to have a Material Adverse Effect or (ii) as would occur solely as a result of the identity or the legal or regulatory status of Purchaser or any of its Affiliates); or d. except as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect or to materially and adversely affect the ability (i) of the Company to consummate the transactions contemplated hereby or to perform its obligations hereunder or (ii) Purchaser to operate the Business after the Transfer Time in a manner substantially consistent with the Company's past practice, (A) conflict with or result in a violation or breach of, (B) constitute (with or without notice or lapse of time or both) a default under, (C) require the Company to obtain any consent, approval or action of, make any filing with or give any notice to any Person as a result or under the terms of, (D) result in or give to any Person any right of termination, cancellation, acceleration or modification in or with respect to, or (E) result in the creation or imposition of any Lien upon the Company or any of the Assets <page>under, any Contract or License to which the Company is a party or by which any of its Assets is bound. 4. Governmental Approvals and Filings . Except as disclosed in Section 2.04 of the Disclosure Schedule, no consent, approval, action, order or authorization of, or registration, declaration or filing with or notice to any Governmental or Regulatory Authority on the part of the Company is required in connection with the execution, delivery and performance of this Agreement or the consummation of the transactions contemplated hereby, except (a) where the failure to obtain any such consent, approval or action, to make any such filing or to give any such notice could not reasonably be expected to materially and adversely affect the ability of the Company to consummate the transactions contemplated by this Agreement or to perform its obligations hereunder, or to have a Material Adverse Effect, and (b) those as would be required solely as a result of the identity or the legal or regulatory status of Purchaser or any of its Affiliates. 5. Financial Statements and Condition . b. Prior to the execution of this Agreement, the Company has delivered to Purchaser true and complete copies of (i) the unaudited combined balance sheets and the related combined statements of operations, stockholder's equity and cash flows of the Company and Kansas City Station Corporation for the fiscal year ended December 31, 1999, and (ii) the unaudited combined balance sheets of the Company and Kansas City Station Corporation as of March 31, 2000 and June 30, 2000 and the related unaudited statement of operations for the portion of the fiscal year then ended. Except as set forth in the notes thereto and as disclosed in Section 2.05(a) of the Disclosure Schedule, all such financial statements were prepared in accordance with GAAP and fairly present in all material respects the combined financial condition and results of operations of the Company and Kansas City Station Corporation, in each case, as of the respective dates thereof and for the respective periods covered thereby. c. Except for the execution and delivery of this Agreement and the transactions to take place pursuant hereto on or prior to the Closing Date and except as disclosed in Section 2.05(b) of the Disclosure Schedule, during the period beginning on the Financial Statement Date and ending on the Effective Date there has not been any change with respect to the Business or the Assets that could reasonably be expected to have a Material Adverse Effect. 6. Taxes . Tax Liens . Except as set forth in Section 2.06(a) of the Disclosure Schedule , there are no Tax Liens upon the assets of the Company except liens for Taxes not yet due. Compliance with Tax Laws . Except as set forth in Section 2.06(b) of the Disclosure Schedule , the Company has complied (and, with respect to all amounts due with respect to periods through and including the Closing Date, will comply) with all applicable laws, rules, and regulations relating to the filing of Tax Returns and the payment and withholding of Taxes (including, without limitation, withholding and reporting requirements under Code Secs. 1441 through 1464, 3401 through 3406, 6041 and 6049 and similar provisions under any other laws) <page>and have, within the time and in the manner prescribed by law, withheld from employee wages and paid over to the proper governmental authorities all required amounts. 7. Legal Proceedings . Except as disclosed in Section 2.07 of the Disclosure Schedule, there are no Orders outstanding and no Actions or Proceedings pending or, to the Knowledge of the Company, threatened against, relating to or affecting the Company or any of its Assets which could reasonably be expected individually or in the aggregate to have a Material Adverse Effect, or which seek to enjoin, rescind or otherwise prevent the consummation of the transactions contemplated hereby. Compliance With Laws and Orders . To the Knowledge of the Company, except as disclosed in Section 2.08 of the Disclosure Schedule or in the filings of Parent with the Securities and Exchange Commission, the Company is not in violation of or in default under any Law or Order applicable to the Company or any of its Assets the effect of which, individually or in the aggregate with other such violations and defaults, could reasonably be expected to have a Material Adverse Effect. Benefit Plans; ERISA; Labor Matters . Section 2.09(a) of the Disclosure Schedule contains a true and complete list of each Benefit Plan and "employee benefit plan" (within the meaning of section 3(3) of ERISA, including, without limitation, multiemployer plans within the meaning of ERISA section 3(37)), stock purchase, stock option, severance, employment, change-in-control, fringe benefit, collective bargaining, bonus, incentive, deferred compensation and all other employee benefit plans, agreements, programs, policies or other arrangements, whether or not subject to ERISA (including any funding mechanism therefor now in effect or required in the future as a result of the transaction contemplated by this Agreement or otherwise), whether formal or informal, oral or written, legally binding or not, under which any employee or former employee of the Company has any present or future right to benefits or under which the Company has any present or future liability. All such plans, agreements, programs, policies and arrangements shall be collectively referred to as the "Company Plans." b. With respect to each Company Plan, the Company has delivered to Purchaser a current, accurate and complete copy (or, to the extent no such copy exists, an accurate description) thereof. c. No Lien has arisen on the Assets by reason of Section 302 of ERISA, Section 412 of the Code or Title IV of ERISA. d. Except as set forth in Section 2.09(e) of the Disclosure Schedule, no individual shall accrue or receive additional benefits, service or accelerated rights to payments of benefits under any Benefit Plan, as defined in Section 280G of the Code, or become entitled to severance, termination allowance or similar payments as a direct result of the transactions contemplated by this Agreement. e. There are no controversies pending or, to the Knowledge of the Company, threatened between the Company and any of its employees which controversies would have a <page>Material Adverse Effect. The Company is not a party to any collective bargaining agreement or other labor union Contract applicable to persons employed by the Company except as disclosed in Section 2.09(f) of the Disclosure Schedule . To the Knowledge of the Company, there are no strikes, slowdowns, work stoppages, lockouts or threats thereof by or with respect to any of the employees of the Company. Section 2.09(g) of the Disclosure Schedule lists the number of employees terminated by the Company at each site of employment of the Business in the 90-day period ending on the date hereof, and the date of such termination, with respect to each such termination which would be required to be taken into account in determining whether a "plant closing" or "mass layoff" subject to the Worker Adjustment and Retraining Notification Act (the " WARN ") could occur based on subsequent terminations; provided that this sentence shall not apply with respect to any site of employment at which sufficient employees have not been employed at any time in such 90-day period for terminations of employment at such site to be subject to WARN. Real Property . Section 2.10(a) of the Disclosure Schedule contains a list of (i) each parcel of real property currently owned by the Company and (ii) each parcel of real property leased by the Company. b. The Company has good and marketable title to each parcel of real property described in clause (i) of paragraph (a) above free and clear of Liens, except for Permitted Liens or as disclosed in Section 2.10(b) of the Disclosure Schedule, and has a valid and subsisting leasehold estate in the real properties referred to in clause (ii) of paragraph (a) above free and clear of Liens, except for Permitted Liens or as disclosed in Section 2.10(b) of the Disclosure Schedule. To the Knowledge of the Company, all of the Real Property Leases are valid, binding, and enforceable in accordance with their terms, and are in full force and effect as of the date hereof. To the Knowledge of the Company, except as disclosed in Section 2.10(b) of the Disclosure Schedule there are no existing material defaults by the Company beyond any applicable grace periods under such leases and the Company has not received any notice of default under any of such leases. c. Without limiting the generality of the foregoing, as to leasehold estates under the Real Property Leases, the Company warrants that it has quiet and peaceful possession of each of the properties leased by it. d. To the Knowledge of the Company, the Real Property is not subject to any deferred or rollback taxes on account of any change in zoning or land use classification, and to the Knowledge of the Company there are no pending assessments affecting the Real Property. e. Except as could not be reasonably expected to have a Material Adverse Effect, all water, sewer, gas, electric, telephone and drainage facilities and all other utilities required by law or for the present normal use and operation of the Business are all connected and operating pursuant to valid permits, are adequate to service the Business, and such facilities are connected by means of one or more public or private easements extending from a property line to one or more public streets, public rights-of-way or utility facilities. f. <page>There are no pending or, to the Knowledge of the Company, threatened condemnation, eminent domain or similar proceedings affecting the Real Property or any portion thereof. g. The Company is not a "foreign person" within the meaning of Section 1445 et seq. of the Internal Revenue Code of 1986, as amended. h. The mechanical equipment located in any improvements located on the Real Property, including but not limited to air conditioning and heating systems and the electrical and plumbing systems, are in sufficient condition to permit the operation of the Business as it is currently conducted. Tangible Personal Property . The Company is in possession of and has good title to, or has valid leasehold interests in or valid rights under Contract to use, the Expansion Materials and all tangible personal property used in and, individually or in the aggregate with other such property, material to the Business or Condition of the Company, except for such tangible personal property sold, consumed or otherwise disposed of in the ordinary course of business since the Financial Statement Date. All tangible Assets, taken as a whole, are in sufficient condition to permit the operation of the Business as it is currently conducted. Contracts . Section 2.12(a) of the Disclosure Schedule (with paragraph references corresponding to those set forth below) contains a true and complete list of each of the following Contracts that constitute Assets as of the Effective Date: i. all Contracts (excluding Benefit Plans) providing for a commitment of employment or consultation services for a specified term and payments at any one time or in any one year in excess of One Hundred Thousand Dollars ($100,000); ii. all Contracts with any Person containing any provision or covenant prohibiting or materially limiting the ability of the Company to engage in any business activity or compete with any Person; iii. all Contracts relating to Indebtedness of the Company included as an Assumed Liability; iv. all Contracts (other than this Agreement) providing for (A) the future disposition or acquisition of any assets or properties individually or in the aggregate material to the Business, other than dispositions or acquisitions in the ordinary course of business, and (B) any merger or other business combination; v. all Contracts between the Company, on the one hand, and any Affiliate of the Company, on the other hand and which is included as an Assumed Liability; vi. <page>all Contracts (other than this Agreement) that limit or contain restrictions on the ability of the Company to incur Indebtedness or incur or suffer to exist any Lien, to purchase or sell any Assets, to change the lines of business in which it participates or engages or to engage in any merger or other business combination and which is included as an Assumed Liability; vii. all other Contracts that (A) involve the payment, pursuant to the terms of any such Contract, by or to the Company of more than One Hundred Thousand Dollars ($100,000) annually or (B) cannot be terminated within ninety (90) days after giving notice of termination without resulting in any material cost or penalty to the Company; and viii. all Real Property Leases. b. As of the Effective Date, each Contract required to be disclosed in Section 2.12(a) of the Disclosure Schedule, true and complete copies of which have been delivered to Purchaser, is in full force and effect and constitutes a legal, valid and binding agreement, enforceable in accordance with its terms, of the Company and, to the Knowledge of the Company, of each other party thereto; and except as disclosed in Section 2.12(b) of the Disclosure Schedule neither the Company nor, to the Knowledge of the Company, any other party to such Contract is in violation or breach of or default under any such Contract (or with notice or lapse of time or both, would be in violation or breach of or default under any such Contract) as of the Effective Date, the effect of which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. c. As of the Effective Date, the July Agreement has been terminated by the parties thereto and is of no further force or effect. Licenses . As of the Effective Date, the Company has all Licenses required for the conduct of the Business as presently conducted (other than Licenses, the absence of which could not reasonably be expected to have a Material Adverse Effect). Except as set forth on Section 2.13 of the Disclosure Schedule, each such License is valid, binding and in full force and effect as of the Effective Date. Except as set forth on Section 2.13 of the Disclosure Schedule, to the Knowledge of the Company, as of the Effective Date the Company is not in default (or with the giving of notice or lapse of time or both, would be in default) under any such License in any respect that could reasonably be expected to have a Material Adverse Effect. The Licenses listed in Section 2.13 of the Disclosure Schedule are not transferable. Affiliate Transactions . There is no Liability between the Company, on the one hand, and any officer, director or Affiliate of the Company, on the other, that will constitute an Assumed Liability. Environmental Matters . Except as disclosed in Section 2.15 of the Disclosure Schedule or as could not be reasonably expected to have a Material Adverse Effect, to the Knowledge of the Company: b. <page>the Company holds and is in compliance with all Licenses which are required under applicable Environmental Laws for the Company to own and operate the Business (the "Environmental Permits") and will use commercially reasonable efforts to provide copies of such Environmental Permits to Purchaser and to facilitate the transfer of those Environmental Permits which are transferable to Purchaser; c. the Company and all real property owned, operated or leased by the Company are in compliance with applicable Environmental Laws; d. the Company has not been notified by any Governmental or Regulatory Authority or third party of any pending or threatened claim arising under Environmental Laws (an "Environmental Claim") against the Business or the Company in connection with the Business; e. the Company has not been notified by any Governmental or Regulatory Authority or third party of any pending claim that either the Business or the Company in connection with the Business may be a potential responsible party for environmental contamination or any Release of Hazardous Material, nor has the Company been notified that any site or facility now or previously owned or leased by the Company is listed or proposed for listing on the NPL or any similar state or local list of sites requiring investigation or clean-up; f. the Company in connection with the Business has not entered into or agreed to any consent decree or order with respect to or affecting the Assets relating to compliance with any Environmental Law or to investigation or cleanup of Hazardous Material under any Environmental Law; g. there are no aboveground or underground storage tanks located on, in or under any properties currently or formerly owned, operated or leased by the Company in connection with the Business or any predecessor of the Business or the Company in connection with the Business; h. no Releases of Hazardous Material have occurred at, from, in, on, to or under any property currently or formerly owned, operated or leased by the Company in connection with the Business or any predecessor of the Business or the Company, and no Hazardous Material is present in, on or about or is migrating to or from any such property that could give rise to an Environmental Claim by a Governmental or Regulatory Authority or third party against the Business or the Company; i. neither the Company in connection with the Business, nor any predecessors thereof, has transported or arranged for the treatment, storage, handling, disposal or transportation of any Hazardous Substance to any location that could result in an Environmental Claim against or liability to the Business or the Company; j. there is no amount of asbestos, ureaformaldehyde material, polychlorinated biphenyl containing equipment or lead paint containing materials in, at or on any property owned, leased or operated by the Company in connection with the Business; and k. <page>there have been no environmental investigations, studies, audits or tests with respect to any property currently or formerly owned, leased or operated by the Company in connection with the Business thereof which have not been delivered to Purchaser prior to execution of this Agreement. Labor Matters . To the Knowledge of the Company, the Company is in compliance in all material respects with all Laws respecting employment and employment practices, terms and conditions of employment and wages and hours. Brokers . Except for Wasserstein Perella & Co., Inc., whose fees, commissions and expenses are the sole responsibility of the Company, all negotiations relative to this Agreement and the transactions contemplated hereby have been carried out by the Company directly with Purchaser without the intervention of any other Person on behalf of the Company in such manner as to give rise to any valid claim by any Person against Purchaser for a finder's fee, brokerage commission or similar payment. Absence of Certain Changes . Except as set forth in Section 2.18 of the Disclosure Schedule, since the Financial Statement Date, the Business has been conducted in the ordinary course, and there has not been: b. any event, occurrence, state of circumstances or facts or change in the Company, the Assets or the Business that has had or that may be reasonably expected to have, either alone or together, a Material Adverse Effect; c. any change by the Company in its accounting principles, methods or practices other than changes required pursuant to GAAP or in the manner it keeps its books and records or any change by the Company of its current practices with regards to sales, receivables, payables or accrued expenses; d. the entering into of any Contract (other than the July Agreement) or other arrangement between the Company and any officer, director, stockholder or Affiliate of the Company; or e. any (i) single commitment for capital expenditures that has not been performed prior to the Effective Date in excess of $1,000,000 for additions to property, plant, equipment or intangible capital assets, (ii) commitments for capital expenditures that has not been performed prior to the Effective Date in an aggregate amount in excess of $5,000,000 for additions to property, plant, equipment or intangible capital assets or capital expenditures, (iii) sale, assignment, transfer, lease or other disposition of or agreement to sell, assign, transfer, lease or otherwise dispose of any asset or property outside the ordinary course of business having a value of $2,000,000 in the aggregate. Sufficiency of and Title to the Assets . Upon consummation of the transactions contemplated by this Agreement, the Company will have sold, assigned, transferred and conveyed to Purchaser, free and clear of all Liens, other than Permitted Liens, all of the Assets, which constitute all of the properties and assets now held or employed by the Company primarily in connection with the Business (other than the Excluded Assets). Neither the <page>Agreement for Property Acquisitions dated September 22, 1999 by and between the Company and the City of St. Charles, Missouri nor the real property described in Section 1.01(b)(xvi) of the Disclosure Schedule has been used in the operation of the Business or is required to operate the Business in the future in the same manner as it has been conducted prior to the Effective Date. Insurance . As of the Effective Date, the assets, properties and operations of the Business are insured under various policies of insurance, all of which are described in Section 2.20 of the Disclosure Schedule, which discloses for each policy the type of coverage and the amounts of coverage. As of the Effective Date, all such policies are in full force and effect, no notice of cancellation has been received, and there is no existing material default, or event which the giving of notice or lapse of time or both, would constitute a material default, by any insured thereunder. REPRESENTATIONS AND WARRANTIES OF PURCHASER and aci Purchaser and ACI, jointly and severally represent and warrant to the Company as follows as of the Effective Time and as of the Closing Date, except, to the extent any such representation or warranty is made as of a specified date earlier than the Closing Date, such earlier date: 1. Existence . Purchaser is a corporation duly organized, validly existing and in good standing under the Laws of the State of Missouri. ACI is a corporation duly organized, validly existing and in good standing under the Laws of the State of Nevada. Each of Purchaser and ACI has full corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. 2. Authority . The execution and delivery by Purchaser and ACI of this Agreement, and the performance by Purchaser and ACI of their respective obligations hereunder, have been duly and validly authorized by the respective boards of directors of Purchaser and ACI, no other corporate action on the part of Purchaser or ACI or their respective shareholders being necessary. This Agreement has been duly and validly executed and delivered by each of Purchaser and ACI and constitutes a legal, valid and binding obligation of each of Purchaser and ACI enforceable against each of them in accordance with its terms, except to the extent such enforceability (a) may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to creditors' rights generally and (b) is subject to general principles of equity. 3. No Conflicts . The execution and delivery by each of Purchaser and ACI of this Agreement do not and the consummation of the transactions contemplated hereby will not: b. conflict with or result in a violation or breach of any of the terms, conditions or provisions of the articles of incorporation (or other comparable corporate charter document) of Purchaser or ACI, as applicable; c. <page>subject to obtaining the consents, approvals and actions, making the filings and giving the notices disclosed in Section 3.04 of the Disclosure Schedule, conflict with or result in a violation or breach of any term or provision of any Law or Order applicable to Purchaser or ACI or any of the Assets (other than such conflicts, violations or breaches which could not in the aggregate reasonably be expected to adversely affect the validity or enforceability of this Agreement); or d. except as could not, individually or in the aggregate, reasonably be expected to adversely affect the ability of Purchaser or ACI to consummate the transactions contemplated hereby or to perform its obligations hereunder, (i) conflict with or result in a violation or breach of, (ii) constitute (with or without notice or lapse of time or both) a default under, (iii) require Purchaser or ACI to obtain any consent, approval or action of, make any filing with or give any notice to any Person as a result or under the terms of, or (iv) result in the creation or imposition of any Lien upon Purchaser or ACI or any of their respective assets or properties under, any Contract or License to which Purchaser or ACI is a party or by which any of their respective assets and properties is bound. 4. Governmental Approvals and Filings . Except as disclosed in Section 3.04 of the Disclosure Schedule, no consent, approval, action, order or authorization of, or registration, declaration or filing with or notice to any Governmental or Regulatory Authority on the part of Purchaser or ACI is required in connection with the execution, delivery and performance of this Agreement or the consummation of the transactions contemplated hereby, except where the failure to obtain any such consent, approval or action, to make any such filing or to give any such notice could not reasonably be expected to adversely affect the ability of Purchaser or ACI to consummate the transactions contemplated by this Agreement or to perform its obligations hereunder. 5. Legal Proceedings . There are no Orders outstanding and no Actions or Proceedings pending or, to the Knowledge of Purchaser or ACI, as applicable, threatened against, relating to or affecting Purchaser or ACI, as the case may be, which could reasonably be expected to result in the issuance of an Order restraining, enjoining or otherwise prohibiting or making illegal the consummation of any of the transactions contemplated by this Agreement. 6. Brokers . Except for Deutsche Bank Securities Inc., whose fees, commissions and expenses are the sole responsibility of Purchaser and/or ACI, all negotiations relative to this Agreement and the transactions contemplated hereby have been carried out by Purchaser and ACI without the intervention of any Person on behalf of Purchaser or ACI in such manner as to give rise to any valid claim by any Person against the Company for a finder's fee, brokerage commission or similar payment. 7. Financing . Purchaser has sufficient cash and/or available credit facilities (and has provided the Company with evidence thereof) to pay the Purchase Price and to make all other necessary payments of fees and expenses in connection with the transactions contemplated by this Agreement. 8. <page>Purchaser's Gaming Licenses . Neither Purchaser nor any of its directors or executive officers has ever been denied a gaming license by any Governmental or Regulatory Authority. ACI and the directors and executive officers of Purchaser are currently licensed or hold findings of suitability to conduct gaming activities in the States of Nevada, Mississippi and Iowa. A list of such directors, officers and each such state in which such Person is licensed or holds a finding of suitability is set forth in Section 3.08 of the Disclosure Schedule. COVENANTS OF THE COMPANY AND PARENT The Company and Parent covenant and agree with Purchaser that, at all times from and after the Effective Date until the Closing, and in the case of Sections 4.06, 4.11 and 4.12 for the period set forth therein, Parent and the Company will, and Parent will cause the Company to, comply with all covenants and provisions of this Article IV, except to the extent Purchaser may otherwise consent in writing. Purchaser acknowledges and agrees that the actions taken, or failed to be taken, by Parent and the Company prior to or following the Effective Date with respect to the investigation by the Commission or any other Governmental or Regulatory Authority into the activities of Michael Lazaroff and the involvement of Parent and the Company therewith, and any related matters, shall not constitute a breach of the obligations of Parent and the Company pursuant to this Article IV; provided, however, that Purchaser shall have no liability with respect to any obligations resulting from such investigation and all liabilities arising out of, or with respect to, such investigation shall be considered a "Retained Liability" for the purposes of this Agreement. 1. Regulatory and Other Approvals . The Company will, as promptly as reasonably practicable (a) take all commercially reasonable steps necessary or desirable to obtain all consents, approvals, actions, orders or authorizations of, or make all registrations, declarations or filings with and give all notices to Governmental or Regulatory Authorities or any other Person required of the Company to consummate the transactions contemplated hereby (including, without limitation, the Required Consents), (b) provide such other information and communications to such Governmental or Regulatory Authorities or other Persons as such Governmental or Regulatory Authorities or other Persons may reasonably request in connection therewith and (c) provide reasonable cooperation to Purchaser in connection with the performance of its obligations under Sections 5.01 and 5.02 below. The Company will provide, or cause to be provided, notification to Purchaser when any such consent, approval, action, order, authorization, registration, declaration, filing or notice referred to in clause (a) above is obtained, taken, made or given, as applicable, and will advise Purchaser of any communications (and, unless precluded by Law, provide copies of any such communications that are in writing) with any Governmental or Regulatory Authority or other Person regarding any of the transactions contemplated by this Agreement. 2. HSR Filings . In addition to and not in limitation of the Company's covenants contained in Section 4.01 above, the Company will (a) take promptly all actions necessary to make the filings required of the Company or its Affiliates under the HSR Act, (b) comply at the earliest practicable date with any request for additional information received by <page>the Company or its Affiliates from the Federal Trade Commission or the Antitrust Division of the Department of Justice pursuant to the HSR Act and (c) cooperate with Purchaser in connection with Purchaser's filing under the HSR Act and in connection with resolving any investigation or other inquiry concerning the transactions contemplated by this Agreement commenced by either the Federal Trade Commission or the Antitrust Division of the Department of Justice or state attorneys general. 3. Investigation by Purchaser . The Company will (a) provide Purchaser and its officers, employees, counsel, accountants, financial advisors, consultants and other representatives (together, "Representatives") with full access, upon reasonable prior notice and during normal business hours, to all officers, employees, agents and accountants of the Company and its Assets and Books and Records, but only to the extent that such access does not unreasonably interfere with the business operations of the Company and (b) furnish Purchaser and such other Persons with all such information and data (including, without limitation, copies of Contracts, Benefit Plans and other Books and Records) concerning the business and operations of the Company as Purchaser or any of such other Persons reasonably may request in connection with such investigation, except to the extent that furnishing any such information or data would violate any Law, Order, Contract or License applicable to the Company or by which any of its Assets is bound. 4. Conduct of Business . Subject to Section 4.05 below, the Company will conduct business only in the ordinary course consistent with past practice and shall: b. take all actions to be in compliance with, and to maintain the effectiveness of, all Licenses, it being acknowledged and agreed that actions taken, or failed to be taken, by Parent and the Company prior to or following the Effective Date with respect to the investigation by the Commission or any other Governmental or Regulatory Authority into the activities of Michael Lazaroff and the involvement of Parent and the Company therewith shall not constitute a breach of this clause (a); c. preserve the goodwill of those of its suppliers, customers and distributors having material business relationships with the Business, unless such failure to preserve such goodwill would not be commercially unreasonable; d. maintain policies of insurances with substantially the same insurance coverage as exists as of the Effective Date against loss or damage to the Assets; e. use commercially reasonable efforts to maintain the Assets, in the aggregate, in a condition comparable to their current condition, reasonable wear, tear and depreciation excepted, and except for Assets disposed of, sold or consumed in the ordinary course of business in accordance with Section 4.05(a) below; f. continue and maintain its dredging operations in material compliance with the requirements of applicable Laws; and g. unless precluded by law, notify Purchaser in writing if to the Knowledge of the Company there is any event, condition, circumstance or group of actions, events, <page>conditions or circumstances that could be reasonably expected to have a Material Adverse Effect, provided that nothing contained herein shall be deemed to require the Company to disclose any information that is privileged. 5. Certain Restrictions . The Company shall not: b. other than in the ordinary course of business, acquire, lease, dispose of or otherwise transfer, any Assets; c. engage with any Person in any merger or other business combination; or d. amend or modify in any material respect or terminate any material Contract that could be reasonably expected to have a Material Adverse Effect; e. make any material changes in the Company's staffing levels that could be reasonably expected to have a Material Adverse Effect; f. without Purchaser's prior written approval, which approval shall not be unreasonably withheld, materially increase the salary, bonus or other compensation of any of the Company's current employees that are department heads of the Business, other than pursuant to bonus plans that have been approved prior to the Effective Date, increases pursuant to employment agreements entered into prior to the Effective Date and increases consistent with past practices in an amount not to exceed five percent (5%) of the applicable employee's most recent annual salary and bonus g. enter into any Contract to do or engage in any of items listed in clauses (a) through (g) above; or h. except as expressly permitted elsewhere in this Agreement, enter into or commit or propose to enter into any Contract obligating the Company to make payments thereunder in excess of $100,000 in any twelve-month period that cannot be cancelled upon thirty days notice; and i. amend its articles of incorporation or bylaws in any manner that would have an adverse effect on the transactions contemplated hereby. 6. Transition Period . b. Subject to the prior approval of the Commission, the Company and Parent will, beginning at the Transfer Time until the earlier of (x) twenty-four (24) months after the Transfer Time and (y) the date on which Purchaser opens the expansion facilities of the Business for conduct of gaming activities by the public, permit Purchaser to use and employ, solely in connection with the operation of the Business and pursuant to a non-exclusive, non-transferable, royalty-free license and right to use, the "Station Casino" name and logo (the "Mark") in connection with the operation of the Business following the Closing; provided that Purchaser shall conduct the Business under the Mark in a manner that is of a quality which at all times comports with the quality of the goods and services previously offered by the Company and its <page>Affiliates under the Mark at the acquired property. The Company or its designee shall have the right, upon reasonable notice to Purchaser and during reasonable business hours, to inspect the premises of the Business to ensure that the quality of the Business is being maintained. In the event Purchaser fails to carry out or comply with such quality standards, the Company may immediately terminate this non-exclusive, non-transferable, royalty-free license upon written notice to Purchaser. c. Each of the Company and Parent will, beginning at the Effective Date and for a period of twelve (12) months after the Transfer Time, upon reasonable request from Purchaser and at the sole cost and expense of Purchaser, promptly provide Purchaser any and all information regarding the Assets and the Business, including but not limited to financial, accounting, tax and related data, reasonably necessary for the preparation by Purchaser of applications, reports and filings with any Governmental or Regulatory Authority. d. Each of the Company and Parent will, following the Effective Date and at the sole cost and expense of Purchaser, provide reasonable assistance to Purchaser with respect to the transfer of the Assets, including, without limitation, the transition and integration of payroll and benefit processing, accounting systems and other similar administrative systems and software systems constituting Assets. In addition, the Company and Parent will reasonably cooperate with Purchaser with respect to any permitted transfer of any rating experience with respect to unemployment and workers' compensation, and such other processes and procedures with respect to the operation of the Business as Purchaser may reasonably request. 7. No Solicitation . From and after the Effective Date, neither the Company nor Parent shall, directly or indirectly, through any officer, director, employee, financial advisor, representative or agent of such party (i) solicit, initiate, or encourage (including by way of furnishing information) or take any other action to facilitate knowingly any inquiries or proposals that constitute, or could reasonably be expected to lead to, a proposal or offer for a merger, consolidation, business combination, sale of substantial assets, sale of shares of capital stock (including, without limitation, by way of a tender or exchange offer) or similar transaction involving the Company or the Business, other than the transactions contemplated by this Agreement (an "Acquisition Proposal"), (ii) engage in negotiations or discussions with any person (or group of persons) other than Purchaser or its affiliates (a "Third Party") concerning, or provide any non-public information to any person or entity relating to, any Acquisition Proposal, (iii) continue any prior discussions or negotiations with any Third Party concerning any Acquisition Proposal or (iv) accept, or enter into any agreement concerning, any Acquisition Proposal with any Third Party or consummate any Acquisition Proposal other than as contemplated by this Agreement. 8. Title Insurance b. On the Closing Date, the Company shall, at the Company's expense (except as provided hereinafter), cause to be issued and delivered to Purchaser a policy of title insurance (the "Title Policy") with respect to the Real Property and conforming to the following specifications: i. <page>The form of the policy will be ALTA Owner's Policy Form B 1970 (amended 10/17/70), or the current approved form for the jurisdiction in which the Real Property is located, with an endorsement deleting any exclusion or exception for creditors' rights; ii. The Title Policy will be issued by Assured Quality Title Company (the "Title Company") and shall be underwritten by First American Title Insurance Company; iii. Reinsurance (with direct access) of all amounts in excess of $100,000,000, if any, shall be underwritten by Chicago Title Insurance Company; iv. The insured will be Purchaser; v. The Title Policy shall be in an amount equal to that portion of the Purchase Price allocated to the Real Property; vi. The Title Policy will be dated concurrent with or subsequent to the Closing; vii. There will be no exceptions to coverage other than the Permitted Liens. Without limiting the generality of the foregoing provisions hereof, the Title Policy shall not contain any exceptions with respect to: A. Rights or claims of parties in possession other than tenants, as tenants only, under the leases and subleases described in Sections 1.01(a)(ii)(A) and 1.01(a)(ii)(B) of the Disclosure Schedule; B. Encroachments, overlaps, boundary line disputes or any other matters which would be disclosed by an accurate survey and inspection; C. Easements or claims of easements not shown by the public records; D. Any lien, or right to a lien, for services, labor or materials heretofore or hereafter furnished; and E. Any other exceptions which may be designated or included as standard exceptions in the area where the Real Property is located. viii. The Title Policy, at Purchaser's request and expense, shall contain a zoning endorsement in the form of ALTA Form 3.1 showing the zoning classification of the Real Property and confirming that the current use of the Real Property is in conformance with the applicable zoning laws and use restrictions; and ix. The Title Policy, at Purchaser's request, will contain an assignment endorsement whereby the insurer agrees to consent to the assignment of the policy to, and to issue without charge an endorsement to the policy to show as an insured under the policy, any of the following: (i) any successor to Purchaser, by dissolution, liquidation, <page>merger, consolidation or reorganization; (ii) any stockholder of Purchaser to whom the Real Property, or any part thereof, is distributed; and (iii) any Affiliate of Purchaser, including any entity controlled by, in control of or under common control with Purchaser and to whom an interest in the Real Property, or any part thereof, is transferred by Purchaser. In the event that the Real Property, or any part thereof, consists of more than one parcel, the Title Policy shall, at Purchaser's request, contain an affirmative statement of insurance to the effect that all parcels of land constituting the Real Property, or such part thereof, are contiguous. The policy also shall contain such other affirmative statements of insurance and endorsements (for example, but not by way of limitation, an "access endorsement") as Purchaser may reasonably require. x. The fee or premium for any endorsements to the Title Policy whether identified in this Section 4.08 or otherwise requested by Purchaser, shall be for the account of and paid by Purchaser. c. The Company shall within ten (10) days after the date hereof deliver to Purchaser (i) a current commitment from the Title Company setting forth the basis upon which the Title Company is willing to insure title to the Real Property (the "Title Commitment"), and all documents referenced in Schedule B thereto, and (ii) a copy of each survey (the "Survey") of each parcel of the Real Property in the Company's possession, which Purchaser acknowledges and agrees shall be delivered without any representation or warranty of any kind as to the accuracy or completeness thereof by the Company or Parent. The cost of any survey work performed or ordered by the Company prior to the date hereof shall be paid for by the Company. If Purchaser requires any revisions or updates to the Survey delivered by the Company or requires a new survey, all such work shall be at the cost and expense of Purchaser. If the Title Commitment or the Survey discloses any liens, easements, restrictions, reservations or other defects or any other matters objectionable to Purchaser ("Title Objections"), other than Permitted Liens, Purchaser shall advise the Company of the same in writing within ten (10) days after last receipt by Purchaser of the Title Commitment (with all documents referred to in Schedule B thereto) and the Survey (as revised or updated as may be required by Purchaser within 30 days after receipt of the Title Commitment and Survey). Matters not objected to by Purchaser within said period shall be deemed to be additional Permitted Liens. As to any Title Objections, the Company may, but shall not be obligated to, remedy such matters as are susceptible of being remedied and shall, within ten (10) days after Purchaser gives the Company notice of its Title Objections, deliver written notice to Purchaser of those Title Objections which it shall remedy and those which it shall not remedy. Unless Purchaser elects to terminate this Agreement in accordance with clause 4.08(b)(y) below, the Company shall, as a condition to Purchaser's obligation to close hereunder, deliver to Purchaser a Title Commitment and Survey revised to reflect that any Title Objections which the Company has committed to remedy have been remedied to Purchaser's reasonable satisfaction. If the Company elects not to remedy any Title Objection, Purchaser shall have the option, which it shall exercise in writing within ten (10) days of its receipt of the written notice from the Company, of (x) consummating the transaction contemplated hereby and accepting such title as the Company holds, without change in or to the terms hereof, unless such matters are encumbrances or liens for an ascertainable amount, in which case the Company shall pay the amount thereof to Purchaser in cash at the Closing, or (y) terminating this Agreement and receiving a refund of all monies deposited hereunder. If <page>Purchaser fails to deliver the written notice required in the immediately preceding sentence within the period prescribed thereby, such failure shall be deemed an irrevocable election by Purchaser to proceed to close the purchase and sale contemplated by this Agreement in accordance with clause 4.08(b)(ix) above. 9. ACI's Gaming Compliance Program . The Company, Parent and their respective executive officers, directors and principal stockholders shall fully cooperate with any background investigation with respect to each of them required to be conducted by ACI pursuant to its Gaming Compliance Program to the extent required by the Nevada Gaming Control Board. Fulfillment of Conditions . The Company (a) will execute and deliver at the Closing each certificate, document and instrument that the Company is hereby required to execute and deliver as a condition to Closing, (b) will take all commercially reasonable steps necessary or desirable and proceed diligently and in good faith (i) to satisfy each condition to the obligations of Purchaser contained in this Agreement and (ii) to consummate all of the transactions contemplated by this Agreement, and (c) will not take or fail to take any action that could reasonably be expected to result in the nonfulfillment of any obligation of the Company or Purchaser contained in this Agreement. 10. Noncompetition . Term . The Company and Parent hereby covenant with Purchaser that from the Closing Date until the date that is three (3) years following the Closing Date, none of the Company, Parent or their respective subsidiaries shall (except as otherwise specifically permitted herein), directly or indirectly, for their own account, or as a partner, member, advisor or agent of any partnership or joint venture, or as a trustee, officer, director, shareholder, advisor or agent of any corporation, trust, or other business organization or entity, own, manage, join, participate in, encourage, support, finance, be engaged in, have an interest in, give financial assistance or advice to, permit Parent's name to be used in connection with or be concerned in any way in the ownership, management, operation or control of any casino gaming operation within one hundred (100) miles of the facilities of the Business as of the Effective Date other than a Currently Existing Gaming Operation (as such operations may be expanded from time to time) provided that (i) such operation shall not conduct casino gaming under the "Station Casinos" name, or any derivative thereof, (ii) such entity is acquired by or becomes affiliated with Parent or its subsidiaries as a result of a transaction between an entity that has assets other than such Currently Existing Gaming Operation (the " Competing Group ") and Parent or such subsidiary and (iii) either (A) EBITDA of such operation for the immediately preceding four fiscal quarters shall not be greater than 30% of the consolidated EBITDA of the Competing Group for the immediately preceding four fiscal quarters or (B) Parent or the Competing Group pays Purchaser an amount equal to $10 million no later than ten (10) Business Days following consummation of the transaction between Parent and the Competing Group. For purposes of this Agreement, "Currently Existing Gaming Operation" shall mean a gaming operation that is owned or operated by third parties prior to the acquisition of ownership or commencement of operations thereof by the Company, Parent or their Affiliates. Each of the Company and Parent also hereby covenants that it shall not, for a period of eighteen (18) months after the Closing <page>Date, solicit or encourage any employee, agent, consultant or independent contractor of Purchaser to terminate or curtail his or her relationship with Purchaser. Remedies . The parties agree that the remedy of the Purchaser at law for any actual or threatened breach of this Section 4.11 by the Company or Parent would be inadequate and that, in the event of such actual or threatened breach, in addition to any other remedy available to it, Purchaser shall be entitled to specific performance hereof, injunctive relief, or both, by temporary or permanent injunction or other appropriate judicial remedy, writ or order. The remedies provided for in this Section 4.11 are non-exclusive and are in addition to each other and to any other remedy available elsewhere in this Agreement or available generally at law or in equity. Divisibility . If any portion of this Section 4.11 is held to be unreasonable, arbitrary or against public policy, provisions of this Section 4.11 shall be considered divisible both as to time and as to geographical areas; and each month of each year of the specified period shall be deemed to be a separate period of time. In the event any court determines the specified time period or geographical area to be unreasonable, arbitrary or against public policy, the lesser time period or geographical area which is determined to be reasonable, non-arbitrary and not against public policy may be enforced. Notwithstanding the foregoing, the Company and Parent agree to honor the terms of this Section 4.11 for the time periods and areas specified herein and not to contest the enforceability of such periods or areas. Permitted Ownership . Notwithstanding any language to the contrary contained in this Section 4.11 , it shall be permissible for the Company and Parent to own stock or securities of any company which may be deemed competitive with Purchaser providing such shares or securities held by the Company or Parent are issued by a company listed on a national securities exchange or the NASDAQ Automated Quotation System and represent less than a five percent (5%) interest in such company. 11. No Solicitation . For a period of twelve (12) months following the Closing Date, Parent, the Company and their respective Affiliates shall refrain from, either alone or in conjunction with any other Person, directly or indirectly, soliciting for hire any employee of Purchaser or any Affiliate of Purchaser except as contemplated pursuant to the terms of that certain Asset Purchase Agreement dated as of October 17, 2000, by and among Lake Mead Station, Inc., Parent, Ameristar Casino Las Vegas, Inc. and ACI; provided, however, that the Company shall not be prohibited from soliciting for employment any Person whose employment with Purchaser or any of its Affiliates terminated prior to such solicitation. COVENANTS OF PURCHASER Purchaser covenants and agrees with the Company that, at all times from and after the date hereof until the Closing and, in the case of Sections 5.04, 5.05, 5.06, 5.07, and 5.08 below, thereafter, Purchaser will comply with all covenants and provisions of this Article V, except to the extent the Company may otherwise consent in writing. 1. <page>Regulatory and Other Approvals . Purchaser will as promptly as practicable (a) take all steps necessary or desirable to obtain all consents, approvals, actions, orders or authorizations of, or make all registrations, declarations or filings with and give all notices to Governmental or Regulatory Authorities or any other Person required of Purchaser to consummate the transactions contemplated hereby and will diligently and in good faith strive to obtain the same including, without limitation, (i) making all necessary filings under the HSR Act with the Federal Trade Commission and the Department of Justice no later than seven (7) days following the date hereof (ii)  making all necessary filings with the Commission no later than fifteen (15) days following the date hereof, and (iii) no later than ten (10) days following the Effective Date, making all necessary filings and requesting consents from and, to the extent required to obtain consents, hearings with the U.S. Corps of Engineers and the Missouri Department of Natural Resources, (b) provide such other information and communications to such Governmental or Regulatory Authorities or other Persons as such Governmental or Regulatory Authorities or other Persons may request in connection therewith and (c) provide cooperation to the Company in connection with the performance of their obligations under Sections 4.01 and 4.02 above. The parties acknowledge and agree that so long as the Purchaser complies with clauses (a) and (b) of the foregoing sentence, any failure or refusal by the Commission to grant to Purchaser a Class A gaming license to operate the Business shall not be deemed to be a breach of the obligations of Purchaser or Parent hereunder; provided that nothing contained herein shall limit the obligations of Purchaser to comply with any other covenant or agreement contained in this Agreement or shall relieve Purchaser from liability for any breach of a representation or warranty contained in this Agreement. Purchaser will provide prompt written notification to the Company when any such consent, approval, action, order, authorization, registration, declaration, filing or notice referred to in clause (a) above is obtained, taken, made or given, as applicable, and will advise the Company of any communications (and, unless precluded by Law, provide copies of any such communications that are in writing) with any Governmental or Regulatory Authority or other Person regarding any of the transactions contemplated by this Agreement. 2. HSR Filings . In addition to and without limiting Purchaser's covenants contained in Section 5.01 above, Purchaser will (a) take promptly all actions necessary to make the filings required of Purchaser or its Affiliates under the HSR Act and in any event no later than seven (7) days following the date hereof, (b) comply at the earliest practicable date with any request for additional information received by Purchaser or its Affiliates from the Federal Trade Commission or the Antitrust Division of the Department of Justice pursuant to the HSR Act and (c) cooperate with the Company in connection with the Company's filing under the HSR Act and in connection with resolving any investigation or other inquiry concerning the transactions contemplated by this Agreement commenced by either the Federal Trade Commission or the Antitrust Division of the Department of Justice or state attorneys general. Purchaser shall pay the Filing Fee, if any, required under the HSR Act. 3. Investigation by the Company . Purchaser will provide the Company and their respective Representatives with such documentation, data and other information as the Company may reasonably request in order to verify Purchaser's representations and warranties set forth in Section 3.07 above, but only to the extent that furnishing any such documentation, <page>data or information would not violate any Law, Order, Contract or License applicable to Purchaser. 4. No Solicitation . Purchaser will, for a period of eighteen (18) months following the Closing Date, except as expressly permitted or required by Article IX of this Agreement, refrain from, either alone or in conjunction with any other Person, directly or indirectly, through its present of future Affiliates, soliciting for hire any employee of the Company or any Affiliate of the Company; provided, however, that Purchaser shall not be prohibited from soliciting for employment any Person whose employment with the Company or any of its Affiliates terminated prior to such solicitation. 5. Collection of Gaming Chips and Tokens . Purchaser shall redeem, in its capacity as the Company's agent if Purchaser has not elected to acquire such chips and tokens pursuant to Section 1.01(b)(x) hereof, any gaming chips or tokens (from any series in use as of or prior to the Transfer Time) of the Company relating to the use and operation of the Business, which are presented by patrons of the Business or Purchaser for payment within the applicable Missouri statutory time periods for such redemptions. The Company's gaming chips and tokens redeemed by Purchaser shall be reimbursed, at Purchaser's election, as often as weekly for the first 30 Business Days following the Closing Date, and thereafter as often as monthly, by the Company, upon delivery by Purchaser to the Company of such gaming chips and tokens being redeemed. The Company agrees to make arrangements for the additional redemption of its gaming chips and tokens as may be required by Missouri law. 6. Valet Parking . At the Transfer Time, an authorized representative of the Company shall perform the following functions for all motor vehicles that were checked and placed in the care of the Company: (i) mark all motor vehicles with a sticker or tape; (ii) prepare a report with respect to any damages to such vehicles; (iii) prepare an inventory of such vehicles ("Inventoried Vehicles") indicating the check number applicable thereto; and (iv) transfer control of the Inventoried Vehicles to an authorized representative of Purchaser and secure a receipt for the Inventoried Vehicles. Thereafter, Purchaser shall be responsible for the Inventoried Vehicles, provided that the Company shall be liable to the owners of such Inventoried Vehicles with respect to any damages occurring as a result of actions taken by the Company and its employees prior to the Transfer Time (including, without limitation, damages (as a result of actions taken by the Company and its employees) set forth in the damage report) or items missing from or damaged in such Inventoried Vehicles and such liability shall be a Retained Liability for the purposes of this Agreement, to the extent that Purchaser is able to prove that such items were missing or damaged prior to the Transfer Time. 7. Return of Books and Records . Following the Closing Date, upon the request of the Company, Purchaser shall return to the Company all Books and Records relating to the Company that are not used primarily in the conduct of the Business, including, without limitation, the Books and Records relating to the businesses of Parent or its Affiliates (other than the Company). 8. Use of Transferred Intellectual Property . Purchaser agrees that neither it nor any of its Affiliates shall use any portion of the Transferred Intellectual Property that prior to <page>the Closing Date constituted proprietary property of the Company in its operations in Clark County, Nevada. 9. Fulfillment of Conditions . Purchaser (a) will execute and deliver at the Closing each certificate, document and instruments that Purchaser is hereby required to execute and deliver as a condition to the Closing, (b) will as promptly as practicable affirmatively take all steps necessary or desirable and proceed diligently and in good faith (i) to satisfy each other condition to the obligations of the Company contained in this Agreement and (ii) to consummate all of the transactions contemplated in this Agreement, and (c) will not take or fail to take any action that could reasonably be expected to result in the nonfulfillment of any obligation of the Company or Purchaser contained in this Agreement. CONDITIONS TO OBLIGATIONS OF PURCHASER The obligations of Purchaser hereunder to purchase the Assets are subject to the fulfillment, at or before the Closing, of each of the following conditions (all or any of which may be waived in whole or in part by Purchaser in its sole discretion): 1. Representations and Warranties . The representations and warranties made by the Company and Parent in this Agreement shall be true and correct, in all respects, on and as of the Closing Date as though made on and as of the Closing Date or, in the case of representations and warranties made as of a specified date earlier than the Closing Date, on and as of such earlier date, except in each case as could not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; provided, however, that for the purposes of determining the accuracy of such representations and warranties, all "Material Adverse Effect" qualifications and other materiality qualifications, and any similar qualifications, contained in such representations and warranties shall be disregarded. 2. Performance . The Company and Parent shall have performed and complied with the agreements, covenants and obligations required by this Agreement to be so performed or complied with by the Company, as the case may be, at or before the Closing, except in each case as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 3. Officers' Certificates . The Company and Parent shall have delivered to Purchaser a certificate, dated the Closing Date and executed in the name and on behalf of the Company by an executive officer of the Company and on behalf of the Parent by an executive officer of the Parent, substantially in the form and to the effect of Exhibit C hereto, and certificates, dated the Closing Date and executed by the Secretary of the Company and the Secretary of Parent, substantially in the form and to the effect of Exhibit D hereto. 4. Orders and Laws . There shall not be in effect at the time of Closing any Order or Law restraining, enjoining or otherwise prohibiting or making illegal the consummation of any of the transactions contemplated by this Agreement. 5. <page>Regulatory Consents and Approvals . All consents, approvals, actions, orders or authorizations of, all registrations, declarations or filings with and all notices to any Governmental or Regulatory Authority necessary to permit Purchaser and the Company to perform their respective obligations under this Agreement and to consummate the transactions contemplated hereby shall have been duly obtained, made or given and shall be in full force and effect, and all terminations or expirations of waiting periods imposed by any Governmental or Regulatory Authority necessary for the consummation of the transactions contemplated by this Agreement, including under the HSR Act, shall have occurred, except for such consents, approvals, actions, orders or authorizations the failure of which to obtain could not be reasonably expected to have a Material Adverse Effect. 6. Consummation of Related Transaction . The transactions contemplated by the St. Charles Riverfront Station, Inc. Agreement shall be consummated substantially concurrently with the consummation of the transactions contemplated hereby. 7. Deliveries . The Company shall have delivered to Purchaser the General Assignment and other Assignment Instruments. 8. Title Insurance and Environmental Reports . Purchaser shall have received (a) the Title Policy (as defined and described in Section 4.08 hereof) and (b) recently completed Phase I environmental assessment reports with respect to the Real Property. 9. Consents. With respect to each Contract set forth in Section 6.09 of the Disclosure Schedule, the Company shall have obtained and delivered to Purchaser a consent from the relevant third parties to the extent required for the assignment of such Contract to Purchaser. 10. Absence of Material Adverse Effect . Since the date hereof, there shall not have occurred any Material Adverse Effect or any events or series of events that constitute a Material Adverse Effect. CONDITIONS TO OBLIGATIONS OF THE COMPANY The obligations of the Company hereunder to sell the Assets are subject to the fulfillment, at or before the Closing, of each of the following conditions (all or any of which may be waived in whole or in part by the Company in its sole discretion): 1. Representations and Warranties . The representations and warranties made by Purchaser in this Agreement shall be true and correct in all material respects on and as of the Closing Date as though made on and as of the Closing Date or, in the case of representations and warranties made as of a specified date earlier than the Closing Date, on and as of such earlier date, except in each case as could not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; provided, however, that for the purposes of determining the accuracy of such representations and warranties, all "Material Adverse Effect" <page>qualifications and other materiality qualifications, and any similar qualifications, contained in such representations and warranties shall be disregarded.. 2. Performance . Purchaser shall have performed and complied with, in all material respects, the agreements, covenants and obligations required by this Agreement to be so performed or complied with by Purchaser at or before the Closing. 3. Officers' Certificates . Purchaser and ACI shall have delivered to the Company certificates, dated the Closing Date and executed in the name and on behalf of Purchaser and ACI by the executive officer of Purchaser and ACI, respectively, substantially in the form and to the effect of Exhibit E-1 and Exhibit E-2 hereto, and certificates, dated the Closing Date and executed by the Secretary of Purchaser and ACI, respectively, substantially in the form and to the effect of Exhibit F-1 and Exhibit F-2 hereto. 4. Orders and Laws . There shall not be in effect at the time of Closing any Order or Law restraining, enjoining or otherwise prohibiting or making illegal the consummation of any of the transactions contemplated by this Agreement. 5. Regulatory Consents and Approvals . All consents, approvals and actions of, filings with and notices to any Governmental or Regulatory Authority necessary to permit the Company and Purchaser to materially perform their obligations under this Agreement and to consummate the transactions contemplated hereby, shall have been duly obtained, made or given, shall be in full force and effect and shall be in form and substance satisfactory to the Company and not subject to any material condition or contingency and all terminations or expirations of waiting periods imposed by any Governmental or Regulatory Authority necessary for the consummation of the transactions contemplated by this Agreement, including under the HSR Act, shall have occurred. 6. Consummation of Related Transaction . The transactions contemplated by the Kansas City Station Corporation Agreement shall be consummated substantially concurrently with the consummation of the transactions contemplated hereby. 7. Deliveries . Purchaser shall have delivered the Assumption Agreement and other Assumption Instruments. 8. Required Consents . The third party consents listed in Section 6.09 of the Disclosure Schedule shall have been obtained and shall not have been revoked. TAX MATTERS AND POST-CLOSING TAXES 1. Transfer Taxes and Transfer Fees . The Company shall pay all sales, use, transfer, real property transfer, recording, stock transfer and other similar taxes and fees (other than Taxes of Purchaser and its Affiliates based upon or measured by net income or gains) ("Transfer Taxe s") arising out of or in connection with the transactions effected pursuant to this <page>Agreement, and shall indemnify, defend, and hold harmless Purchaser and its Affiliates with respect to such Transfer Taxes. The Company and Purchaser shall equally share the costs of Gaming Device transfer fees. The Company shall file all necessary documentation and Tax Returns with respect to such Transfer Taxes. 2. Tax Indemnification . b. Subject to Section 1.06, after the Closing Date, the Company and Parent will indemnify and hold harmless Purchaser from and against any and all claims, actions, causes of action, liabilities, losses, damages, and reasonable out-of-pocket expenses and costs resulting from, arising out of or relating to any Taxes of, or with respect to, the Company (including, without limitation, any Tax liability that arises solely by reason of Company being severally liable for any Tax of any federal or state or local consolidated or combined group of which it is a member pursuant to Treasury Regulation Sec. 1.1502-6 or any analogous state or local Tax provision) or with respect to the income, assets or operation of the Business or the Assets for all taxable periods ending on or before the Closing Date and that portion of any taxable period including and ending on the Closing Date that ends on or after the Closing Date (determined as if the relevant period ended on the Closing Date) in excess of the amount of such Taxes shown as Accrued Expenses on the Closing Balance Sheet. c. Purchaser will be responsible for and indemnify and hold the Company harmless against any all liabilities with respect to Taxes relating to the Assets for all taxable periods beginning on the Closing Date and ending after the Closing Date other than to the extent such Taxes relate to or result from a breach of a representation set forth in Section 2.06, and other than Taxes for which the Company is responsible pursuant to Sections 1.06, 8.01 and 8.02(a) above. d. For purposes of clarification, the obligations of the Company, Parent and Purchaser pursuant to this Section 8.02 shall not be subject to the limits contained in Section 11.01(c)(i) hereof. 3. Tax Cooperation . After the Closing Date, the Company and Parent will cooperate with Purchaser, and Purchaser will cooperate with the Company and Parent, in the preparation of all Tax Returns and will provide (or cause to be provided) any records and other information the other so requests, and will provide access to, and the cooperation of its auditors. The Company and Parent will cooperate with Purchaser and Purchaser will cooperate with the Company and Parent in connection with any Tax investigation, audit or other proceeding. 4. Notification of Proceedings; Control . The Company shall have the right to control any audit or examination relating to Taxes by any taxing authority, initiate any claim for refund, file any amended return, contest, resolve and defend against any assessment, notice of deficiency or other adjustment or proposed adjustment relating or with respect to any Taxes of any company for which the Company is responsible pursuant to Section 8.02 and shall be entitled to all refunds with respect to such taxes. <page> EMPLOYEE BENEFITS MATTERS 1. Offer of Employment . b. The parties hereto intend that there shall be continuity of employment with respect to all of the employees of the Business. Subject to Purchaser's (or its Affiliates') ordinary ninety-day orientation period, Purchaser shall offer employment at will, commencing on the Closing Date, to all employees, including those on vacation, leave of absence or disability, who were employed by the Business immediately prior to Closing, on substantially the same terms in the aggregate (including salary, fringe benefits, job responsibility and location but excluding employee stock ownership and incentive plans) as those provided to similar employees of Purchaser (or its Affiliates) immediately prior to Closing to the extent permitted under applicable law. Those persons who accept Purchaser's offer of employment and commence working with Purchaser on the Closing Date shall hereafter be referred to as "Transferred Employees." The parties hereto agree that nothing in this Agreement shall limit Purchaser's ability after the Closing Date to modify or terminate (i) the employment of any Transferred Employee or (ii) any benefit policy, plan or program offered to or covering any Transferred Employee. c. Prior to, or in connection with, the Closing, Purchaser shall take no action to cause the Company or the Business to terminate the employment of any employee of the Business, and neither the Company nor the Business shall be under any obligation to terminate any employee of the Business prior to or on the Closing Date. Purchaser shall be liable for any amounts to which any employee of the Business may become entitled pursuant to any employment or severance contract as a result of, or in connection with, the sale of the Business hereunder. Purchaser agrees that it will not take any action which would give rise to liability under WARN or any similar state, local or federal Law or regulation. 2. Welfare Plans -- Claims Incurred; Pre-Existing Conditions . b. Notwithstanding any provision of this Agreement to the contrary, the Company shall retain responsibility for and continue to pay all medical, life insurance, disability and other welfare plan expenses and benefits for each Transferred Employee with respect to claims incurred by such Transferred Employees or their covered dependents prior to the Closing Date. Notwithstanding any provision of this Agreement to the contrary, expenses and benefits with respect to claims incurred by Transferred Employees or their covered dependents on or after the Closing Date shall be the responsibility of Purchaser. For purposes of this paragraph, a claim is deemed incurred when the services that are the subject of the claim are performed; in the case of life insurance, when the death occurs, in the case of long-term disability benefits, when the disability occurs and, in the case of a hospital stay, when the employee first enters the hospital. c. With respect to any welfare benefit plans (as defined in Section 3(1) of ERISA) maintained by Purchaser for the benefit of Transferred Employees on and after the <page>Closing Date, Purchaser shall (i) use commercially reasonable efforts to cause there to be waived any pre-existing condition limitations (other than those limitations existing under the Company's welfare benefit plans) and (ii) give effect, in determining any deductible and maximum out-of-pocket limitations, to claims incurred and amounts paid by, and amounts reimbursed to, such employees with respect to similar plans maintained by the Company (and its Affiliates) for their benefit immediately prior to the Closing Date. 3. Vacation . With respect to any accrued but unused vacation time to which any Transferred Employee is entitled pursuant to the vacation policy applicable to such employee immediately prior to the Closing Date (the "Vacation Policy"), Purchaser shall allow such Transferred Employee to use such accrued vacation, subject to the terms and conditions of Purchaser's vacation policy; provided, however, that if Purchaser deems it necessary to disallow such Transferred Employee from taking such accrued vacation, Purchaser shall be liable for and pay in cash to each such Transferred Employee an amount equal to such vacation time in accordance with terms of the Vacation Policy; provided, further, that Purchaser shall be liable for and pay in cash an amount equal to any remaining accrued vacation time to any Transferred Employee whose employment terminates for any reason prior to the close of business on the last calendar day of the year during which the Closing Date occurs. 4. Service Credit . Purchaser will provide, for the purposes of eligibility and vesting (but not for benefit accrual) each Transferred Employee with credit for all service with the Company and its Affiliates to the extent possible under each employee benefit plan, program, or arrangement of Purchaser or its Affiliates in which such employee is eligible to participate; provided, however, that in no event shall any employee be entitled to any credit to the extent that it would result in a duplication of benefits with respect to the same period of service. 5. Company's Benefit Plans . Except as provided in this Agreement, the parties hereto agree that Purchaser shall not assume any Benefit Plan and the Company shall retain and be responsible for any cost, expense, liability, damage or obligation relating to any Benefit Plan, whether arising before, on or after the Closing Date. 6. COBRA Matters . The Company agrees to provide and be fully responsible for the continuation coverage required by Section 4980B of the Code and Sections 601 through 608 of ERISA ("COBRA") for all employees and former employees of the Company and their covered beneficiaries who incurred or will incur a qualifying event prior to the Closing Date, or will incur a qualifying event as a result of the consummation of the transactions contemplated herein, and who are entitled to COBRA coverage as a result thereof. SURVIVAL OF REPRESENTATIONS 1. Survival of Representations, Warranties, Covenants and Agreements . Except for (i) this Article X, Sections 2.06, 5.05, 5.06, 5.07, and 5.08 above, Articles VIII and IX above, Sections 14.03, 14.04 and 14.07 below and the Company's agreements and covenants with respect to Retained Liabilities, which shall survive and remain enforceable indefinitely, (ii) <page>Sections 4.06, 4.11 and 5.04 which shall survive for the period set forth therein, and (iii) Sections 2.10 and 2.15 which shall survive and remain enforceable for a period of five (5) years following the Closing Date, the representations, warranties, agreements and covenants contained in this Agreement shall survive the Closing for a period of eighteen (18) months following the Closing Date, after which time there shall be no liability in respect thereof on the part of either party or its officers, directors, employees, agents and Affiliates. 2. No Other Representations . Notwithstanding anything to the contrary contained in this Agreement, but subject to Section 10.01 above, it is the explicit intent of each party hereto that the Company and Purchaser are making no representation or warranty whatsoever, express or implied, except those representations and warranties contained in Article II above and in any certificate delivered pursuant to Section 6.03 above. It is understood that, except to the extent otherwise expressly provided herein, Purchaser takes the Assets "as is" and "where is." In particular, the Company and Parent make no representation or warranty to Purchaser with respect to the information set forth in the Wasserstein Perella & Co., Inc. offering memorandum relating to the Company, or (y) any financial projection or forecast relating to the Company. With respect to any projection or forecast delivered by or on behalf of the Company to Purchaser, Purchaser acknowledges that (i) there are uncertainties inherent in attempting to make such projections and forecasts, (ii) it is familiar with such uncertainties, (iii) it is taking full responsibility for making its own evaluation of the adequacy and accuracy of all such projections and forecasts furnished to it and (iv) it shall have no claim against the Company or Parent with respect thereto. INDEMNIFICATION 1. Other Indemnification . b. Subject to paragraph (c) of this Section and the other Sections of this Article XI, the Company and Parent shall jointly and severally indemnify the Purchaser Indemnified Parties in respect of, and hold it harmless from and against, any and all Losses suffered, incurred or sustained by any of them or to which any of them becomes subject, resulting from, arising out of or relating to (i) any breach of representation or warranty or nonfulfillment of or failure to perform any covenant or agreement on the part of the Company or Parent contained in this Agreement, or (ii) a Retained Liability; c. Subject to the other Sections of this Article XI, Purchaser shall indemnify the Company Indemnified Parties in respect of, and hold each of them harmless from and against, any and all Losses suffered, incurred or sustained by any of them or to which any of them becomes subject, resulting from, arising out of or relating to (i) any breach of representation or warranty or nonfulfillment of or failure to perform any covenant or agreement on the part of Purchaser contained in this Agreement or (ii) an Assumed Liability; d. Notwithstanding anything to the contrary contained in this Agreement, no amounts of indemnity shall be payable as a result of any claim in respect of a Loss arising under <page>paragraph (a)(i) or (b)(i), as applicable, of Section 11.01 (other than a claim based on fraud or willful misconduct or for or with respect breaches of Section 2.06 hereof or claims under Article VIII hereof): (i) unless, until and then only to the extent that the Purchaser Indemnified Parties or the Company Indemnified Parties, as applicable, have suffered, incurred, sustained or become subject to Losses referred to in such paragraph in excess of one hundred thousand dollars ($100,000) in the aggregate; (ii) unless and to the extent that the Purchaser Indemnified Parties and the Purchaser Indemnified Parties as defined in the Kansas City Station Corporation Agreement or the Company Indemnified Parties and the Company Indemnified Parties as defined in the Kansas City Station Corporation Agreement, as applicable, have not received payments in respect of claims made under Section 11.01(a)(i) of this Agreement and the Kansas City Station Corporation Agreement or Section 11.01(b)(i) of this Agreement and the Kansas City Station Corporation Agreement, respectively, in excess of Twenty Million Dollars ($20,000,000) in the aggregate; (iii) unless the Indemnified Party has given the Indemnifying Party a Claim Notice or Indemnity Notice, as applicable, with respect to such claim, setting forth in reasonable detail the specific facts and circumstances pertaining thereto, (A) as soon as practical following the time at which the Indemnified Party discovered or reasonably should have discovered such claim (except to the extent the Indemnifying Party is not prejudiced by any delay in the delivery of such notice) and (B) in any event prior to the applicable Cut-off Date; or (iv) to the extent that the Indemnified Party had a reasonable opportunity, but failed, in good faith to mitigate such Loss, including, without limitation, to the failure to use commercially reasonable efforts to recover under a policy of insurance or under a contractual right of set off or indemnity. 2. Method of Asserting Claim . All claims for indemnification by any Indemnified Party under Section 11.01 will be asserted and resolved as follows: b. In the event any claim or demand in respect of which an Indemnified Party might seek indemnity under Section 11.01 is asserted against or sought to be collected from such Indemnified Party by a Person other than the Company, Parent, ACI, Purchaser or any Affiliate of the Company or of Purchaser (a "Third Party Claim"), the Indemnified Party shall deliver a Claim Notice with reasonable promptness to the Indemnifying Party. The Indemnifying Party will notify the Indemnified Party as soon as practicable within the Dispute Period whether the Indemnifying Party disputes its liability to the Indemnified Party under Section 11.01 and whether the Indemnifying Party desires, at its sole cost and expense, to defend the Indemnified Party against such Third Party Claim, provided that failure to give such notice shall not relieve the Indemnifying Party of its obligations hereunder except to the extent it shall have been prejudiced by such failure. i. If the Indemnifying Party notifies the Indemnified Party within the Dispute Period that the Indemnifying Party desires to defend the Indemnified Party with <page>respect to the Third Party Claim pursuant to this Section 11.02(a), then the Indemnifying Party will have the right to defend, at the sole cost and expense of the Indemnifying Party, such Third Party Claim by all appropriate proceedings, which proceedings will be vigorously and diligently prosecuted by the Indemnifying Party to a final conclusion or will be settled at the discretion of the Indemnifying Party. The Indemnifying Party will have full control of such defense and proceedings, including that if requested by the Indemnifying Party, the Indemnified Party will, at the sole cost and expense of the Indemnifying Party, reasonably cooperate with the Indemnifying Party and its counsel in contesting any Third Party Claim that the Indemnifying Party elects to contest, or, if appropriate and related to the Third Party Claim in question, in making any counterclaim against the Person asserting the Third Party Claim, or any cross-complaint against any Person (other than the Indemnified Party or any of its Affiliates); provided that the Indemnified Party may participate in such settlement or defense through counsel chosen by such Indemnified Party and paid at its own expense; and provided further that, if in the opinion of counsel for such Indemnified Party, there is a reasonable likelihood of a conflict of interest between the Indemnifying Party and the Indemnified Party, the Indemnifying Party shall be responsible for reasonable fees and expenses of one counsel to such Indemnifying Party in connection with such defense. Notwithstanding the foregoing, the Indemnified Party may retain or take over the control of the defense or settlement of any Third Party Claim the defense of which the Indemnifying Party has elected to control if the Indemnified Party irrevocably waives its right to indemnity under Section 11.01 with respect to such Third Party Claim. ii. If the Indemnifying Party fails to notify the Indemnified Party within the Dispute Period that the Indemnifying Party desires to defend the Third Party Claim pursuant to Section 11.02(a), then the Indemnified Party will have the right to defend, at the sole cost and expense of the Indemnifying Party, the Third Party Claim by all appropriate proceedings, which proceedings will be vigorously and diligently prosecuted by the Indemnified Party to a final conclusion or will be settled at the discretion of the Indemnified Party (with the consent of the Indemnifying Party, which consent will not be unreasonably withheld). The Indemnified Party will have full control of such defense and proceedings, including (except as provided in the immediately preceding sentence) any settlement thereof; provided, however, that if requested by the Indemnified Party, the Indemnifying Party will, at the sole cost and expense of the Indemnifying Party, cooperate with the Indemnified Party and its counsel in contesting any Third Party Claim which the Indemnified Party is contesting, or, if appropriate and related to the Third Party Claim in question, in making any counterclaim against the Person asserting the Third Party Claim, or any cross-complaint against any Person (other than the Indemnifying Party or any of its Affiliates). Notwithstanding the foregoing provisions of this clause (ii), if the Indemnifying Party has notified the Indemnified Party within the Dispute Period that the Indemnifying Party disputes its liability hereunder to the Indemnified Party with respect to such Third Party Claim and if such dispute is resolved in favor of the Indemnifying Party in the manner provided in clause (iii) below, the Indemnifying Party will not be required to bear the costs and expenses of the Indemnified Party's defense pursuant to this clause (ii) or of the Indemnifying Party's participation therein at the Indemnified Party's request, and the Indemnified Party will reimburse the <page>Indemnifying Party in full for all reasonable costs and expenses incurred by the Indemnifying Party in connection with such litigation. The Indemnifying Party may retain separate counsel to represent it in, but not control, any defense or settlement controlled by the Indemnified Party pursuant to this clause (ii), and the Indemnifying Party will bear its own costs and expenses with respect to such participation. iii. If the Indemnifying Party notifies the Indemnified Party that it does not dispute its liability to the Indemnified Party with respect to the Third Party Claim under Section 11.02 or fails to notify the Indemnified Party within the Dispute Period whether the Indemnifying Party disputes its liability to the Indemnified Party with respect to such Third Party Claim, the Loss arising from such Third Party Claim will be conclusively deemed a liability of the Indemnifying Party under Section 11.01 and the Indemnifying Party shall pay the amount of such Loss to the Indemnified Party on demand following the final determination thereof. If the Indemnifying Party has timely disputed its liability with respect to such claim, the Indemnifying Party and the Indemnified Party will proceed in good faith to negotiate a resolution of such dispute, and if not resolved through negotiations within the Resolution Period, such dispute shall be resolved by arbitration in accordance with paragraph (c) of this Section 11.02. c. In the event any Indemnified Party should have a claim under Section 11.02 against any Indemnifying Party that does not involve a Third Party Claim, the Indemnified Party shall deliver an Indemnity Notice with reasonable promptness to the Indemnifying Party. If the Indemnifying Party notifies the Indemnified Party that it does not dispute the claim described in such Indemnity Notice or fails to notify the Indemnified Party within the Dispute Period whether the Indemnifying Party disputes the claim described in such Indemnity Notice, the Loss arising from the claim specified in such Indemnity Notice will be conclusively deemed a liability of the Indemnifying Party under Section 11.01 and the Indemnifying Party shall pay the amount of such Loss to the Indemnified Party on demand following the final determination thereof. If the Indemnifying Party has timely disputed its liability with respect to such claim, the Indemnifying Party and the Indemnified Party will proceed in good faith to negotiate a resolution of such dispute, and if not resolved through negotiations within the Resolution Period, such dispute shall be resolved by arbitration in accordance with paragraph (c) of this Section 11.02. d. Any dispute submitted to arbitration pursuant to this Section 11.02 shall be finally and conclusively determined by the decision of a panel of three arbitrators (hereinafter sometimes called the "Board of Arbitration") selected as herein provided. Each of the Indemnified Party and the Indemnifying Party shall select one (1) member and the third member shall be selected by mutual agreement of the other members, or if the other members fail to reach agreement on a third member within twenty (20) days after their selection, such third member shall thereafter be selected by the American Arbitration Association (the "AAA") upon application made to it jointly by the Indemnified Party and the Indemnifying Party for a third member possessing expertise or experience appropriate to the dispute. Within 120 days of the selection of the Board of Arbitration, the Indemnified Party and the Indemnifying Party shall meet in Las Vegas, Nevada with such Board of Arbitration at a place and time designated by such Board of Arbitration after consultation with such parties and present their respective <page>positions on the dispute. The arbitration proceeding shall be held in accordance with the rules for commercial arbitration of the AAA in effect on the date of the initial request for appointment of the Board of Arbitration, that gave rise to the dispute to be arbitrated (as such rules are modified by the terms of this Agreement or may be further modified by mutual agreement of the parties). Each party shall have no longer than five (5) days to present its position, the entire proceedings before the Board of Arbitration shall be no more than ten consecutive days, and the decision of the Board of Arbitration shall be made in writing no more than thirty (30) days following the end of the proceeding. Such an award shall be a final and binding determination of the dispute and shall be fully enforceable as an arbitration decision in any court having jurisdiction and venue over such parties. The prevailing party (as determined by the Board of Arbitration) shall in addition be awarded by the Board of Arbitration such party's own attorneys' fees and expenses in connection with such proceeding. The non-prevailing party (as determined by the Arbitrator) shall pay the Board of Arbitration's fees and expenses. e. In the event of any claim for indemnity under Section 11.02(a), Purchaser agrees to give the Company and its Representatives reasonable access to the Books and Records and employees of the Company in connection with the matters for which indemnification is sought to the extent the Company reasonably deems necessary in connection with its rights and obligations under this Article XI. 3. Exclusivity . After the Closing, to the extent permitted by Law, the indemnities set forth in Article VIII and this Article XI shall be the exclusive remedies of Purchaser, Parent and the Company and their respective officers, directors, employees, agents and Affiliates for any misrepresentation, breach of warranty or nonfulfillment or failure to be performed of any covenant or agreement contained in this Agreement, and the parties shall not be entitled to a rescission of this Agreement or to any further indemnification rights or claims of any nature whatsoever in respect thereof, all of which the parties hereto hereby waive; provided, however, that no party hereto shall be deemed to have waived any rights, claims, causes of action or remedies if and to the extent such rights, claims, causes of action or remedies may not be waived under applicable law or actual fraud or intentional misrepresentation is proven on the part of a party by another party hereto. TERMINATION 1. Termination . This Agreement may be terminated, and the transactions contemplated hereby may be abandoned: b. at any time before the Closing, by mutual written agreement of the Company and Purchaser; c. at any time before the Closing without liability to the terminating party, by the Company or the Purchaser, in the event that any Order or Law becomes effective restraining, enjoining or otherwise prohibiting or making illegal the consummation of any of the transactions <page>contemplated by this Agreement upon notification of the non-terminating party by the terminating party and the terminating party is not then in material breach of this Agreement; d. at any time before the Closing, by Company or Purchaser in the event of a material breach of this Agreement by the non-terminating party if such non-terminating party fails to cure such non-compliance or breach within ten (10) Business Days following notification thereof by the terminating party; e. at any time after the date that is ninety (90) days following the Effective Date (the "Initial Term"), without liability to the terminating party, upon notification of the non-terminating party by the terminating party if the Closing shall not have occurred on or before such date and such failure to consummate is not caused by a breach of this Agreement by the terminating party; provided that the Company may in its sole and absolute discretion extend such period for up to three additional thirty (30) day extension periods upon five (5) Business days' written notice to Purchaser prior to the then applicable termination date; and provided, further, that if the sole condition that remains unsatisfied as of the expiration of the then applicable term (other than deliveries of closing certificates and other Closing documents) is the receipt of a Class A license from the Commission and Purchaser demonstrates to the reasonable satisfaction of the Company that (x) it has sufficient cash on hand and/or availability under credit facilities to pay the Purchase Price and make all other necessary payments of fees and expenses in connection with the transactions contemplated by this Agreement and (y) it is using commercially reasonable efforts to obtain such license and there are no facts known to Purchaser or the Company that could be reasonably expected to result in the failure to obtain such license, Purchaser may extend such period for up to three additional thirty (30) day extension periods by providing written notice to the Company on or before the date that is no more than ten (10) Business Days and no less than five (5) Business Days prior to the then applicable termination date. 2. Effect of Termination . If this Agreement is validly terminated pursuant to the provisions of Section 12.01 above, this Agreement will forthwith become null and void, and, except as set forth in the next sentence, there will be no liability or obligation on the part of Parent, the Company, Purchaser or ACI (or any of their respective officers, directors, employees, agents or other representatives or Affiliates), except that the provisions of Sections 14.02, 14.03, 14.04 and 14.07 below will continue to apply following any such termination. Notwithstanding any other provision in the Agreement to the contrary, upon any termination of this Agreement by any party pursuant to Section 12.01(c), the non-terminating party shall remain liable to the terminating party for any and all willful breaches of this Agreement and the terminating party may seek such remedies, including damages and attorneys' fees, as are provided in this Agreement or as are otherwise available at Law or in equity. DEFINITIONS 1. Defined Terms . As used in this Agreement, the following defined terms have the meanings indicated below: <page>"Accounts Payable" has the meaning ascribed to it in Section 1.02(a). "Accounts Receivable" has the meaning ascribed to it in Section 1.01(a). "Accrued Expenses" has the meaning ascribed to it in Section 1.02(a). "ACI" has the meaning ascribed to it in the forepart of this Agreement. "Acquisition Proposal" has the meaning ascribed to it in Section 4.07. "Actions or Proceedings" means any action, suit, proceeding, arbitration or Governmental or Regulatory Authority investigation. "Affiliate" means any 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 definition, control of a Person means the power, direct or indirect, to direct or cause the direction of the management and policies of such Person whether by Contract or otherwise and, in any event and without limitation of the previous sentence, any Person owning ten percent (10%) or more of the voting securities of another Person shall be deemed to control that Person. "Agreement" means this Asset Purchase Agreement and the Exhibits, the Disclosure Schedule and the Schedules hereto and the certificates delivered in accordance with Sections 6.03 and 7.03, as the same shall be amended from time to time. "Assets" has the meaning ascribed to it in Section 1.01(a). "Assignment Instruments" has the meaning ascribed to it in Section 1.04. "Assumed Liabilities" has the meaning ascribed to it in Section 1.02(a). "Assumption Agreement" has the meaning ascribed to it in Section 1.04. "Assumption Instruments" has the meaning ascribed to it in Section 1.04. "Benefit Plan" means any Plan established by the Company, or any predecessor or Affiliate of any of the foregoing, existing at the Closing Date or at any time since December 31, 1997, to which the Company contributes or has contributed, or under which any employee, former employee or director of the Company or any dependent or beneficiary thereof is covered, is eligible for coverage or has benefit rights. "Board of Arbitration" has the meaning ascribed to it in Section 11.02(c). "Books and Records" means all files, documents, instruments, papers, books and records relating primarily to the Business or Condition of the Company, including, without limitation, financial statements, Tax Returns and related work papers and letters from accountants, budgets, pricing guidelines, ledgers, journals, deeds, title policies, minute books, stock certificates and books, stock transfer ledgers, Contracts, Licenses, customer lists, computer <page>files and programs, retrieval programs, operating data and plans, environmental studies, audits, plans, surveys, designs, models and specifications. "Business" has the meaning ascribed to it in the forepart of this Agreement. "Business Books and Records" has the meaning ascribed to it in Section 1.01(a). "Business Contracts" has the meaning ascribed to it in Section 1.01(a). "Business Customer Lists" has the meaning ascribed to it in Section 1.01(a). "Business Day" means a day other than Saturday, Sunday or any day on which banks located in the States of location of the Company's principal executive offices are authorized or obligated to close. "Business Licenses" has the meaning ascribed to it in Section 1.01(a). "Business or Condition of the Company" means the business, financial condition or results of operations of the Company. "CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, and the rules and regulations promulgated thereunder. "Claim Notice" means written notification pursuant to Section 11.02(a) of a Third Party Claim as to which indemnity under Section 11.01 is sought by an Indemnified Party, enclosing a copy of all papers served, if any, and specifying the nature of and basis for such Third Party Claim and for the Indemnified Party's claim against the Indemnifying Party under Section 11.01, together with the amount or, if not then reasonably determinable, the estimated amount, determined in good faith, of the Loss arising from such Third Party Claim. "Closing" means the closing of the transactions contemplated by Section 1.04. "Closing Balance Sheet" has the meaning ascribed to it in Section 1.05(a). "Closing Date" means (a) the second Business Day after the day on which the last of the conditions described in Articles VI and VII hereof above has been obtained, made or given or has expired, as applicable, or (b) such other date as Purchaser and the Company mutually agree upon in writing. "Closing Financial Statements Delivery Date" has the meaning ascribed to it in Section 1.05(a). "Code" means the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder. "Commission" has the meaning ascribed to it in Section 1.01(a)(iv). "Common Stock" means the common stock, no par value, of the Company. <page>"Company" has the meaning ascribed to it in the forepart of this Agreement. "Company Indemnified Parties" means Parent, the Company and their respective officers, directors, employees, agents and Affiliates. "Company Plans" has the meaning ascribed to it in Section 2.09(a). "Company's Accountant" has the meaning ascribed to it in Section 1.05(c). "Contract" means any agreement, lease, license, evidence of Indebtedness, mortgage, indenture, security agreement or other contract. "Cut-off Date" means, with respect to any representation, warranty, covenant or agreement contained in this Agreement, the date on which such representation, warranty, covenant or agreement ceases to survive as provided in Section 11.01 , as applicable. "Deficiency" means the amount, if any, by which the Net Current Assets as determined in accordance with Section 1.05 is a negative number. "Determination Date" has the meaning ascribed to it in Section 1.05(c). "Disclosure Schedule" means the record delivered to Purchaser by the Company herewith and dated as of the date hereof, containing all lists, descriptions, exceptions and other information and materials as are required to be included therein by the Company pursuant to this Agreement, as said record may be amended, supplemented or modified by the Company at any time prior to the Closing without any liability to the Company other than that Purchaser shall have the right for five (5) Business Days after such amendment, supplement or modification of the Disclosure Schedule to terminate the Agreement based upon such amendment, supplement or modification of the Disclosure Schedule if such amendment, supplement or modification of the Disclosure Schedule reveals a matter which would have a Material Adverse Effect. Reference herein to the Disclosure Schedule shall mean and refer not only to the record itself, but to all items, documents, agreements and instruments referenced therein and to the content of each such item, document, agreement and instrument. Likewise, reference herein to a certain Section of the Disclosure Schedule shall refer not only to that portion of the Disclosure Schedule, but to the items, documents, agreements and instruments referenced in that Section and the contents of each such item, document, agreement and instrument. Further, matters disclosed for the purpose of one Section of the Disclosure Schedule shall constitute disclosure of such matters for the purposes of all other Sections of the Disclosure Schedule. The duplication or cross-referencing of any disclosures made in the Disclosure Schedule shall not, in any instance or in the aggregate, effect a waiver of the foregoing sentence. "Dispute Period" means the period ending sixty (60) days following receipt by an Indemnifying Party of either a Claim Notice or an Indemnity Notice. "EBITDA" means, with respect to any Person for any period, the earnings before interest, taxes, depreciation and amortization of such Person for such period. <page>"Effective Date" has the meaning ascribed to it in the forepart of this Agreement. "Environmental Claim" has the meaning ascribed to it in Section 2.15(c). "Environmental Law" means any federal, state, or local law, statute, code, ordinance, order, rule, regulation, judgment, decree, injunction, writ, edict, award, authorization, or other legally binding and enforceable requirement by any Governmental or Regulatory Authority relating to any environmental, health or safety matters. "Environmental Permits" has the meaning ascribed to it in Section 2.15(a). "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated thereunder. "Excluded Assets" has the meaning ascribed to it in Section 1.01(b). "Excluded Books and Records" has the meaning ascribed to it in Section 1.01(b). "Financial Statement Date" means December 31, 1999. "Financial Statements" means the combined financial statements of the Company delivered to Purchaser pursuant to Section 2.05. "GAAP" means generally accepted accounting principles, consistently applied throughout the specified period and in the immediately prior comparable period. "Gaming Devices" means any gambling games or implements of gaming (as such terms are used in the applicable gaming statutes and regulations of the State of Missouri) that is an asset or property of the Company and is not an Excluded Asset. "General Assignment" has the meaning ascribed to it in Section 1.04. "Governmental or Regulatory Authority" means any court, tribunal, arbitrator, authority, administrative or other agency, commission, gaming authority, official or other authority or instrumentality of the United States or any state, county, city or other political subdivision. "Hazardous Material" means any chemical, or other material, or substance regulated under any Environmental Law including, without limitation, any which are defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "infectious waste," "extremely hazardous wastes," "restricted hazardous wastes," "toxic substances," or "toxic pollutants" or words of similar import under any Environmental Law. "HSR Act" means Section 7A of the Clayton Act (Title II of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended) and the rules and regulations promulgated thereunder. <page>"Improvements" has the meaning ascribed to it in Section 1.01(a). "Indebtedness" of any Person means all obligations of such Person (i) for borrowed money, (ii) evidenced by notes, bonds, debentures or similar instruments, (iii) for the deferred purchase price of goods or services (other than trade payables or accruals incurred in the ordinary course of business), (iv) under capital leases and (v) in the nature of guarantees of the obligations described in clauses (i) through (iv) above of any other Person. "Indemnified Party" means any Person claiming indemnification under any provision of Article XI. "Indemnifying Party" means any Person against whom a claim for indemnification is being asserted under any provision of Article XI. "Indemnity Notice" means written notification pursuant to Section 11.02(b) of a claim for indemnity under Article XI by an Indemnified Party, specifying the nature of and basis for such claim, together with the amount or, if not then reasonably determinable, the estimated amount, determined in good faith, of the Loss arising from such claim. "Inventoried Baggage" has the meaning ascribed to it in Section 5.06. "Inventoried Vehicles" has the meaning ascribed to it in Section 5.08. "July Agreement" has the meaning ascribed to it in the forepart of this Agreement. "Kansas City Station Corporation Agreement" means that certain agreement dated as of October 17, 2000 by and among Ameristar Casino Kansas City, Inc, a Missouri corporation, Ameristar Casinos, Inc, a Nevada corporation, Kansas City Station Corporation, a Missouri corporation and Station Casinos, Inc., a Nevada corporation. "Knowledge of the Company" means the actual knowledge of the directors and executive officers of Parent or the Company, Parent's President of Midwest Operations, Parent's General Counsel for Midwest Operations or the General Manager of the Business. "Knowledge of Purchaser" means the actual knowledge of the members, directors and officers of Purchaser and its Affiliates. "Laws" means all laws, statutes, rules, regulations, ordinances and other pronouncements having the effect of law of the United States or any state, county, city or other political subdivision or of any Governmental or Regulatory Authority. "Leased Real Property" has the meaning ascribed to it in Section 1.01(a). "Lessee Security Deposits" has the meaning ascribed to it in Section 1.01(a). "Lessor Security Deposits" has the meaning ascribed to it in Section 1.02(a). <page>"Liabilities" means all Indebtedness, obligations and other liabilities of a Person (whether absolute, accrued, contingent, fixed or otherwise, or whether due or to become due). "Licensed Supplier" means a licensed supplier of Gaming Devices in the State of Missouri. "Licenses" means all licenses, permits, certificates of authority, authorizations, approvals, registrations, franchises and similar consents granted or issued by any Governmental or Regulatory Authority. "Liens" means any mortgage, pledge, assessment, security interest, lease, lien, adverse claim, levy, charge or other encumbrance of any kind, or any conditional sale Contract, title retention Contract or other Contract to give any of the foregoing. "Loss" or "Losses" means any and all damages, fines, penalties, deficiencies, losses and expenses (including without limitation interest, court costs, reasonable fees of attorneys, accountants and other experts or other reasonable expenses of litigation or other proceedings or of any claim, default or assessment). "Mark" has the meaning ascribed to it in Section 4.06(a). "Material Adverse Effect" means any event or circumstance that has or will have, or could reasonably be expected to have, a material adverse effect on the Business or Condition of the Company after the Closing Date, it being understood that in no event shall any of the following shall be deemed by itself or by themselves, either individually or in the aggregate, to constitute a Material Adverse Effect: (a) a failure by the Company to meet internal earnings, revenue or other projections or earnings, revenue or other predictions of any analyst, (b) any event, circumstance or market condition occurring as a general economic or financial conditions or other developments which are not unique to the Company but also is applicable to the gaming industry generally, or the Missouri gaming industry in particular, or (c) the appointment of a receiver to operate the Business, the operation of the Business by such a receiver and the results of operations of the Business during such period of operation, the imposition of monetary penalties which shall constitute Retained Liabilities, or any Permitted Interruption; it being further understood that any cessation of operation of the Business other than a Permitted Interruption shall conclusively be deemed to be a Material Adverse Effect. "Net Current Assets" means for any date of determination the net current assets of such Person at such date of determination calculated as set forth on Exhibit H attached hereto. "NPL" means the National Priorities List under CERCLA. "Order" means any writ, judgment, decree, injunction or similar order of any Governmental or Regulatory Authority (in each such case whether preliminary or final). "Owned Real Property" has the meaning ascribed to it in Section 1.01(a). "Parent" has the meaning ascribed to it in the forepart of this Agreement. <page>"Permitted Interruption" shall mean a cessation of the operation of the Business for a period not to exceed fifteen days, provided that during such period of interruption the Company shall continue to pay its employees pursuant to its compensation policies in effect immediately prior to the cessation of operations and for each day of such interruption shall compensate employees that receive compensation in the form of tips an additional amount equal to the average daily tip compensation received by such employees. "Permitted Lien" means (i) any Lien for Taxes not yet due or delinquent or being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with GAAP, (ii) any statutory Lien arising in the ordinary course of business by operation of Law with respect to a Liability that is not yet due or delinquent and (iii) any minor imperfection of title, easements of public record or similar Liens which individually or in the aggregate with other such Liens would not have a Material Adverse Effect. "Person" means any natural person, corporation, limited liability company, general partnership, limited partnership, proprietorship, other business organization, trust, union, association or Governmental or Regulatory Authority. "Personal Property Leases" has the meaning ascribed to it in Section 1.01(a). "Plan" means any bonus, incentive compensation, deferred compensation, pension, profit sharing, retirement, stock purchase, stock option, stock ownership, stock appreciation rights, phantom stock, leave of absence, layoff, vacation, day or dependent care, legal services, cafeteria, life, health, accident, disability, workers' compensation or other insurance, severance, separation or other employee benefit plan, practice, policy or arrangement of any kind, whether written or oral, including, without limitation, any "employee benefit plan" within the meaning of Section 3(3) of ERISA. "Prepaid Expenses" has the meaning ascribed to it in Section 1.01(a). "Purchase Price" has the meaning ascribed to it in Section 1.03(a). "Purchaser" has the meaning ascribed to it in the forepart of this Agreement. "Purchaser Indemnified Parties" means Purchaser and its officers, directors, employees, agents and Affiliates. "Real Property" has the meaning ascribed to it in Section 1.01(a). "Real Property Leases" has the meaning ascribed to it in Section 1.01(a). "Release" means any release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching or migration into the indoor or outdoor environment. "Representatives" has the meaning ascribed to it in Section 4.03. "Required Consents" has the meaning ascribed to it in Section 1.08. <page>"Resolution Period" means the period ending ninety (90) days following receipt by an Indemnified Party of a written notice from an Indemnifying Party stating that it disputes all or any portion of a claim set forth in a Claim Notice or an Indemnity Notice. "Retained Liabilities" has the meaning ascribed to it in Section 1.02(b). "Surplus" means the amount, if any, by which Net Current Assets as determined in accordance with Section 1.05 is a positive number. "Tangible Personal Property" has the meaning ascribed to it in Section 1.01(a). "Tax Return" means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof. "Taxes" means (i) any federal, state, local or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental (including taxes under Code Sec. 59A), customs duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition thereto, whether disputed or not and any expenses incurred in connection with the determination, settlement or litigation of any Tax liability and (ii) any liability for payment of amounts described in clause (i) above as a result of any express or implied agreement to pay or indemnify another Person with respect to such amounts or any liability for such amounts, any joint and/or several liability for such amounts, and any such amounts for which a Person is liable by operation of Law (including but not limited to successor liability). "Third Party Claim" has the meaning ascribed to it in Section 11.02(a). "Transfer Taxes" has the meaning ascribed to it in Section 8.01. "Transfer Time" has the meaning ascribed to it in Section 1.04. "Transferred Employees" has the meaning ascribed to it in Section 9.01(a). "Transferred Intellectual Property" has the meaning ascribed to it in Section 1.01(a). "Vacation Policy" has the meaning ascribed to it in Section 9.03. "Vehicles and Vessels" has the meaning ascribed to it in Section 1.01(a). "WARN" means the Worker Adjustment Retraining and Notification Act of 1988. 2. Construction of Certain Terms and Phrases . Unless the context of this Agreement otherwise requires, (i) words of any gender include each other gender; (ii) words <page>using the singular or plural number also include the plural or singular number, respectively; (iii) the terms "hereof," "herein," "hereby" and derivative or similar words refer to this entire Agreement; (iv) the terms "Article" or "Section" refer to the specified Article or Section of this Agreement; and (v) the phrase "ordinary course of business" refers to the business of the Company. Whenever this Agreement refers to a number of days, such number shall refer to calendar days unless Business Days are specified. All accounting terms used herein and not expressly defined herein shall have the meanings given to them under GAAP. Any representation or warranty contained herein as to the enforceability of a Contract shall be subject to the effect of any bankruptcy, insolvency, reorganization, moratorium or other similar law affecting the enforcement of creditors' rights generally and to general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at Law). MISCELLANEOUS 1. Notices . All notices, requests and other communications hereunder must be in writing and will be deemed to have been duly given only if delivered personally, by facsimile transmission, by registered or certified mail (postage prepaid, return receipt requested) or by overnight express courier to the parties at the following addresses or facsimile numbers: If to Purchaser, to: Ameristar Casino St. Charles, Inc. 3773 Howard Hughes Parkway Suite 490 South Las Vegas, Nevada 89109 Attention: Craig H. Neilsen, President & CEO Facsimile No. (702) 369-8860 with copies to: Gordon R. Kanofsky, Esq. Senior Vice President of Legal Affairs Ameristar Casinos, Inc. 16633 Ventura Boulevard, Suite 1050 Encino, CA 91436-1864 Facsimile No. (818) 995-7099 and Gibson, Dunn & Crutcher LLP 333 South Grand Avenue Los Angeles, CA 90071 Attention: Jonathan K. Layne, Esq. Facsimile No. (213) 229-6141 <page> If to the Company, to: St. Charles Riverfront Station, Inc. c/o Station Casinos, Inc. 2411 West Sahara Ave. Las Vegas, Nevada 89102 Facsimile No.: (702) 253-2926 Attn: Scott M Nielson, Esq. with copies to: Milbank, Tweed, Hadley & McCloy LLP 601 South Figueroa, Suite 300 Los Angeles, California 90017 Facsimile No.: (213) 892-5063 Attn: Kenneth J. Baronsky, Esq. All such notices, requests and other communications will (a) if delivered personally to the address as provided in this Section 14.01, be deemed given upon delivery, (b) if delivered by facsimile transmission to the facsimile number as provided in this Section 14.01, be deemed given upon receipt, and (c) if delivered by mail in the manner described above to the address as provided in this Section 14.01, be deemed given upon receipt (in each case regardless of whether such notice, request or other communication is received by any other Person to whom a copy of such notice, request or other communication is to be delivered pursuant to this Section 14.01). Any party from time to time may change its address, facsimile number or other information for the purpose of notices to that party by giving notice specifying such change to the other party hereto. 2. Entire Agreement . This Agreement supersedes all prior discussions and agreements between the parties with respect to the subject matter hereof and contains the sole and entire agreement between the parties hereto with respect to the subject matter hereof. 3. Expenses . Whether or not the transactions contemplated hereby are consummated, Purchaser and the Company each shall pay the costs and expenses incurred by such party in connection with the negotiation, execution and closing of this Agreement and the transactions contemplated hereby. 4. Public Announcements . At all times at or before the Closing, the Company and Parent, on the one hand, and Purchaser and ACI, on the other, will not issue or make any reports, statements or releases to the public or generally to the employees, customers, suppliers or other Persons to whom the Company sells goods or provides services or with whom the Company otherwise has significant business relationships with respect to this Agreement or the transactions contemplated hereby without the consent of the other, which consent shall not be unreasonably withheld. If either party is unable to obtain the approval of its public report, statement or release from the other party and such report, statement or release is, in the opinion <page>of legal counsel to such party, required by Law in order to discharge such party's disclosure obligations, then such party may make or issue the legally required report, statement or release and promptly furnish the other party with a copy thereof. Purchaser and ACI will obtain the Company's prior approval of any press release to be issued immediately following execution of this Agreement or the Closing announcing execution of this Agreement or the consummation of the transactions contemplated by this Agreement, which approval shall not be unreasonably withheld. The Company and Parent will obtain Purchaser's prior approval of any press release to be issued immediately following execution of this Agreement or the Closing announcing this Agreement or the consummation of the transactions contemplated by this Agreement. 5. Waiver . Any term or condition of this Agreement may be waived at any time by the party that is entitled to the benefit thereof, but no such waiver shall be effective unless set forth in a written instrument duly executed by or on behalf of the party waiving such term or condition. No waiver by any party of any term or condition of this Agreement, in any one or more instances, shall be deemed to be or construed as a waiver of the same or any other term or condition of this Agreement on any future occasion. All remedies, either under this Agreement or by Law or otherwise afforded, will be cumulative and not alternative. 6. Amendment . Except for amendments, supplements and modifications to the Disclosure Schedule by the Company prior to the Closing (which shall be made in accordance with the terms and provisions set forth in the definition of the term "Disclosure Schedule"), this Agreement may be amended, supplemented or modified only by a written instrument duly executed by or on behalf of Purchaser, on the one hand, and the Company, on the other hand. 7. Confidentiality . Each party hereto will hold, and will use its best efforts to cause its Affiliates , and in the case of Purchaser, any Person who has provided, or who is considering providing, financing to Purchaser to finance all or any portion of the Purchase Price, and their respective Representatives to hold, in strict confidence from any Person (other than any such Affiliate, Person who has provided, or who is considering providing, financing or Representative), unless (i) compelled to disclose by judicial or administrative process (including, without limitation, in connection with obtaining the necessary approvals of this Agreement and the transactions contemplated hereby of Governmental or Regulatory Authorities) or by other requirements of Law or (ii) disclosed in an Action or Proceeding brought by a party hereto in pursuit of its rights or in the exercise of its remedies hereunder, all documents and information concerning the other party or any of its Affiliates furnished to it by the other party or such other party's Representatives in connection with this Agreement or the transactions contemplated hereby, except to the extent that such documents or information can be shown to have been (a) previously known by the party receiving such documents or information, (b) in the public domain (either prior to or after the furnishing of such documents or information hereunder) through no fault of such receiving party or (c) later acquired by the receiving party from another source if the receiving party is not aware that such source is under an obligation to another party hereto to keep such documents and information confidential; provided that following the Closing the foregoing restrictions will not apply to Purchaser's use of documents and information concerning the Business, the Assets or the Assumed Liabilities furnished by Seller hereunder. In the event the transactions contemplated hereby are not consummated, upon the request of the <page>other party, each party hereto will, and will cause its Affiliates, any Person who has provided, or who is considering providing, financing to such party and their respective Representatives to, promptly (and in no event later than five (5) Business Days after such request) redeliver or cause to be redelivered all copies of documents and information furnished by the other party in connection with this Agreement or the transactions contemplated hereby and destroy or cause to be destroyed all notes, memoranda, summaries, analyses, compilations and other writings related thereto or based thereon prepared by the party furnished such documents and information or its Representatives. 8. No Third Party Beneficiary . The terms and provisions of this Agreement are intended solely for the benefit of each party hereto and their respective successors or permitted assigns, and it is not the intention of the parties to confer third-party beneficiary rights upon any other Person other than any Person entitled to indemnity pursuant to Article XI hereof. 9. No Assignment; Binding Effect . Neither this Agreement nor any right, interest or obligation hereunder may be assigned by any party hereto without the prior written consent of the other party hereto and any attempt to do so will be void, except (a) for assignments and transfers by operation of Law and (b) that Purchaser may assign any or all of its rights, interests and obligations hereunder (including, without limitation, its rights under Article XI) to (i) a wholly-owned subsidiary, provided that any such subsidiary agrees in writing to be bound by all of the terms, conditions and provisions contained herein and Purchaser remains liable for its obligations under this Agreement, (ii) any post-Closing purchaser of the Business or a substantial part of the Assets or (iii) any financial institution or other entity providing purchase money or other financing to Purchaser from time to time as collateral security for such financing. Subject to the preceding sentence, this Agreement is binding upon, inures to the benefit of and is enforceable by the parties hereto and their respective successors and assigns. 10. Headings . The headings used in this Agreement have been inserted for convenience of reference only and do not define or limit the provisions hereof. 11. Invalid Provisions . If any provision of this Agreement is held to be illegal, invalid or unenforceable under any present or future Law, and if the rights or obligations of any party hereto under this Agreement will not be materially and adversely affected thereby, (a) such provision will be fully severable, (b) this Agreement will be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof, and (c) the remaining provisions of this Agreement will remain in full force and effect and will not be affected by the illegal, invalid or unenforceable provision or by its severance herefrom. 12. Consent to Jurisdiction and Venue . Each party hereby irrevocably submits to the exclusive jurisdiction of the United States District Court for the District of Nevada or any court of the State of Nevada located in Clark County in any action, suit or proceeding arising out of or relating to this Agreement or any of the transactions contemplated hereby, and agrees that any such action, suit or proceeding shall be brought only in such court; provided, however, that such consent to jurisdiction is solely for the purpose referred to in this Section 14.12 and shall not be deemed to be a general submission to the jurisdiction of said courts or in <page>the State of Nevada other than for such purpose. Each party hereby irrevocably waives, to the fullest extent permitted by Law, any objection that it may now or hereafter have to the laying of the venue of any such action, suit or proceeding brought in such a court. Each party further irrevocably waives and agrees not to plead or claim that any such action, suit or proceeding brought in such a court has been brought in an inconvenient forum. 13. Governing Law . This Agreement shall be governed by and construed in accordance with the Laws of the State of Nevada applicable to a Contract executed and performed in such State, without giving effect to the conflicts of laws principles thereof. 14. Attorney's Fees . In the event of a dispute between the parties hereto relating to this Agreement, the prevailing party to such dispute will be entitled to recover its reasonable attorneys fees and other costs and expenses relating to such dispute from the non-prevailing party. 15. Time of the Essence . Time is of the essence in performing covenants and agreements hereunder. 16. Counterparts . This Agreement may be executed in any number of counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument. GUARANTEES 1. Guarantee of the Company's Obligations . Parent hereby, to the fullest extent permitted by applicable law, irrevocably and unconditionally guarantees (the "Parent Guarantee") to Purchaser and its successors and assigns the prompt performance and payment in full when due of all obligations of the Company to Purchaser under this Agreement and hereby agrees to take all reasonably necessary action as the sole shareholder of the Company to cause the Company to perform its obligations hereunder. 2. Guarantee of Purchaser's Obligations . ACI hereby, to the fullest extent permitted by applicable law, irrevocably and unconditionally guarantees (the "ACI Guarantee") to the Company and its successors and assigns the prompt performance and payment in full when due of all obligations of Purchaser to the Company under this Agreement and hereby agrees to take all reasonably necessary action as the sole shareholder of Purchaser to cause Purchaser to perform its obligations under this Agreement. <page>THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the duly authorized officer or trustee, as applicable, of each party hereto as of the date first above written. "PURCHASER" AMERISTAR CASINO ST. CHARLES, INC., a Missouri corporation By: /s/ Thomas M. Steinbauer Name: Thomas M. Steinbauer Title: Vice President "THE COMPANY" ST. CHARLES RIVERFRONT STATION, INC., a Missouri corporation By: /s/ Glenn C. Christenson Name: Title: "PARENT" STATION CASINOS, INC., a Nevada corporation By: /s/ Glenn C. Christenson Name: Title: <page>"ACI" AMERISTAR CASINOS, INC., a Nevada corporation By: /s/ Thomas M. Steinbauer Name: Thomas M. Steinbauer Title: Senior Vice President and Chief Financial Officer

EXHIBIT 10.11 MANATRON, INC. EXECUTIVE INCENTIVE PLAN FOR FISCAL 2000 ARTICLE I DECLARATION Section 1. Establishment of Plan. The Manatron, Inc. Executive Incentive Plan for Fiscal 2000 (the "Plan") is established by Manatron, Inc. (the "Company") for fiscal year 2000, and may be continued, intact or as amended, from year to year, at the Company's option. The Plan is an annual incentive, performance, and bonus compensation program for eligible employees of the Company.     Section 2. Objectives. The objectives of the Plan are to:   (a) Reward the outstanding performance of certain Executive Employees who contribute significantly to the achievement of the Company's annual objectives; and         (b) Facilitate the attraction and retention of superior personnel required for continued innovation, growth, and profitability. Section 3. Effective Dates. The effective date of the Plan is May 1, 1999. Each provision of the Plan applies until the effective date of an amendment of that provision. ARTICLE II DEFINITIONS                     The following terms shall have the definition stated, unless the context requires a different meaning: Section 1. Pre-Tax Earnings. "Pre-Tax Earnings" shall mean the Company's corporate net income for the subject fiscal year as shown in the Company's annual audited financial statements for that fiscal year after all expenses but before the provision or credit for federal income taxes, adjusted to remove amounts expended for payments made pursuant to this Plan.     Section 2. Award. "Award" means a contingent right to receive cash following the end of an Award Year.     Section 3. Award Year. "Award Year" means each fiscal year of the Company. -------------------------------------------------------------------------------- Section 4. Committee. "Committee" means the Compensation Committee of the Board of Directors of the Company which administers the Plan.     Section 5. Executive Employee. "Executive Employee" means a full-time senior employee of the Company or one of the Company's subsidiaries determined by the Committee to have the potential of a direct and significant impact on the performance of the Company or to make a substantial contribution to the success of the Company.     Section 6. Participant. "Participant" means an Executive Employee determined by the Committee to be eligible for an Award for the Award Year.     Section 7. Plan. "Plan" means the Manatron, Inc. Executive Incentive Plan for Fiscal 2000. ARTICLE III PARTICIPATION Section 1. Designation by Committee. An Executive Employee shall be a Participant in the Plan for an Award Year when designated as a Participant for that Award Year by the Committee. Executive Employees selected by the Committee for participation for the Award Year shall be notified in writing and provided with a copy of this Plan or with a written summary and explanation of the Plan.     Section 2. Participation Limited to One Year. Designation as a Participant in the Plan for an Award Year is limited to that Award Year. Each Participant must be designated as a Participant by the Committee for each Award Year to be eligible to participate in the Plan for that Award Year. ARTICLE IV ADMINISTRATION Section 1. Authority of Committee. The Plan will be administered by the Committee and (except with respect to his own Award) the Chief Executive Officer of the Company. If deemed by the Committee to be necessary, the Committee will adopt rules, policies, and forms for the administration, interpretation, and implementation of the Plan.     Section 2. Determination of Award Amounts. The components of any Award, as listed in Article V, shall be determined by the Chief Executive Officer and the Committee. All decisions, determinations, and interpretations of the Chief Executive Officer and the -2- --------------------------------------------------------------------------------   Committee will be final and binding on all Participants. No member of the Committee shall be eligible to receive Award pursuant to the Plan.     Section 3. Limitation on Liability. Neither the Chief Executive Officer, any member of the Committee, nor any member of the Board of Directors shall be liable for any act or omission in connection with the performance of such person's duties or the exercise of such person's discretion related to any act or omission concerning the operation and administration of the Plan. ARTICLE V AWARDS Section 1. Determination of Participant's Award Potential. Unless modified by the Committee or the Chief Executive Officer, each Participant's award potential shall consist of the following:   (a) Personal Range. The Participant's maximum potential Award pursuant to this Plan for an Award Year shall be fifty percent (50%) of the base salary paid to the Participant during the Award Year.         (b) Company Performance. The target financial performance and other objectives of the Company that will be considered in determining Awards are as follows for Fiscal 2000:   (i) Pre-Tax Earnings. An Award will be earned if the Company's Pre-Tax Earnings for the Award Year exceed the minimum threshold of One Million Two Hundred Thousand Dollars ($1,200,000). Twenty-five percent (25%) of the Company's Pre-Tax Earnings for the Award Year in excess of the minimum threshold shall be available for Awards to Participants pursuant to the Plan. Sixty-five percent (65%) of the Pre-Tax Earnings component of an Award for an Award Year will be distributed to Participants pro-rata based on each Participant's base salary for the Award Year. The remaining thirty-five percent (35%) of the Pre-Tax Earnings component may be distributed to Participants based on performance objectives, criteria, and/or ratings for individual Participants as determined pursuant to Section 2 of Article IV ("Discretionary Portion").         (ii) Other Objectives. An Award will be earned if any of the following three variables (the "Variables") are achieved, provided that the Company has Pre-Tax Earnings for the Award Year of at least One Million Two Hundred Thousand Dollars ($1,200,000): -3- --------------------------------------------------------------------------------   (a) Line of Credit and Invested Cash Balances. As of April 30, 1999, the Company's line of credit balance was zero, and the amount of invested cash was Five Million Five Hundred Twenty-Three Thousand Dollars ($5,523,000). Two and one-half percent (2 1/2%) of any increase in the invested cash as of April 30, 2000, provided that there are still no borrowings outstanding under the line of credit, shall be available for Awards to Participants pursuant to the Plan. In the event that the Board of Directors elects to borrow money or use the Company's cash to purchase a building, acquire another company, purchase the Company's common stock, or to fund any other significant nonbudgeted item, such amounts will be excluded when calculating any decrease or increase in the above amounts. In no event will the amount available for Awards to Participants under this subsection exceed Fifty Thousand Dollars ($50,000).         (b) Receivables. As of April 30, 1999, the Company's receivables that have been past due for more than 90 days are as follows:       Over 90 Days --------------------------------------------------------------------------------     Over 120 Days --------------------------------------------------------------------------------       Total --------------------------------------------------------------------------------                       Mana. $ 23,130   $ 381,394   $ 404,524   SDS   16,684     217,334     234,018   Atek   151,185     261,082     412,267   Sabre   -------------------------------------------------------------------------------- 3,716 --------------------------------------------------------------------------------     -------------------------------------------------------------------------------- 405,544 --------------------------------------------------------------------------------     -------------------------------------------------------------------------------- 409,260 --------------------------------------------------------------------------------   Total $ -------------------------------------------------------------------------------- 194,715 --------------------------------------------------------------------------------   $ -------------------------------------------------------------------------------- 1,265,354 --------------------------------------------------------------------------------   $ -------------------------------------------------------------------------------- 1,460,069 --------------------------------------------------------------------------------     Five percent (5%) of any reduction in the One Million Four Hundred Sixty Thousand Sixty-Nine Dollars ($1,460,069) consolidated total, excluding write-offs, as of April 30, 2000, shall be available for Awards to Participants pursuant to the Plan. In no event will the amount available for Awards to Participants under this subsection exceed Fifty Thousand Dollars ($50,000).         (c) Sales Forecast. The Company's sales forecast for its fiscal year ended April 30, 2000, is Twenty-six Million Seven Hundred Fifty Thousand ($26,750,000). In the event at least one hundred percent (100%) of this amount is achieved, then a total of Twenty Thousand Dollars ($20,000) shall be available for Awards to Participants pursuant to the Plan. In the event more than one hundred percent (100%) of this amount is achieved, then an additional Two -4- --------------------------------------------------------------------------------     Thousand Dollars ($2,000) for each percentage point in excess of one hundred percent (100%) shall be available for awards to Participants pursuant to the Plan. In no event will the amount available for awards to Participants under this subsection exceed Fifty Thousand Dollars ($50,000).     The amount of a Participant's Award based on the Variables listed above will be determined as follows: (1) sixty-five percent (65%) of the total amount of the Variables will be distributed to Participant's pro-rata based on each Participant's base salary for the Award Year; and (2) the remaining thirty-five percent (35%) of the total amount of the Variables may be distributed to Participants based on performance objectives, criteria, and/or ratings for individual Participants as determined pursuant to Section 2 of Article IV ("Discretionary Portion"). ARTICLE VI INDIVIDUAL ASSESSMENT AND ADJUSTMENT Section 1. Participant's Award. The basis for Awards of any Award Year will be achievement of financial performance targets and other objectives as set forth in this Plan and, with respect to the Discretionary Portion, as determined in the sole discretion of the Chief Executive Officer and Committee. If the financial targets and other objectives are met for the Award Year, the Chief Executive Officer will calculate and determine the amount of the Award for each Participant based upon the extent to which the Company's financial performance targets and other objectives (as determined by the Chief Executive Officer) were achieved for the Award Year.     Section 2. Partial Award. In the event an Executive Employee participates in the Plan for only part of an Award Year, the Award may be adjusted pro-rata based on the amount of time for which the Executive Employee was a Participant in the Plan. ARTICLE VII PAYMENT OF AWARDS                     Subject to Article VII, each Award, as finally determined for the Award Year, shall be paid to the Participant in cash as soon as administratively feasible following final determination and approval. -5- -------------------------------------------------------------------------------- ARTICLE VIII TERMINATION OF EMPLOYMENT Section 1. Retirement, Death, Disability, or Other Termination. In the event of a Participant's death, disability, normal retirement, or termination of employment (unless Section 2 of this Article applies) during an Award Year, payment of the Award earned for that year will be pro-rated. In the event of death, payment shall be made to the Participant's designated beneficiary, or if there is no designated beneficiary, payment shall be made to the Participant's estate.     Section 2. Forfeiture. In the event that a Participant is terminated for "cause," the Participant's entitlement to any Award, including any Award for a prior Award Year that has not been paid, shall be forfeited and the Award shall be canceled. For purposes of this Plan, termination shall be considered to be for "cause" if based upon (a) Participant's conviction of a crime involving moral turpitude or embezzlement; (b) Participant's willful activities in competition with the Company or in aid of its competitors; (c) Participant's willful and continued failure to substantially perform Participant's duties with the Company under this Plan (other than any such failure resulting from disability), under any employment agreement with the Company, or otherwise, after a written demand for substantial performance is delivered to Participant that specifically identifies the manner in which the Company believes Participant has failed to resume substantial performance of his or her duties on a continuous basis within 14 calendar days of receiving such demand; or (d) Participant willfully engaging in conduct that is demonstrably and materially injurious to the Company, monetarily or otherwise. For purposes of (b), (c) and (d) above, no act, or failure to act, on Participant's part shall be deemed "willful" unless done, or omitted to be done, by the Participant not in good faith and without reasonable belief that the action or omission was in the best interest of the Company. ARTICLE IX GENERAL PROVISIONS Section 1. No Right to Participate. Nothing in this Plan will be deemed to give a Participant or a Participant's legal representative or any other person or entity claiming under or through a Participant a contract or right to participate in the benefits of the Plan. The selection of an individual as an Executive Employee and as a Participant, as well as determination of the amount of any Award or any other determination relating to the Plan, shall be final and binding on all parties to this Plan. -6- -------------------------------------------------------------------------------- Section 2. No Employment Right. Participation in this Plan shall not be construed as constituting a commitment, guarantee, agreement, or understanding of any kind that the Company will continue to employ any Executive Employee or Participant, and this Plan shall not be construed as any type of employment contract or obligation between the Company and an Executive Employee or Participant.     Section 3. Nontransferability. Neither a Participant nor any beneficiary of the Participant shall have any right to assign, transfer, attach, or hypothecate any Award, potential Award, or right to future payment of any Award or other benefit under this Plan. Payment of any amount due or to become due under this Plan shall not be subject to the claims of creditors of the Participant or to execution by attachment or garnishment or by any other legal or equitable proceeding.     Section 4. Withholding. The Company shall have the right to deduct from any payment made under this Plan all amounts required by federal, state, or local tax laws to be withheld and shall apply to any payment made under this Plan all applicable payroll taxes and assessments.     Section 5. Change in Capitalization. In the event of a reorganization, merger, consolidation, or other transaction in which the Company is not the surviving corporation, or upon the sale of substantially all of the property and assets of the Company or upon the dissolution or liquidation of the Company, this Plan will terminate on the effective date of such transaction. Participants shall be entitled to prompt payment of pro-rated Awards for the Award Year during which the event occurs unless this Plan continues in whole or in part or a successor plan is substituted.                     IN WITNESS WHEREOF, this instrument is executed as an act of the Company effective as of May 1, 1999. MANATRON, INC. By /s/ Paul R. Sylvester -------------------------------------------------------------------------------- Paul R. Sylvester      President, Chief Executive Officer,        and Chief Financial Officer By /s/ Harry C. Vorys --------------------------------------------------------------------------------      Harry C. Vorys, Member,      Compensation Committee   By /s/ Gene Bledsoe --------------------------------------------------------------------------------      Gene Bledsoe, Member, Compensation        Committee By /s/ Stephen C. Waterbury --------------------------------------------------------------------------------      Stephen C. Waterbury, Member      Compensation Committee -7-

EMPLOYMENT AGREEMENT      This Employment Agreement (the “Agreement”), is made and entered into this 27th day of June, 2000, by and between Credit Management Solutions, Inc., a Delaware corporation with principal offices located at 135 National Business Parkway, Annapolis Junction, Maryland 20701 (the “Company”), and Scott Freiman (the “Executive”). WITNESSETH      WHEREAS, the Company has a need for the Executive’s personal services in an executive capacity; and      WHEREAS, the Executive possesses the necessary strategic, financial, planning, operational and managerial skills necessary to fulfill those needs;      WHEREAS, the Executive and the Company desire to have a formal Employment Agreement to fully recognize the contributions of the Executive to the Company and to assure continuous harmonious performance of the affairs of the Company.      WHEREAS, the Executive and the Company entered into an Employment Agreement dated March 22, 2000, and whereas the parties wish to amend and replace that agreement with this Agreement, as set forth in Section 7(m) below.      NOW, THEREFORE, in consideration of the mutual promises, terms, provisions, and conditions contained herein, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:      1. Definitions. For purposes of this Agreement, the following capitalized terms shall have the following meanings:      a. “Affiliate” means any person or entity (i) that directly or indirectly owns more than fifty percent (50%) of the Voting Stock (as defined below) of the Company, or (ii) more than fifty percent (50%) of the Voting Stock of which is directly or indirectly owned by the Company, or (iii) more than fifty percent (50%) of the Voting Stock of which is directly or indirectly owned by another person or entity that directly or indirectly owns more than fifty percent (50%) of the Voting Stock of the Company.      b. “Change of Control” of a company means the occurrence of any of the following:        (i) any “person,” as such term is currently used in Section 13(d) of the Securities Exchange Act of 1934, becomes a “beneficial owner,” as such term is currently used in Rule 13d-3 promulgated under that Act of fifty percent (50%) or more of the Voting Stock of the company;        (ii) a majority of the Board of Directors of the company consists of individuals other than Incumbent Directors, which term means the members of the Board on the date hereof; provided that any individual becoming a director subsequent to such date whose election or nomination for election was supported by two-thirds of the directors who then comprised the Incumbent Directors shall be considered to be an Incumbent Director; --------------------------------------------------------------------------------        (iii) the Board of Directors of the company adopts any plan of liquidation providing for the distribution of all or substantially all of the company’s assets;        (iv) all or substantially all of the assets or business of the company are disposed of in any one or more transactions pursuant to a merger, consolidation or other transaction (unless the shareholders of the company immediately prior to such merger, consolidation or other transaction beneficially own, directly or indirectly, in substantially the same proportion as they owned the Voting Stock of the company, all of the Voting Stock or other ownership interests of the entity or entities, if any, that succeed to the business of the company); provided, however, that this subsection (iv) shall not apply in the event of a merger or consolidation of the Company with an Affiliate; or        (v) the company combines with another company and is the surviving corporation but, immediately after the combination, the shareholders of the company immediately prior to the combination hold, directly or indirectly, fifty percent (50%) or less of the Voting Stock of the combined company, (there being excluded from the number of shares held by such shareholders, but not from the Voting Stock of the combined company, any shares received by affiliates of such other company in exchange for securities of such other company); provided, however, that this subsection (v) shall not apply in the event of a combination of the Company with an Affiliate.      c. “Good Reason” means any of the following events:        (i) a reduction in annual Salary (as defined below);        (ii) a failure by the Company, or Affiliate by which the Executive is employed, to provide fringe benefits comparable to those offered to the Executive’s peer executives;        (iii) the failure of the Company, or Affiliate by which the Executive is employed, to obtain by operation of law or otherwise the assumption of its obligations to perform this Agreement from any successor to all or substantially all of the assets of the Company or such Affiliate; or        (iv) a relocation of the Executive’s worksite to a location which increases the distance from the Executive’s home to his worksite by more than fifty (50) miles. d.  “Good Reason Upon Change In Control” means any of the following events provided the event occurs either (i) less than eighteen (18) months after a Change in Control of the Company, or an Affiliate if the Executive is employed at that time by such Affiliate or the Company or (ii) during one-hundred and eighty (180) days or shorter time period between (x) the execution by Company (or such Affiliate) and a third party of a letter of intent or term sheet reflecting the terms of such Change in Control, or receipt by the Company (or such Affiliate) of a written offer from a third party reflecting such Change in Control, and (y) the effective date of such Change in Control:   (A) any of the events which constitute Good Reason under Section 1(c) above;   (B) a material diminution in the Executive’s duties or responsibilities; provided that a diminution shall not be deemed to have occurred solely because that Executive no longer has duties and responsibilities for a particular Affiliate as long as the Executive continues to have the same level, type and scope of duties and responsibilities as he had prior to the Change in Control; or --------------------------------------------------------------------------------   (C) the assignment to the Executive of duties that materially impair his ability to perform the duties normally assigned to a person of his title and position at a corporation of the size and nature of the Company or Affiliate by which the Executive is employed (as applicable).      e. “Voting Stock” means the issued and outstanding capital stock or other securities of any class or classes having general voting power under ordinary circumstances, in the absence of contingencies, to elect the directors of a corporation.      f. “Termination Without Cause Upon Change in Control” means termination of the Executive’s employment without “Cause” (as defined in Section 5(a) below) either (i) less than eighteen (18) months after a Change in Control of the Company or an Affiliate if the Executive is employed at that time by such Affiliate or the Company, (ii) during one-hundred and eighty (180) days or shorter time period between (x) the execution by Company (or such Affiliate) and a third party of a letter of intent or a term sheet reflecting the terms of such Change in Control, or receipt by the Company (or such Affiliate) of a written offer from a third party reflecting such Change in Control, and (y) the effective date of such Change in Control. 2. Position.      The Company hereby agrees to continue to employ the Executive to serve in the role of President and Chief Executive Officer of the Company. The Company reserves the right to change the Executive’s title, duties and/or responsibilities, and to reassign the Executive to or from any Affiliate. The Executive accepts such employment upon the terms and conditions set forth herein, and further agrees to perform to the best of his abilities the duties generally associated with his position, as well as such other duties as may be reasonably assigned by the Board of Directors of the Company (the “Board”), the Chief Executive Officer or President of the Company, and, if the Executive is employed by an Affiliate, the Chief Executive Officer, President or Board of Directors of such Affiliate. The Executive shall perform his duties diligently and faithfully and shall devote his full business time and attention to such duties. Each party’s rights and obligations under this Section 2 are subject to Section 5 below. 3. Term of Employment and Renewal.      The term of the Executive’s employment under this Agreement (the “Term”) will commence on the date of this Agreement (the “Effective Date”) and continue until terminated in accordance with Section 5 below. 4. Compensation and Benefits.      (a) Salary. Commencing on the Effective Date, the Company agrees to pay the Executive a base salary at an annual rate of two hundred and twenty thousand Dollars ($220,000), payable in such installments as is the policy of the Company (the “Salary”), but no less frequently than monthly. Thereafter, the Company shall evaluate the Executive’s Salary from time to time and make adjustments, in its discretion, subject to the rights and obligations set forth in Section 5 below. --------------------------------------------------------------------------------      (b) Bonus. In its sole discretion, the Company may make the Executive eligible to receive bonuses based on criteria to be determined by the Company and issued to the Executive in writing, in which event the Executive shall be entitled to receive such bonuses in accordance with such criteria.      (c) Benefits. The Executive shall be entitled to participate in all employee benefit plans which the Company provides or may establish from time to time for the benefit of its employees, including, without limitation, group life, medical, surgical, dental and other health insurance, short and long-term disability, deferred compensation, profit-sharing and similar plans. The Executive shall also be entitled to one hundred eighty four (184) hours of paid leave per year of employment, plus sick leave in accordance with standard Company policy. Two-thirds of any unused portion of such paid leave shall be considered to be vacation and, therefore, shall be paid to the Executive upon his cessation of employment with the Company. The Company will provide term life insurance for the Executive with benefits equal to his annual Salary, up to a maximum of four hundred thousand dollars ($400,000). The Company may also purchase one or more “key man” insurance policies on the Executive’s life, each of which will be payable to and owned by the Company. The Company, in its sole discretion, may select the amount and type of key man life insurance purchased, and the Executive will have no interest in any such policy. The Executive will cooperate with the Company in securing this key man insurance, by submitting to all required medical examinations, supplying all information and executing all documents required in order for the Company to secure the insurance      (d) Stock Options. In the sole discretion of the Board, the Company may from time to time issue the Executive stock option grants under the Company’s stock option plan and a stock option agreement, in which event the Executive shall be entitled to such options in accordance with such plan and agreement(s), subject however to the provisions of this Agreement regarding stock options.      (e) Expenses. The Company shall pay or reimburse the Executive for all reasonable out-of-pocket expenses actually incurred by the Executive during the Term in performing services hereunder, provided that the Executive properly accounts for such expenses in accordance with the Company’s policies. The Company shall pay the Executive an automobile allowance of no less than five hundred dollars ($500) per month through normal payroll procedures, and such allowance shall be reported as income on the Executive’s year-end W-2 form. The Executive shall be responsible for submitting automobile expense reimbursement requests to the extent he wishes to convert any portion of the allowance to an expense reimbursement. The Company shall reimburse the Executive for cellular telephone expenses associated with business use. 5. Termination and Severance.      (a) Termination by the Company for Cause. Notwithstanding anything to the contrary in this Agreement, the Company may terminate the Executive’s employment for Cause at any time, upon written notice to the Executive setting forth in reasonable detail the nature of such Cause. For purposes of this Agreement, “Cause” is defined as (i) the Executive’s continued failure to perform his duties (other than due to physical incapacity or illness) after thirty (30) days’ written notice and opportunity to cure; (ii) the Executive’s conviction of any felony; (iii) the Executive’s material misrepresentation of his professional qualifications; (iv) willful or reckless conduct by the Executive injurious to the Company or any Affiliate; or (v) the Executive’s commission of fraud or malfeasance. Upon the termination for Cause of the Executive’s employment, the Company and its Affiliates shall have no further obligation or liability to the Executive other than for Salary earned prior to the date of termination and any accrued but unused vacation. --------------------------------------------------------------------------------      (b) Termination by the Company Without Cause. Notwithstanding anything to the contrary in this Agreement, the Executive’s employment hereunder may be terminated at any time without Cause by the Company upon fourteen (14) days’ written notice to the Executive, provided, however, that if the Company terminates the Executive’s employment without Cause the Company shall (i) pay the Executive on the effective date of termination all earned and unpaid Salary, earned and unpaid bonuses, and accrued and unused vacation; (ii) continue to pay the Executive the Salary and shall provide medical, life and disability coverage, under the same conditions as exist at the time of termination, for a six (6) month period beginning on the effective date of the termination; and (iii) notwithstanding anything to the contrary in any stock option agreement, any unvested stock options granted to the Executive shall accelerate and vest in full on the effective date of termination, and the Executive may exercise such options at any time up to two-hundred seventy (270) days after the effective date of termination of his employment. As a condition of receiving such benefits pursuant to this Agreement, the Executive shall execute and deliver to the Company prior to his receipt of such benefits a general release substantially in the form attached hereto as Exhibit A provided the Company executes such release and delivers an executed counterpart to the Executive. Notwithstanding anything to the contrary in this Section 5(b), if the termination constitutes a Termination Without Cause Upon Change in Control, then the Executive shall receive the benefits set forth in Section 5(d) below rather than as set forth in this Section 5(b).      (c) Termination by the Executive. Notwithstanding anything to the contrary in this Agreement, the Executive may terminate his employment hereunder upon thirty (30) days written notice to the Company provided that the Company may pay the Executive his Salary in lieu of any portion of such notice period. The Executive may also terminate his employment hereunder after giving the Company written notice no more than thirty (30) days after the occurrence of an event which constitutes Good Reason, in which event the Company shall (i) pay the Executive on the effective date of termination all earned and unpaid Salary, earned and unpaid bonuses, and accrued and unused vacation; (ii) continue to pay the Executive the Salary and shall provide medical, life and disability coverage, under the same conditions as exist at the time of termination, for a six (6) month period beginning on the effective date of the termination provided the Company executes such release and delivers an executed counterpart to the Executive; and (iii) notwithstanding anything to the contrary in any stock option agreement, any unvested stock options granted to the Executive shall accelerate and vest in full on the effective date of termination and the Executive may exercise such options at any time up to two-hundred seventy (270) days after the effective date of termination of his employment. As a condition of receiving such benefits pursuant to this Agreement, the Executive shall execute and deliver to the Company prior to his receipt of such benefits a general release substantially in the form attached hereto as Exhibit A provided the Company executes such release and delivers an executed counterpart to the Executive. Notwithstanding anything to the contrary in this Section 5(c), if the Executive terminates his employment for Good Reason Upon Change in Control, then the Executive shall receive the benefits set forth in Section 5(d) below rather than as set forth in this Section 5(c). --------------------------------------------------------------------------------      (d) Termination By Company or Executive After Change in Control. Notwithstanding anything to the contrary in this Agreement, in the event of a Termination Without Cause Upon Change in Control, or termination by the Executive for Good Reason Upon Change in Control, the Company shall provide the Executive the following benefits: (i) all earned and unpaid Salary and bonuses; (ii) all accrued and unused vacation; (iii) a lump sum payment equal to 2.99 times the Executive’s average annual cash compensation during the previous five (5) years (or, if the Executive has been employed by the Company for a shorter period, then the average during such shorter period); (iv) notwithstanding anything to the contrary in any stock option agreement, upon the Executive acknowledging in a signed writing the surrender of all his rights to vested and unvested stock options granted to him by the Company, a lump sum equal to the difference between the exercise price of such stock options and the higher of (x) the fair market value of the option shares on the effective date of the termination, or (y) the highest effective price paid for the Company’s common stock by any acquirer in connection with the Change in Control; (v) medical, life and disability coverage for a period of twelve (12) months after the effective date of the termination, or until the Executive receives comparable coverage from another employer, whichever occurs first; and (vi) all accrued retirement and deferred compensation plans vest in full. Items (i) through (iv) shall be paid to the Executive within twenty (20) days after the effective date of the termination. As a condition of receiving such benefits pursuant to this Agreement, the Executive shall execute and deliver to the Company prior to his receipt of such benefits a general release substantially in the form attached hereto as Exhibit A provided the Company executes such release and delivers an executed counterpart to the Executive.      (e) Death. In the event of the Executive’s death during the Term of this Agreement, the Executive’s employment hereunder shall immediately and automatically terminate, and the Company shall (i) pay the Executive’s estate or beneficiaries within a reasonable period after the effective date of termination all earned, unpaid Salary, all earned, unpaid bonuses and all accrued unused vacation; and (ii) notwithstanding anything to the contrary in any stock option agreement, any unvested stock options granted to the Executive shall accelerate and vest in full on the effective date of termination and the recipients of such benefits may exercise such options at any time up to two-hundred seventy (270) days after the effective date of termination of the Executives’ employment. As a condition of receiving such benefits pursuant to this Agreement, the recipient(s) of benefits under this subsection shall execute and deliver to the Company prior to receipt of such benefits a general release substantially in the form attached hereto as Exhibit A.       Disability. Notwithstanding anything to the contrary in the Agreement, the Company may terminate the Executive’s employment hereunder, upon written notice to the Executive, in the event that the Executive becomes disabled during the Term through any condition of either a physical or psychological nature and, as a result, is, with or without reasonable accommodation, unable to perform the essential functions of the services contemplated hereunder for (a) a period of ninety (90) consecutive days, or (b) for shorter periods aggregating one hundred twenty (120) days during any twelve (12) month period during the Term. Any such termination shall become effective upon mailing or hand delivery of notice that the Company has elected its right to terminate under this subsection 5(f), and the Company shall (i) pay the Executive on the effective date of termination all earned, unpaid Salary; (ii) pay the Executive on the effective date of termination all earned, unpaid bonuses; (iii) pay the Executive on the effective date of termination all accrued unused vacation; (iv) continue to pay the Executive the Salary and shall provide medical, life and disability coverage, under the same conditions as exist at the time of termination, for a six (6) month period beginning on the effective date of the termination, and (v) notwithstanding anything to the contrary in any stock option agreement, any unvested stock options granted to the Executive shall accelerate and vest in full on the effective date of termination and the Executive may exercise such options at any time up to two-hundred seventy (270) days after the effective date of termination of his employment. As a condition of receiving such benefits pursuant to this Agreement, the Executive shall execute and deliver to the Company prior to his receipt of such benefits a general release substantially in the form attached hereto as Exhibit A provided the Company executes such release and delivers an executed counterpart to the Executive. --------------------------------------------------------------------------------      (f) Certain Events. Notwithstanding anything to the contrary in any stock option plan or agreement, in the event of a Change in Control of the Company, or Affiliate by which the Executive is employed, all unvested stock options in the Company granted to the Executive shall accelerate and vest in full upon the Change in Control. As a condition of the foregoing benefit, the Executive agrees that, if so requested by the Company, or such Affiliate, prior to the Change in Control, he shall continue to be employed by the Company or such Affiliate for a period of one (1) year, subject to all of the other terms and conditions of this Agreement, and if he fails to satisfy such obligation he shall pay to the Company as liquidated damages a sum equal to the difference between the exercise price of such stock options and the higher of (x) the fair market value of the option shares on the effective date of the Change in Control, or (y) the highest effective price paid for the Company’s common stock by any acquirer in connection with the Change in Control. As a further condition of the foregoing benefit, the Executive shall execute and deliver to the Company prior to his receipt of such benefit a general release of claims up to the date of the Change in Control, substantially in the form attached hereto as Exhibit A, provided the Company shall execute such release and deliver an executed counterpart to the Executive.      (g) Tax Deductability. If it is determined by the Company or the Internal Revenue Service that any payment or benefit received or deemed received by the Executive from the Company (pursuant to this Agreement or otherwise) is or will become subject to any excise tax under Section 4999 of the Internal Revenue Code, and, therefore, that the Company will not be entitled to a federal tax deduction in connection with such payments and benefits or any portion thereof, then such payments and/or benefits shall be reduced, in a form and amount agreed to by the parties in good faith, in the amount necessary to allow the Company a federal tax deduction in connection with all payments and benefits provided to the Executive. 6. Choice of Law.      The validity, interpretation and performance of this Agreement shall be governed by, and construed in accordance with, the internal law of Maryland, without giving effect to conflict of law principles. 7. Miscellaneous.      (a) Assignment; Delegation. The Executive acknowledges and agrees that the rights and obligations of the Company under this Agreement may be assigned by the Company to any successors in interest. The Executive further acknowledges and agrees that the Company may delegate performance of its obligations to any Affiliate provided that the Company shall retain liability for any breach of its obligations under this Agreement. The Executive further acknowledges and agrees that this Agreement is personal to the Executive and that the Executive may not assign or delegate any rights or obligations hereunder.      (b) Withholding. All payments required to be made by the Company to the Executive under this Agreement shall be subject to withholding taxes, social security and other payroll deductions in accordance with the Company’s policies applicable to employees of the Company at the Executive’s level.      (c) Entire Agreement. This Agreement, the Executive’s employee nondisclosure/noncompetition agreement with the Company, and any stock option agreement(s) between the parties, set forth the entire agreement between the parties on the subject matter contained herein and supersede any prior communications, agreements and understandings, written or oral, with respect to the terms and conditions of the Executive’s employment.      (d) Amendments. Any attempted modification of this Agreement will not be effective unless signed by an officer of the Company and the Executive. --------------------------------------------------------------------------------      (e) Waiver of Breach. The Executive understands that a breach of any provision of this Agreement may only be waived by an officer of the Company. The waiver by the Company of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach.      (f) Severability. If any provision of this Agreement should, for any reason, be held invalid or unenforceable in any respect by a court of competent jurisdiction, then the remainder of this Agreement, and the application of such provision in circumstances other than those as to which it is so declared invalid or unenforceable, shall not be affected thereby, and each such provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.      (g) Notices. Any notices, requests, demands and other communications provided for by this Agreement shall be in writing and shall be effective when delivered (i) in hand by private messenger, or (ii) by a nationally known and reputable overnight mail service, as follows (or to such other address as either party shall designate by notice in writing to the other in accordance herewith):   If to the Company:   135 National Business Parkway Annapolis Junction, MD 20701 Attn: CEO With a copy to General Counsel   If to Executive:   __________________________   __________________________   __________________________   __________________________      (h) Survival. The Executive and the Company agree that certain provisions of this Agreement shall survive the expiration or termination of this Agreement and the termination of the Executive’s employment with the Company. Such provisions shall be limited to those within this Agreement which, by their express and implied terms, obligate either party to perform beyond the termination of the Executive’s employment or termination of this Agreement.      (i) Arbitration of Disputes. Any controversy or claim arising out of this Agreement or any aspect of the Executive’s relationship with the Company including the cessation thereof shall be resolved by arbitration in accordance with the then existing Employment Dispute Resolution Rules of the American Arbitration Association, in Washington, D.C., and judgment upon the award rendered may be entered in any court having jurisdiction thereof. The parties shall split equally the costs of arbitration, except that each party shall pay its own attorneys’ fees. The parties agree that the award of the arbitrator shall be final and binding. --------------------------------------------------------------------------------      (j) Rights of Other Individuals. This Agreement confers rights solely on the Executive and the Company. This Agreement is not a benefit plan and confers no rights on any individual or entity other than the undersigned.      (k) Headings. The parties acknowledge that the headings in this Agreement are for convenience of reference only and shall not control or affect the meaning or construction of this Agreement.      (l) Advice of Counsel. The Executive and the Company hereby acknowledge that each party has had adequate opportunity to review this Agreement, to obtain the advice of counsel with respect to this Agreement, and to reflect upon and consider the terms and conditions of this Agreement. The parties further acknowledge that each party fully understands the terms of this Agreement and has voluntarily executed this Agreement. The Company shall pay the legal fees and costs incurred by the Executive in connection with the negotiation and preparation of this Agreement, upon the presentation of invoices in appropriate form.      (m) Amendment and Replacement. Effective June 30, 2000, this Agreement amends and replaces the Employment Agreement between the parties dated March 22, 2000.      IN WITNESS WHEREOF, the undersigned have duly executed this Agreement as of the day and year set forth below. EXECUTIVE CREDIT MANAGEMENT SOLUTIONS, INC. __________________________________ By: ______________________________ __________________________________ SCOTT FREIMAN Title:_____________________________ Dated:________________________, 2000 Dated:________________________, 2000 -------------------------------------------------------------------------------- EXHIBIT A SEPARATION AGREEMENT AND GENERAL RELEASE      This Separation Agreement and General Release (“Agreement”) is made and entered into this ____ day of _____, _____, by and between Credit Management Solutions, Inc. (hereinafter the “Company” or “Employer”) and [EMPLOYEE NAME] (“Employee”) (hereinafter collectively referred to as the “Parties”), and is made and entered into with reference to the following facts. RECITALS      WHEREAS, Employee was hired by the Company on or about ________, as a ____________; and      WHEREAS, the Company and Employee have agreed to terminate their employment relationship effective ______, ____; and      WHEREAS, the Parties have entered into a written employment agreement, dated _________ (the “Employment Agreement”), under which Employee is entitled to certain severance benefits conditioned upon his/her execution of this Agreement; and      WHEREAS, the Parties each desire to resolve any potential disputes which exist or may exist arising out of Employee’s employment with the Company and/or the termination thereof.      NOW THEREFORE, in consideration of the covenants and promises contained herein, the Parties hereto agree as follows: AGREEMENT      1. Agreement By the Employee. In exchange for the payments described in paragraph 2 below, Employee agrees to the following: (a) that his/her employment with the Company is terminated effective _________, ____ (hereinafter the “Termination Date”); and (b) to be bound by the terms of this entire Agreement.      2. Agreement By the Company. In exchange for Employee’s agreement to be bound by the terms of this entire Agreement, including but not limited to the Release of Claims in paragraph 3, the Company agrees to provide Employee with a severance benefits as provided for in the Employment Agreement.      Employee acknowledges that, absent this Agreement, s/he has no legal, contractual or other entitlement to the consideration set forth in this paragraph and that the amount set forth in this paragraph constitute valid and sufficient consideration for Employee’s release of claims and other obligations set forth herein.      3. Release of Claims.      (a) Employee hereby expressly waives, release, acquits and forever discharges the Company and its divisions, subsidiaries, affiliates, parents, related entities, partners, officers, directors, shareholders, investors, executives, managers, employees, agents, attorneys, representatives, successors and assigns (hereinafter collectively referred to as “Releasees”), from any and all claims, demands, and causes of action which Employee has or claims to have, whether known or unknown, of whatever nature, which exist or may exist on Employee’s behalf from the beginning of time up to and including the date of this Agreement. As used in this paragraph 3, “claims,” “demands,” and “causes of action” include, but are not limited to, claims based on contract, whether express or implied, fraud, stock fraud, defamation, wrongful termination, estoppel, equity, tort, retaliation, intellectual property, personal injury, spoliation of evidence, emotional distress, public policy, wage and hour law, statute or common law, claims for severance pay, claims related to stock options and/or fringe benefits, claims for attorneys’ fees, vacation pay, debts accounts, compensatory damages, punitive or exemplary damages, liquidated damages, and any and all claims arising under any federal, state, or local statute, law, or ordinance prohibiting discrimination on account of race, color, sex, age, religion, sexual orientation, disability or national origin, including but not limited to, the Age Discrimination in Employment Act, Title VII of the Civil Rights Act of 1964 as amended, the Americans with Disabilities Act, the Family and Medical Leave Act or the Employee Retirement Income Security Act.      (b) The Company and its divisions, subsidiaries, affiliates, parents, related entities, hereby expressly waive, release, aquit and forever discharge Employee and his agents, attorneys, representatives, successors, heirs and assigns (hereinafter collectively referred to as “Employee Releasees”), from any and all claims, demands, and causes of action which Employee has or claims to have, whether known or unknown, of whatever nature, which exist or may exist on Employee’s behalf from the beginning of time up to and including the date of this Agreement. As used in this paragraph 3, “claims,” “demands,” and “causes of action” include, but are not limited to, claims based on contract, whether expressed or implied, fraud, stock fraud, defamation, wrongful termination, estoppel, equity, tort, retaliation, intellectual property, personal injury, spoliation of evidence, emotional distress, public policy, wage and hour law, statute or common law, claims for severance pay, claims related to stock options and/or fringe benefits, claims for attorneys’ fees, vacation pay, debts, accounts, compensatory damages, punitive or exemplary damages, liquidated damages, and any and all claims arising under any federal state, or local statute, law, or ordinance prohibiting discrimination on account of race, color, sex, age, religion, sexual orientation, disability or national origin, including but not limited to, the Age Discrimination in Employment Act Title VIII of the Civil Rights Act of 1964 as amended, the Americans with Disabilities Act, the Family and Medical Leave Act or the Employee Retirement Income Security Act; provided, however, that, this release does not include any claim, demand or cause of action arising out of Executive’s malfeasance, fraud, embezzlement, intentional torts, breach of his duties under his employee nondisclosure/noncompetition agreement with the Company, violation of any other duties with respect to confidential or proprietary information or intellectual property (including without limitation patents, copyrights, trade secrets and trademarks), noncompetition, nonsolicitation or loyalty, or violation of the Company’s employee policies, including without limitation its Human Resources and securities trading policies. --------------------------------------------------------------------------------      4. Last Date of Employment. It is understood and agreed that Employee’s last date of employment with Employer is _________, ____.      5. Receipt of Wages and Other Compensation. Employee acknowledges and agrees that, prior to his/her execution of this Agreement, s/he has received payment for all wages, salary, bonuses, accrued vacation, and all other compensation owed to Employee by the Company.      6. Company Property/Proprietary Information. Employee agrees to continue to abide by the terms of the Company’s Proprietary Information Agreement the terms of which are incorporated herein by reference.      7. Acceptance of Agreement/[Revocation]. This Agreement was received by Employee on ______, ____. Employee may accept this Agreement by returning a signed original to the Company. This Agreement shall be withdrawn if not accepted in the above manner on or before _____.      8. Non-Admission of Liability. The Company denies any wrongdoing whatsoever in connection with its dealings with Employee, including but not limited to Employee’s employment and termination. It is expressly understood and agreed that nothing contained in this Agreement shall constitute or be treated as an admission of any wrongdoing or liability on the part of the Company or the Employee.      9. No Filing of Claims. Employee represents and warrants that s/he does not presently have on file, and further represents and warrants that s/he will not hereafter file, any claims, charges, grievances or complaints against any of the Releasees (defined above) in or with any administrative, state, federal or governmental entity, agency, board or court, or before any other tribunal or panel or arbitrators, public or private, based upon any actions or omissions by the Releasees occurring prior to the date of this Agreement.      10. Ownership of Claims. Employee represents and warrants that s/he is the sole and lawful owner of all rights, title and interest in and to all released matters, claims and demands referred to herein. Employee further represents and warrants that there has been no assignment or other transfer of any interest in any such matters, claims or demands which she may have against the Releasees.      11. Confidentiality. Employee understands and agrees that this Agreement, and the matters discussed in negotiating its terms, are entirely confidential. It is therefore expressly understood and agreed that Employee will not reveal, discuss, publish or in any way communicate any of the terms, amount or fact of this Agreement to any person, organization or other entity, with the exception of his/her immediate family members and professional representatives, unless required by subpoena or court order. Employee further agrees that s/he will not, at any time in the future, make any statements to any third parties that disparage any of the Releasees personally or professionally. --------------------------------------------------------------------------------      12. Tax Indemnification. It is understood and agreed that Employee is liable for all tax obligations, if any, with respect to the settlement payments provided for herein. Employee agrees to indemnify, defend and hold harmless Employer from any and all taxes, assessments, penalties, loss, costs, reasonable attorneys’ fees, expenses or interest payments that Employer may at any time incur by reason of any demand, proceeding, action or suit brought against Employer arising out of or in any manner related to any local, state or federal taxes allegedly due from Employee in connection with this Agreement; provided (a) Employer promptly notifies Employee of any such claim, demand or cause of action against the Company, and (b) keeps Employee fully informed of all material facts and events with respect to such proceedings (to the extent such information does not waive any privileges).      13. Maryland Law Applies. This Agreement, in all respects, shall be interpreted, enforced and governed by and under the laws of the State of Maryland. Any and all actions relating to this Agreement shall be filed and maintained in the federal and/or state courts located in the State of Maryland, and the parties consent to the jurisdiction of such courts. In any action arising out of this Agreement, or involving claims barred by this Agreement, the prevailing party shall be entitled to recover all costs of suit, including reasonable attorneys’ fees.      14. Successors and Assigns. The Parties expressly understand and agree that this Agreement, and all of its terms, shall be binding upon their representatives, heirs, executors, administrators, successors and assigns.      15. Consultation with Counsel. Employee acknowledges that s/he has been advised to consult with legal counsel of her choice prior to execution and delivery of this Agreement.      16. Integration. Except as otherwise specifically provided for, this Agreement constitutes an integrated, written contract, expressing the entire agreement between the Parties with respect to the subject matter hereof. In this regard, Employee represents and warrants that s/he is not relying on any promises or representations which do not appear written herein. Employee further understands and agrees that this Agreement can be amended or modified only by a written agreement, signed by all of the Parties hereto.      17. Counterparts. This Agreement may be executed in separate counterparts and by facsimile, and each such counterpart shall be deemed an original with the same effect as if all Parties had signed the same document.      18. Headings. The headings in each paragraph herein are for convenience of reference only and shall be of no legal effect in the interpretation of the terms hereof.      19. Severability. If any provision in this Agreement is held to be invalid, the remainder of this Agreement shall not be affected by such a determination.      20. Voluntary Agreement. EMPLOYEE UNDERSTANDS AND AGREES THAT S/HE MAY BE WAIVING SIGNIFICANT LEGAL RIGHTS BY SIGNING THIS AGREEMENT, AND REPRESENTS THAT S/HE HAS ENTERED INTO THIS AGREEMENT KNOWINGLY AND VOLUNTARILY, WITH A FULL UNDERSTANDING OF AND IN AGREEMENT WITH ALL OF ITS TERMS. -------------------------------------------------------------------------------- DATED: _____________________,____ CREDIT MANAGEMENT SOLUTIONS, INC. By: __________________________ Its: __________________________ DATED: _____________________, ____ [EMPLOYEE NAME] __________________________

QuickLinks -- Click here to rapidly navigate through this document PACIFIC NORTHWEST BANCORP MAKE-WHOLE BENEFIT PLAN ARTICLE 1 INTRODUCTION AND PURPOSE     1.1  Name.  This Plan shall be known as the "Pacific Northwest Bancorp Make-Whole Benefit Plan," herein called the "Plan."     1.2  Purpose.  The purpose of the Plan is to provide "make whole" benefits to employees whose benefits under the Company's qualified retirement plan(s) are limited by the application of Sections 415 and/or 401(a)(17) of the Internal Revenue Code of 1986, as amended (the "Code").     1.3  Classification.  The Plan is intended to constitute both: (a) an "excess benefit plan" as defined in Section 3(36) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"); and (b) a plan primarily for the purpose of providing deferred compensation benefits to a select group of management or highly-compensated personnel. The Plan is unfunded and nonqualified for purposes of the Code and ERISA.     1.4  Effective Date.  The effective date of the Plan is July 1, 2000. ARTICLE 2 DEFINITIONS AND INTERPRETATIONS     In this Plan, the following words and phrases shall have the following meanings, unless the context requires otherwise:     2.1 "Board" means the Board of Directors of Pacific Northwest Bancorp.     2.2 "Code" means the Internal Revenue Code of 1986, as amended, or as it may be amended from time-to-time.     2.3 "Committee" means the Board of Directors of the Company or such committee as is designated by the Board to administer the Plan.     2.4 "Company" means Pacific Northwest Bancorp and its subsidiaries.     2.5 "Contribution Date" means the last day of the month in which the Company makes its annual contribution to the Company's retirement plans.     2.6 "ERISA" means of the Employee Retirement Income Security Act of 1974, as amended, or as it may be amended from time-to-time.     2.7 "Effective Date" means July 1, 2000.     2.8 "Financial Hardship" means (a) severe financial hardship to the Participant resulting from a sudden and unexpected illness or accident involving the Participant or a dependent (as defined in Code Section 152(a)) of the Participant; (b) loss of the Participant's property due to casualty; or (c) other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant, each as determined to exist by the Committee.     2.9 "Make-Whole Benefit" means the dollar amount of the reduction in the contribution the Company is permitted to make on behalf of the Participant to the Company's qualified retirement plans due to the Section 401(a)(17) Limitation and/or the Section 415 Limitation.    2.10 "Memorandum Account" means the account of each Participant under this Plan as established under ARTICLE 3.    2.11 "Plan" means this Pacific Northwest Bancorp Make-Whole Benefit Plan.    2.12 "Prime Rate" means the prime rate reported in The Wall Street Journal. The prime rate reported in The Wall Street Journal is defined as "the base rate on corporate loans posted by at least 75% of the -------------------------------------------------------------------------------- nation's 30 largest banks." This definition is subject to modification by The Wall Street Journal from time to time.    2.13 "Participant" means an employee, selected by the Committee, who holds a position of responsibility with the Company and whose benefits under the Company's qualified retirement plan(s) are limited by the Section 401(a)(17) Limitation and/or the Section 415 Limitation.    2.14 "Section 401(a)(17) Limitation" means the limit on the amount of compensation which can be taken into account under Code Section 401(a)(17) or any successor provision to such Code Section, as adjusted from time to time, for purposes of determining the amount which can be contributed to the Company's qualified retirement plan(s) for the benefit of any one employee.    2.15 "Section 415 Limitation" means the limitation of the benefit of any one Participant under Code Section 415 or any successor provision to such Code Section, as adjusted from time to time on amounts which can be contributed to the Company's qualified retirement plan(s) for the benefit of any one employee. ARTICLE 3 CONTRIBUTION     3.1  Benefit.  On the Contribution Date, the Make-Whole Benefit with respect to each Participant shall be credited to a Memorandum Account maintained by the Company in the name of the Participant.     3.2  Accruals to Memorandum Account.  The value of each Memorandum Account shall accrue interest quarterly based on the Prime Rate minus two percent (2%) on the last business day of each quarter.     3.3  Contribution Creates No Rights to Assets.  The fact that any contribution shall be made and credited to a Memorandum Account under this ARTICLE 3 shall not vest in a Participant any right, title, or interest in or to any assets of the Company. ARTICLE 4 DISTRIBUTION OF MEMORANDUM ACCOUNT     4.1  Method of Payment.  Distribution of a Memorandum Account shall commence within thirty (30) days after the date of termination of employment with the Company for any reason. The form of distribution may be in lump sum, or in equal monthly installments made over a period of years selected by the Participant. The Participant shall have the right to elect and amend his election, from time to time, prior to termination of employment. If no election has been prior to termination of employment, made, the payment shall be in lump sum. If the payment hereunder is to be in installments, the total to be so paid shall continue to accrue interest as provided in ARTICLE 3 hereof, in which case all income attributable thereto shall be reflected in the installment payments in such equitable manner as the Committee shall determine. If a Participant elects to receive installment payments, the Committee shall have the discretion to convert the payments to a lump sum payment if at termination of employment the value of the Memorandum Account is less than Ten Thousand and No/100 Dollars ($10,000.00), or regardless of the value at the date of termination of employment, reduce the period over which payment is made, so that the monthly payment is no less than Five Hundred and No/100 Dollars ($500.00).     4.2  Death Benefits.  If a Participant dies before terminating his employment with the Company or after terminating his employment but before he has received all payments to which he is entitled under the Plan, the entire then-value of the Memorandum Account shall be paid to the person or persons designated in accordance with ARTICLE 6 hereof, in a lump sum payable within thirty (30) days of the date the Company is notified or otherwise becomes aware of the death of the Participant. 2 -------------------------------------------------------------------------------- ARTICLE 5 HARDSHIP DISTRIBUTIONS     In the event of the Financial Hardship of a Participant, the Participant may apply to the Committee for the distribution of all or any part of his Memorandum Account. The Committee shall consider the circumstances of each such case, and the best interests of the Participant and his family, and shall have the right, in its sole discretion, if applicable, to allow such distribution, or, if applicable, to direct a distribution of part of the amount requested, or to refuse to allow any distribution. Upon a finding of Financial Hardship, the Company shall make the appropriate distribution to the Participant from the Participant's Memorandum Account. In no event shall the aggregate amount of the distribution exceed either the full value of the Participant's Memorandum Account or the amount determined by the Company to be necessary to alleviate the Participant's Financial Hardship (which Financial Hardship may be considered to include any taxes due because of the distribution occurring because of this ARTICLE 5), and which is not reasonably available from other resources of the Participant. For purposes of this ARTICLE 5, the value of the Participant's Memorandum Account shall be determined as of the date of the distribution. ARTICLE 6 DESIGNATION OF BENEFICIARY     6.1  Designation of Beneficiaries.  Each Participant from time to time may designate any person or persons to receive such benefits as may be payable under the Plan upon or after the Participant's death, and such designation may be changed from time to time by the Participant by filing a new designation. Each designation will revoke all prior designations by the same Participant, shall be in a form prescribed by the Committee, and will be effective only when filed in writing with the Company during the Participant's lifetime.     In the absence of a valid Beneficiary designation, or if, at the time any benefit payment is due to a Beneficiary, there is no living Beneficiary validly named by the Participant, the Company shall pay any such benefit payment to the Participant's spouse, if then living, but otherwise to the Participant's then-living descendants, if any, per stirpes, but, if none, to the Participant's estate. In determining the existence or identity of anyone entitled to a benefit payment, the Company may rely conclusively upon information supplied by the Participant's personal representative, executor or administrator. If a question arises as to the existence or identity of anyone entitled to receive a benefit payment as aforesaid, or if a dispute arises with respect to any such payment, then, notwithstanding the foregoing, the Company, in its sole discretion, may distribute such payment to the Participant's estate without liability for any tax or other consequences which might flow therefrom, or may take such other action as the Committee deems to be appropriate.     6.2  Information to be Furnished By Participants and Beneficiaries; Inability to Locate Participants or Beneficiaries.  Any communication, statement, or notice addressed to a Participant or to a Beneficiary at his last post office address as shown on the Company's records shall be binding on the Participant or Beneficiary for all purposes of the Plan. The Company shall not be obliged to search for any Participant or Beneficiary beyond the sending of a registered letter to such last known address. If the Company notifies any Participant or Beneficiary that they are entitled to an amount under the Plan, and the Participant or Beneficiary fails to claim such amount or make his location known to the Company within three (3) years thereafter, then, except as otherwise required by law, if the location of one or more of the next of kin of the Participant or Beneficiary is known to the Company, the Company may direct distribution of such amount to any one or more or all of such next of kin, and in such proportions as the Company determines. If the location of none of the foregoing persons can be determined, the Company shall have the right to direct that the amount payable shall be deemed to be a forfeiture, except that the dollar amount of the forfeiture, unadjusted for gains and losses in the interim, shall be paid by the Company if a claim for the benefit subsequently is made by the Participant or the Beneficiary to whom it was payable. If a benefit payable to an unlocated Participant or Beneficiary is subjected to escheat pursuant to applicable state law, the Company shall not be liable to any person for any payment made in accordance with such law. 3 -------------------------------------------------------------------------------- ARTICLE 7 BENEFITS PAYABLE ONLY FROM GENERAL ASSETS OF THE COMPANY; UNSECURED GENERAL CREDITOR STATUS OF PARTICIPANT     No Participant shall have any preferred claim on, nor any beneficial ownership interest in, any assets invested under the Plan. All rights created under the Plan shall be mere unsecured contractual, but enforceable, rights of the Participants and their beneficiaries against the Company. The Participants and their beneficiaries shall have no greater rights than the rights of unsecured general creditors. The payments to the Participant or Participant's beneficiary hereunder shall be made from assets which shall continue, for all purposes, to be a part of the Company; no person shall have nor acquire any interest in any Company assets by virtue of the provisions of this Plan. The Company's obligation hereunder shall be an unfunded and unsecured promise to pay money in the future. To the extent that any person acquires a right to receive payments from the Company under the provisions hereof, such right shall be no greater than the right of any unsecured general creditor of the Company; no such person shall have nor acquire a legal or equitable right, interest or claim in or to any property or assets of the Company. ARTICLE 8 NON-ALIENATION OF BENEFITS     No right or benefit under this Plan shall be subject to anticipation, alienation, sale, assignment, pledge, encumbrance or charge, and any attempt to anticipate, alienate, sell, assign, pledge, encumber or charge the same shall be void. No right or benefit hereunder shall in any manner be liable for or subject to the debts, contracts, liabilities or torts of the person entitled to such benefit. If a Participant or any beneficiary hereunder should become bankrupt, or attempt to anticipate, alienate, sell, assign, pledge, encumber or charge any right or benefit hereunder, then such right or benefit shall, in the discretion of the Company, cease, and in such event, the Company may hold or apply the same or any part thereof for the benefit of Participant or the beneficiary, his or her spouse, children or other dependents, or any of them, in such manner and in such proportion as the Board may deem proper. ARTICLE 9 AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN     The Board may alter, amend, suspend or terminate the Plan; provided that no such action shall deprive Participant or beneficiary of a right accrued hereunder prior to the date of such action. The foregoing notwithstanding, the Plan may be amended by the Company at any time, retroactively, if required, in the opinion of the Company, in order to ensure that the Plan is characterized as a "Make Whole Benefit Plan" of deferred compensation maintained for a select group of management or highly compensated employees as described under ERISA Sections 201(2), 301(a)(3), and 401(a)(1), and to conform the Plan to the provisions and requirements of any applicable law (including ERISA and the Code). No such amendment shall be considered prejudicial to any interest of a Participant or a beneficiary hereunder. ARTICLE 10 NO CONTRACT OF EMPLOYMENT     Nothing contained herein shall be construed to be a contract of employment for any term of years, nor as conferring upon Participant the right to continue to be employed by the Company in Participant's present capacity or in any capacity. Nothing herein contained shall be construed as giving any employee of the Company the right to be retained as an employee or as impairing the right of the Company to terminate his service. 4 -------------------------------------------------------------------------------- ARTICLE 11 ADMINISTRATION OF PLAN     11.1  Administration.  This Plan shall be administered by the Committee, which shall have full and exclusive power to interpret the Plan, to grant waivers of the restrictions set forth in the Plan and to adopt such rules, regulations, and guidelines for carrying out the Plan as it may deem necessary or proper, all of which powers shall be exercised in the best interests of the Company and in keeping with the objectives of the Plan. The Committee may correct any defect or supply any omission or reconcile any inconsistency in the Plan in any manner and to the extent the Committee deems necessary or desirable to carry it into effect. Any decision of the Committee in the interpretation and administration of the Plan shall lie within its sole and absolute discretion and shall be final, conclusive and binding on all parties concerned. No member of the Committee or officer of the Company to whom it has delegated authority in accordance with the provisions of Section 11.2 of this Plan shall be liable for anything done or omitted to be done by him, by any other member of the Committee or by any officer of the Company in connection with the performance of any duties under this Plan, except for his own willful misconduct or as expressly required by law.     11.2  Delegation of Authority.  The Committee may delegate to a senior officer(s) of the Company its duties under this Plan pursuant to such conditions or limitations as the committee may establish, except that the Committee may not delegate to any person the authority to select Participants or to claims made in accordance with Section 11.5 of this plan.     11.3  Administration Expenses.  The Company shall pay all administrative costs and expenses incurred with regard to the operation of the Plan. The Committee, and any person delegated under the provisions hereof to carry out any responsibilities under the Plan, shall serve without compensation but shall be entitled to reimbursement from the Company for any reasonable expenses actually and properly incurred in the performance of their duties.     11.4  Committee Indemnified.  The Company shall indemnify and defend the Committee, and any person delegated under the provisions hereof to carry out any fiduciary or other responsibilities under the Plan, and hold them harmless from the effects, consequences, expenses, attorneys' fees and damages of their acts or conduct in their capacity as a fiduciary, to the fullest extent that is permissible under the law. Such indemnification shall be in addition to any other rights each may have as a matter of law, or by reason of any insurance or other indemnification.     11.5  Claims Procedure.  Any person claiming a benefit under the Plan (a "Claimant") shall present the claim in writing to the Committee, and the Committee shall respond in writing. If the claim is denied, the written notice of denial shall state, in a manner calculated to be understood by the Claimant:     (a) The specific reason or reasons for the denial, with specific references to the Plan provisions on which the denial is based;     (b) A description of any additional material or information necessary for the Claimant to perfect their claim and an explanation of why such material or information is necessary; and     (c) An explanation of the Plan's review procedure.     The written notice denying or granting the Claimant's claim shall be provided to the Claimant within ninety (90) days after the Company's receipt of the claim, unless special circumstances require an extension of time for processing the claim. If such an extension is required, written notice of the extension shall be furnished by the Company to the Claimant within the initial ninety (90) day period and in no event shall such an extension exceed a period of ninety (90) days from the end of the initial ninety (90) day period. Any extension notice shall indicate the special circumstances requiring the extension and the date on which the Committee expects to render a decision on the claim. Any claim not granted or denied within the period noted above shall be deemed to have been denied, and the Claimant shall be permitted to proceed to the review stage described hereafter. 5 --------------------------------------------------------------------------------     Any Claimant (or such Claimant's authorized representative), whose claim is denied or deemed to have been denied, may, within sixty (60) days after the Claimant's receipt of notice of the denial, or after the date of the deemed denial, request a review of the denial by giving notice in writing to the Committee. Upon such a request for review, the claim shall be reviewed by the Committee (or its designated representative), which may, but shall not be required to, grant the Claimant a hearing. In connection with the review, the Claimant may have representation, may examine pertinent documents, and may submit issues and comments in writing.     The decision on review normally shall be made within sixty (60) days of the Committee's receipt of the request for review. If an extension of time is required due to special circumstances, the Claimant shall be notified in writing by the Committee prior to the commencement of the extension, and the time limit of the decision on review shall be extended to one hundred twenty (120) days. The decision on review shall be in writing and shall state, in a manner calculated to be understood by the Claimant, the specific reasons for the decision and shall include specific references to the relevant Plan provisions on which the decision is based. The written decision on review shall be given to the Claimant within the sixty (60) day (or, if applicable, the one hundred twenty (120) day) period discussed above. If the decision on review is not furnished to Claimant within such time, the claim shall be deemed denied on review. All decisions on review shall be final and binding with respect to all concerned parties. ARTICLE 12 MISCELLANEOUS     12.1  Binding Obligation of the Company and Any Successor in Interest.  This Plan shall be binding upon the parties hereto, their successors, beneficiaries, heirs and personal representatives.     12.2  Severability.  If any provision of the Plan is held to be illegal or void, such illegality or invalidity shall not affect the remaining provisions of the Plan, but shall be fully severable, and the Plan shall be construed and enforced as if said illegal or invalid provision had never been inserted herein.     12.3  Effect of Other Benefit Plans.  Nothing contained in this Plan shall affect the right of Participant to participate in, or be covered by, any qualified or non-qualified pension, profit sharing, group bonus or other supplemental compensation or fringe benefit plan constituting a part of the Company's existing or future compensation structure, provided however, that no active participant (e.g. a person for whom contributions are continuing to be made) in the Pacific Northwest Bank Make Whole Benefit Plan may be a Participant.     12.4  Litigation.  Except as may be otherwise required by law, in any action or judicial proceeding affecting the Plan, no Participant or beneficiary shall be entitled to any notice or service of process, and any final judgment entered in such action shall be binding on all persons interested in, or claiming under, the Plan.     12.5  Headings.  Headings of Articles and Sections herein are inserted only for convenience of reference and are not to be considered in the construction of the Plan.     12.6  Gender and Number.  Where the context and circumstances require, the gender of all words used in this Agreement shall include the masculine, feminine and neuter, and the singular of all words shall include the plural and the plural shall include the singular.     12.7  Applicable Law.  The laws of the State of Washington shall govern, control, and determine all questions of law arising with respect to the Plan and the interpretation and validity of its respective provisions, except where those laws are preempted by the laws of the United States. Venue for any action arising under the Plan shall be in King County, Washington.     This Plan was adopted by the Board of Directors on October 17, 2000. 6 -------------------------------------------------------------------------------- QUICKLINKS PACIFIC NORTHWEST BANCORP MAKE-WHOLE BENEFIT PLAN ARTICLE 1 INTRODUCTION AND PURPOSE ARTICLE 2 DEFINITIONS AND INTERPRETATIONS ARTICLE 3 CONTRIBUTION ARTICLE 4 DISTRIBUTION OF MEMORANDUM ACCOUNT ARTICLE 5 HARDSHIP DISTRIBUTIONS ARTICLE 6 DESIGNATION OF BENEFICIARY ARTICLE 7 BENEFITS PAYABLE ONLY FROM GENERAL ASSETS OF THE COMPANY; UNSECURED GENERAL CREDITOR STATUS OF PARTICIPANT ARTICLE 8 NON-ALIENATION OF BENEFITS ARTICLE 9 AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN ARTICLE 10 NO CONTRACT OF EMPLOYMENT ARTICLE 11 ADMINISTRATION OF PLAN ARTICLE 12 MISCELLANEOUS

EXHIBIT 10.1 FIRST AMENDMENT TO THE MANAGEMENT AGREEMENT           THIS FIRST AMENDMENT to the Management Agreement, dated as of November 1, 1999 (the “Agreement”), by and between LASER Mortgage Management, Inc. (the “Company”) and Mariner Mortgage Management, L.L.C., a Delaware limited liability company, is made as of November 1, 2000. Capitalized terms used but not defined herein shall have the meanings set forth in the Agreement.            WHEREAS, pursuant to Section 12 of the Agreement the Company and Mariner desire to amend the Agreement;            NOW THEREFORE, in consideration of the mutual covenants contained herein, the parties hereto hereby agree as follows:            1.      Term.                    (a)    Section 2 of the Agreement is hereby amended by replacing the phrase "November 1, 2000" with the phrase "November 1, 2001".                    (b)    Section 2 of the Agreement is hereby amended by replacing the clause "provided, however, the Company may terminate this Agreement without cause and without penalty (but subject to paying fees upon termination as provided herein) at any time during the Term upon 30 days' prior written notice to Mariner" with the clause "provided, however, the Company or Mariner may terminate this Agreement without cause and without penalty (but subject to paying fees upon termination as provided herein) at any time during the Term upon 30 days' prior written notice to Mariner with respect to a termination by the Company and upon 90 days' prior written notice to the Company with respect to a termination by Mariner (unless the Company shall agree in writing to shorten the period)".           2.      Compensation.                    (a)    Section 3(a)(i) of the Agreement is hereby amended and restated in its entirety as follows:           “(i) a base fee (the “Base Fee”) payable in cash, in arrears, on the first business day of each month (the “Base Fee Payment Date”), appropriately prorated for any partial periods, equal to fifty thousand dollars ($50,000); and”                    (b)    Section 3(a)(ii) of the Agreement is hereby amended and restated in its entirety as follows:            "(ii) an incentive fee (the "Incentive Compensation" or "IC") payable in cash according to the following formula:   IC = (.10 * VA) + (.15 * VA1) + (.20 * VA2); A = ACP + CD;   ACP = the average closing price of the Company’s Common Stock for the 15 days preceding the Anniversary Date (except as provided in paragraph (e) of this section);   CD = the aggregate amount of distributions per share (other than distributions of the Company’s Common Stock) made to stockholders by the Company during the period between November 1, 2000 and November 1, 2001;   S = the number of shares of the Company's Common Stock outstanding at the Anniversary Date; if A is equal to or less than 3.317, then VA=0, VA1=0 and VA2=0;   if A is greater than 3.317 and equal to or less than 3.50, then VA=S*(A-3.317); if A is greater than 3.50, then VA=S*(3.50-3.317);   if A is greater than 3.50 and equal to or less than 4.00, then VA1=S*(A-3.50); if A is greater than 4.00, t hen VA1=S*(4.00-3.50); and if A is greater than 4.00, then VA2=S*(A-4.00).   If the Company pays a dividend or declares a distribution in shares of Common Stock, subdivides its outstanding shares of Common Stock, combines its outstanding shares into a smaller number of shares, issues by reclassification or reorganization other securities of the Company to holders of shares generally or effects a similar transaction, then the Board of Directors of the Company shall cause an adjustment to be made to all of the elements of the formula used to calculate Incentive Compensation so that Mariner shall be entitled to receive the equivalent amount of cash compensation which Mariner would have been entitled to receive in the absence of any such event. An adjustment made pursuant hereto shall become effective immediately after the effective date of such event, retroactive to the record date, if any, for such event, and prompt notice thereof shall be given to Mariner. The parties hereto agree to negotiate in good faith in connection with making additional adjustments that they deem equitable to prevent dilution or enlargement of the benefits intended to be granted to Mariner by this paragraph, including, but not limited to, in the event the Company effectuates its stock repurchase program or a similar transaction, after the effective date of this Agreement.”                    (c)    Section 3(d) of the Agreement is hereby deleted in its entirety, and Mariner hereby waives any and all rights arising in connection with Section 3(d) of the Agreement.            3.    Notices. Section 13 of the Agreement is hereby amended by replacing the phrase "Frederick N. Khedouri, Bear Stears & Co. Inc., 245 Park Avenue, New York, New York 10167, facsimile 212-272-2295" with the phrase "Mr. William J. Michaelcheck, c/o Mariner Mortgage Management, L.L.C., 65 East 55 th Street, New York, New York 10022". [Signature Page Follows]         IN WITNESS WHEREOF, the parties hereto have caused this amendment to be duly executed, as of the day and year first above written.   LASER MORTGAGE MANAGEMENT, INC. By:/s/ William J. Michaelcheck                    Name: William J. Michaelcheck Title: President and Director MARINER MORTGAGE MANAGEMENT, L.L.C. By:/s/ William J. Michaelcheck                    Name: William J. Michaelcheck Title: Chairman

Exhibit 10.8 (b)   American Woodmark Corporation Fiscal Year 2000 Annual Incentive Plan for Senior Vice Presidents   The objectives of the Annual Incentive Plan are threefold: I. Provide an incentive which will encourage and reward outstanding individual performance; II. Help align the personal goals of the individual with the overall goals of and objectives of American Woodmark and the stockholders of American Woodmark; and III. Together with base pay and long term incentive programs, provide a compensation package, in both form and total value, which is equal to or better than opportunities offered in the competitive marketplace for similar performance in similar positions.   Eligibility for Participation in the Annual Incentive Program Senior Vice Presidents of the Company. Eligible participants must be employed by the Company on April 30, 2001. All calculations will be reduced on a pro-rated basis for eligible participants not employed as of May 1, 2000.   Determination of Annual Incentive Payout Determination of the payout will be based on one component: 1. Zero to 100% of base salary on April 30, 2000 as determined by the attached schedule for net income. No payment will be made on net income below $13.5 million. Net income will be the audited amount as listed in the Company's annual report for Fiscal 2000.

EXHIBIT 10.1 EIGHTH AMENDMENT TO GENERAL CREDIT AND SECURITY AGREEMENT THIS AGREEMENT, dated and effective as of August 30, 2000 between SPECTRUM Commercial Services, a division of Lyon Financial Services, Inc., a Minnesota Corporation, having its mailing address and principal place of business at Two Appletree Square, Suite 415, Bloomington, Minnesota 55425 (herein called Lender" or "SCS"), and Appliance Recycling Centers of America, Inc., a Minnesota corporation, having the mailing address and principal place of business at 7400 Excelsior Boulevard, Minneapolis, MN 55426,(herein called "Borrower"), amends that certain General Credit and Security Agreement dated August 30, 1996, ("Credit Agreement") as amended. Where the provisions of this Agreement conflict with the Credit Agreement, the intent of this Agreement shall control. 1. The definition of "Maturity Date" appearing in Paragraph 2 is amended in its entirety to read as follows: "Maturity Date" shall mean AUGUST 30, 2001, provided, however, that the then current Maturity Date shall be extended by succeeding periods of 12 calendar months without notice to or action by either Borrower or Lender, provided further however, that such extension shall not occur if: (i) Lender has notified Borrower of an Event of Default that has occurred and is continuing, or (ii) this Agreement has previously terminated as provided in the paragraph entitled "Termination", or (iii) Lender has, in its sole and absolute discretion, demanded payment of amounts owed hereunder, or (iv) Borrower or Lender have notified the other of the intention not to renew at least sixty days prior to the then current Maturity Date and thereafter no extension shall occur. 2. Paragraph 23 is amended in its entirety to read as follows: TERMINATION. Subject to automatic termination of Borrower's ability to obtain additional Advances under this Agreement upon the occurrence of any Event of Default specified in Paragraphs 20(d), (e), (f) or (g) and to Lender's right to terminate Borrower's ability to obtain additional Advances under this Agreement upon the occurrence of any other Event of Default or upon demand, this Agreement shall have a term ending on the Termination Date provided, however, that Borrower may terminate this Agreement at any earlier time upon sixty days prior written notice and will incur no prepayment fee or charge thereafter. On the Termination Date, all obligations arising under this Agreement shall become immediately due and payable without further notice or demand. Lender's rights with respect to outstanding Obligations owing on or prior to the Termination Date will not be affected by termination and all of said rights including (without limitation) Lender's Security Interest in the Collateral existing on such Termination Date or acquired by Borrower thereafter, and the requirements of this Agreement that Borrower furnish schedules and confirmatory assignments of Receivables and Inventory and turn over to Lender all full and partial payments thereof shall continue to be operative until all such Obligations have been duly satisfied. 3. Paragraph 23 is amended in its entirety to read as follows INTEREST. Borrower agrees to pay interest on the outstanding principal amount of the Note, at the close of each day at a fluctuating rate per annum (computed on the basis of actual number of days elapsed and a year of 360 days) which is at all times equal to One and three-quarters percent (1.75%) in excess of the Prime Rate; each change in such fluctuating rate caused by a change in the Prime Rate to occur simultaneously with the change in the Prime Rate; provided, however, that (i) in no event shall the interest rate in effect hereunder at any time be less than 10% per annum; and (ii) interest payable hereunder with respect to each calendar month shall not be less than $14,000.00 regardless of the amount of loans, Advances or other credit extensions that actually may have been outstanding during the month. Interest accrued through the last day of each month will be due and payable to Lender on the next Monthly Payment Date. Interest shall also be payable on the Maturity Date or on any earlier Termination Date. Interest accrued after the Maturity Date or earlier Termination Date shall be payable on Demand. Interest may be charged to Borrower's loan account as an Advance at Lender's option, whether or not Borrower then has the right to obtain an Advance pursuant to the terms of this Agreement. Notwithstanding the foregoing, after an Event of Default, this Note shall bear interest until paid at 5% per annum in excess of the rate otherwise then in effect, which rate shall continue to vary based on further changes in the Prime Rate; provided, however, that after an Event of Default, (i) in no event shall the interest rate in effect hereunder at any time be less than 15% per annum; and (ii) interest payable hereunder with respect to each calendar month shall not be less than $20,300.00 regardless of the amount of loans, Advances or other credit extensions that actually may have been outstanding during the month. The undersigned also shall pay the holder of this Note a late fee equal to 10% of any payment under this Note that is more than 10 days past due. 4. The definition of "Borrowing Base" appearing in Paragraph 2 is respectively amended in their entirety to read as follows: "Borrowing Base" shall mean the sum of (i) Eighty percent (80%) of the net amount of Eligible Receivables or such greater or lesser percentage as Lender, in its sole discretion, shall deem appropriate, plus (ii) the lesser of (x) Two Hundred Fifty Thousand and No/100ths Dollars ($250,000) or (y) Twenty Five percent (25%) of the net amount of Eligible Inventory (excluding Eligible Whirlpool Inventory and Eligible Scratch and Dent Inventory), or such greater or lesser dollars and/or percentage as Lender, in its sole discretion, shall deem appropriate, plus (iii) the lesser of (x) Five Hundred Thousand and No/100ths Dollars ($500,000) or (y) Fifty percent (50%) of the net amount of Eligible Scratch and Dent Inventory, or such greater or lesser dollars and/or percentage as Lender, in its sole discretion, shall deem appropriate, plus (iv) the lesser of (x) Four Million and No/100ths Dollars ($4,000,000) or (y) Eighty percent (80%) of the net amount of Eligible Whirlpool Inventory, or such greater or lesser dollars and/or percentage as Lender, in its sole discretion, shall deem appropriate, provided however, that notwithstanding the dollar limits contained in subsections (ii) - (iv) above, that the total aggregate amount available under subsections (ii) - (iv) shall in no event exceed Four Million and No/100ths Dollars ($4,000,000), or such greater or lesser dollars as Lender, in its sole discretion, shall deem appropriate. 5. The fixed component of the Loan Administration Fee referred to in paragraph 17(g) which was originally specified at $1,000 per quarter is amended to be $3,000 per quarter hereafter. 6. The final sentence of paragraph 7c shall be deleted and replaced with the following: The net amount received by Lender as proceeds arising from the sale or other disposition of Collateral and/or the receipt of all other funds will be credited by Lender to Borrower's loan account (subject to final collection thereof) after allowing three Business Days for the collection of checks and other instruments. 7. The Guaranty hereof provided by Edward R. Cameron is hereby released completely and his name will be deleted from the definition of Guarantor contained in Paragraph 2. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. SPECTRUM COMMERCIAL SERVICES APPLIANCE RECYCLING CENTERS OF AMERICA, INC. By /s/ Steven I. Lowenthal By /s/ Edward R. Cameron Steven I. Lowenthal, Senior Vice President Its President FIFTH AMENDED AND RESTATED REVOLVING NOTE $5,000,000.00 August 30, 2000 Bloomington, Minnesota FOR VALUE RECEIVED, the undersigned, APPLIANCE RECYCLING CENTERS OF AMERICA, INC. promises to pay to the order of SPECTRUM COMMERCIAL SERVICES, a division of Lyon Financial Services, Inc., a Minnesota corporation, (the "Lender") at its office in Bloomington, Minnesota, or at such other place as any present or future holder of this Note may designate from time to time, the principal sum of (i) Five Million and 00/100 Dollars ($5,000,000.00), or (ii) the aggregate unpaid principal amount of all advances and/or extensions of credit made by the Lender to the undersigned pursuant to this Note as shown in the records of any present or future holder of this Note, whichever is less, plus interest thereon from the date of each advance in whole or in part included in such amount until this Note is fully paid. Interest shall be computed on the basis of the actual number of days elapsed and a 360-day year, at an annual rate equal to One and three-quarters percent (1.75%) per annum in excess of the Prime Rate of Norwest Bank Minnesota, NA, and that shall change when and as said Prime Rate shall change; provided, however, that (i) in no event shall the interest rate in effect hereunder at any time be less than 10% per annum; and (ii) interest payable hereunder with respect to each calendar month shall not be less than $14,000 regardless of the amount of loans, advances or other credit extensions that actually may have been outstanding during the month.. Interest is due and payable on the first day of each month and at maturity. The term "Prime Rate" means the rate established by Norwest Bank in its sole discretion from time to time as its Prime or Base Rate, and the undersigned acknowledges that Norwest Bank and/or Lender may lend to its customers at rates that are at, above or below the Prime Rate. Notwithstanding the foregoing, after an Event of Default, this Note shall bear interest until fully paid at 5% per annum in excess of the rate otherwise then in effect, which rate shall continue to vary based on further changes in the Prime Rate; provided, however, that after an Event of Default, (i) in no event shall the interest rate in effect hereunder at any time be less than 15% per annum; and (ii) interest payable hereunder with respect to each calendar month shall not be less than $20,300 regardless of the amount of loans, advances or other credit extensions that actually may have been outstanding during the month. The undersigned also shall pay the holder of this Note a late fee equal to 10% of any payment under this Note that is more than 10 days past due. All interest, principal, and any other amounts owing hereunder are due on August 30, 2001 or earlier UPON DEMAND by Lender or any holder hereof, and Lender specifically reserves the absolute right to demand payment of all such amounts at any time, with or without advance notice, for any reason or no reason whatsoever. Lender's right to make such demand is not exclusive and Lender may coincidentally or separately from such demand make further demand for payment pursuant to the terms hereof (including but not limited to upon the occurrence of an Event of Default), and further, amounts may become due hereunder without a demand by Lender. All or any part of the unpaid balance of this Note may be prepaid at any time, provided however, that if Borrower provide Lender with 60 days advance notice thereof. At the option of the then holder of this Note, any payment under this Note may be applied first to the payment of other charges, fees and expenses under this Note and any other agreement or writing in connection with this Note, second to the payment of interest accrued through the date of payment, and third to the payment of principal. Amounts may be advanced and readvanced under this Note at the Lender's sole and absolute discretion, provided the principal balance outstanding shall not exceed the amount first above written. Neither the Lender nor any other person has any obligation to make any advance or readvance under this Note. The occurrence of any of the following events shall constitute an Event of Default under this Note: (i) any default in the payment of this Note; or (ii) any other default under the terms of any now existing or hereafter arising debt, obligation or liability of any maker, endorser, guarantor or surety of this Note or any other person providing security for this Note or for any guaranty of this Note, including, but not limited to, that certain General Credit and Security Agreement dated August 30, 1996 as it may have been subsequently amended and/or restated; or (iii) the insolvency (other than the insolvency of the undersigned), death dissolution, liquidation, merger or consolidation of any such maker, endorser, guarantor, surety or other person; or (iv) any appointment of a receiver, trustee or similar officer of any property of any such maker, endorser, guarantor, surety or other person; or (v) any assignment for the benefit of creditors of any such maker, endorser, guarantor, surety or other person; or (vi) any commencement of any proceeding under any bankruptcy, insolvency, dissolution, liquidation or similar law by or against any such maker, endorser, guarantor, surety or other person, provided however, that if such a proceeding is commenced against the maker hereof or any Guarantor on an involuntary basis, then only if such action is not dismissed within 60 days of first being filed; or (vii) the sale, lease or other disposition (whether in one transaction or in a series of transactions) to one or more persons of all or a substantial part of the assets of any such maker, endorser, guarantor, surety or other person; or (viii) any such maker, endorser, guarantor, surety or other person takes any action to revoke or terminate any agreement, liability or security in favor of the Lender; or (ix) the entry of any judgment or other order for the payment of money in the amount of $10,000.00 or more against any such maker, endorser, guarantor, surety or other person which judgment or order is not discharged or stayed in a manner acceptable to the then holder of this Note within 10 days after such entry; or (x) the issuance or levy of any writ, warrant, attachment, garnishment, execution or other process against any property of any such maker, endorser, guarantor, surety or other person; or (xi) the attachment of any tax lien to any property of any such maker, endorser, guarantor, surety or other person which is other than for taxes or assessments not yet due and payable; or (xii) any statement, representation or warranty made by any such maker, endorser, guarantor, surety or other person (or any representative of any such maker, endorser, guarantor, surety or other person) to any present or future holder of this Note at any time shall be false, incorrect or misleading in any material respect when made; or (xiii) there is a material adverse change in the condition (financial or otherwise), business or property of any such maker, endorser, guarantor, surety or other person. Upon the occurrence of an Event of Default and at any time thereafter while an Event of Default is continuing, the then holder of this Note may, at its option, declare this Note to be immediately due and payable and thereupon this Note shall become due and payable for the entire unpaid principal balance of this Note plus accrued interest and other charges on this Note without any presentment, demand, protest or other notice of any kind. The undersigned: (i) waives demand, presentment, protest, notice of protest, notice of dishonor and notice of nonpayment of this Note; (ii) agrees to promptly provide all present and future holders of this Note from time to time with financial statements of the undersigned and such other information respecting the financial condition, business and property of the undersigned as any such holder of this Note may reasonably request, in form and substance acceptable to such holder of this Note; (iii) agrees that when or at any time after this Note becomes due the then holder of this note may offset or charge the full amount owing on this note against any account then maintained by the undersigned with such holder of this Note without notice; (iv) agrees to pay on demand all fees, costs and expenses of all present and future holders of this Note in connection with this Note and any security and guaranties for this Note, including but not limited to audit fees and expenses and reasonable attorneys' fees and legal expenses, plus interest on such amounts at the rate set forth in this Note; and (v) consents to the personal jurisdiction of the state and federal courts located in the State of Minnesota in connection with any controversy related in any way to this Note or any security of guaranty for this Note, waives any argument that venue in such forums is not convenient, and agrees that any litigation initiated by the undersigned against the Lender or any other present or future holder of this Note relating in any way to this Note or any security or guaranty for this Note shall be venued (at the sole option of Lender or the holder hereof) in either the District Court of Dakota or Hennepin County, Minnesota, or the United States District Court, District of Minnesota. Interest on any amount under this Note shall continue to accrue, at the option of any present or future holder of this Note, until such holder receives final payment of such amount in collected funds in form and substance acceptable to such holder. The maker agrees that, if it brings any action or proceeding arising out of or relating to this Agreement, it shall bring such action or proceeding in the District Court of Hennepin County, Minnesota. No waiver of any right or remedy under this Note shall be valid unless in writing executed by the holder of this Note, and any such waiver shall be effective only in the specific instance and for the specific purpose given. All rights and remedies of all present and future holders of this Note shall be cumulative and may be exercised singly, concurrently or successively. The undersigned, if more than one, shall be jointly and severally liable under this Note, and the term "undersigned," wherever used in this Note, shall mean the undersigned or any one or more of them. This Note shall bind the undersigned and the successors and assigns of the undersigned. This Note shall be governed by and construed in accordance with the laws of the State of Minnesota. This Note amends and restates, but does not repay, that certain Third Amended and Restated Revolving Note dated as of July 12, 1999 made by the undersigned payable to the order of Lender in the original principal amount of $2,000,000.00. THE UNDERSIGNED REPRESENTS, CERTIFIES, WARRANTS AND AGREES THAT THE UNDERSIGNED HAS READ ALL OF THIS NOTE AND UNDERSTANDS ALL OF THE PROVISIONS OF THIS NOTE. THE UNDERSIGNED ALSO AGREES THAT COMPLIANCE BY ANY PRESENT OR FUTURE HOLDER OF THIS NOTE WITH THE EXPRESS PROVISIONS OF THIS NOTE SHALL CONSTITUTE GOOD FAITH AND SHALL BE CONSIDERED REASONABLE FOR ALL PURPOSES. APPLIANCE RECYCLING CENTERS OF AMERICA, INC. By /s/ Edward R. Cameron ----------------------------------------- Edward R. Cameron President

EMPLOYMENT AGREEMENT Interstate General Company L.P. is a publicly traded limited partnership. Its units are listed on the AMEX and the PSE. It is commonly referred to as IGC. THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of the first day of January 2000, by and among Interstate General Company Limited Partnership ("the Company") and Paul H. Dillon ("Mr. Dillon"). In consideration of the mutual covenants herein contained, the parties agree to be bound by the following terms and conditions: I. POSITION AND AUTHORITY Mr. Dillon will hold the title Chief Financial Officer of the Company. Mr. Dillon shall report to the President and to the Chief Executive Officer of the Company. Mr. Dillon shall have such authority as shall be defined from time to time by the President, Chief Executive Officer, or the Board of Directors. II. TERM The term of employment of Mr. Dillon by the Company (the "Term") shall begin on January 1, 2000 and shall expire on December 31, 2000 and thereafter for successive one-year terms; provided however, that either party may terminate this Agreement on sixty (60 days) prior written notice, and the Company may terminate this Agreement for "cause" (defined in Section VIII below) immediately upon written notice.   III. COMPANY RULES AND REGULATIONS Mr. Dillon agrees to comply with all directives of the Board of Directors, the President, and the Chief Executive Officer and all written rules, policies and regulations of the Company. IV. LOCATION OF EMPLOYMENT Mr. Dillon's office location will be in the Waldorf, Maryland area.   V. DUTIES AND RESPONSIBILITIES A. Mr. Dillon agrees to devote his entire professional time, energy, and ability to the proper and efficient performance of professional services for the Company and their Operating Affiliates. Without the prior express written authorization of the Company, Mr. Dillon shall not, directly or indirectly, during his employment with the Company render services of a professional nature to any other person or firm, whether for compensation or otherwise. B. If the Company or its affiliates obtains a contract to construct and operate a waste disposal facility developed by the Company (or its affiliates), Mr. Dillon agrees to negotiate in good faith a non-compete clause regarding all such activities and future employment in a like industry. VI. COMPENSATION A. Mr. Dillon shall be compensated by the Company with an annual base salary payable semi-monthly ("Annual Base Salary"). Initially, the Annual Base Salary payable to the Employee shall be $100,000, subject to annual adjustment. B. On June 13, 2000 ("Grant Date"), IGC shall grant Mr. Dillon 7,500 unit appreciation rights with respect to Class A Units ("Rights"), pursuant to the Company's Employee Unit Incentive Plan ("the Plan"). The rights shall be subject to the following terms: (A.) Base Price - $1; (B) Vesting -- 2,500 Rights shall vest on each January 1, commencing on January 1, 2001, provided Mr. Dillon is then an employee of IGC; (C.) Expiration Date -- the Rights will cease to be exercisable upon the sooner of (i) ninety (90) days following the termination of Mr. Dillon's employment agreement with IGC, or (ii) on the 10th Anniversary of the Grant Date. VII. FRINGE BENEFITS In addition to the compensation defined above, Mr. Dillon shall be entitled to the following fringe benefits: A. Mr. Dillon shall be eligible to participate in the Company' health plans, life and disability insurance programs, retirement plans, vacation plans and other employee benefit plans (collectively the "Employee Plans") available to senior executive employees in accordance with the terms and provisions thereof. B. Mr. Dillon is a CPA licensed in the state of Maryland. In order to maintain licensing, forty (40) hours of continuing professional education ("CPE") are required each year. The Company agrees that it will incur the cost for such CPE courses and allow Mr. Dillon to attend such courses during normal business hours. Course selection, and any related travel costs, must first be approved by the Company's President. Mr. Dillon agrees to use his best professional judgment in selecting courses relevant to the Company's accounting and economic requirements.     VIII. SEVERANCE Upon termination of Mr. Dillon's employment, all payment and benefit obligations of the Company shall immediately terminate except as follows: A. In the event of a termination of Mr. Dillon's employment due to his death or disability, Mr. Dillon or his estate shall continue to receive his Annual Base Salary and benefits (excluding the Specified Benefits) for which Mr. Dillon remains eligible under the terms of the Company' benefit plans (collectively "Severance Compensation") for a period commencing on the effective date of Mr. Dillon's termination determined by the Board (the "Termination Date") and ending (3) months following the Termination Date; and B. In the event of a Qualifying Termination (defined below) by the Company, Mr. Dillon shall receive Severance Compensation for a period commencing on the Termination Date and ending at the later of (i) the end of the current contract term, or (ii) three months following the Termination Date. For purposes of this Agreement, "Qualifying Termination" shall mean any termination of Mr. Dillon by the Company other than for "cause" or any termination by Mr. Dillon for "Good Reason". For purposes hereof, "cause" shall be defined as (i) conviction of a felony, other crime involving theft or fraud, or other crime of moral turpitude involving the Company, and/or (ii) engaging in fraud or conduct with the intent of causing substantial harm to the Company. In the event the Company elects to terminate Mr. Dillon's employment for cause, such termination may be made effective immediately, and no advance notice shall be required.   For purposes of this Section VIII, Mr. Dillon shall have terminated the employment for a Good Reason if: A. Mr. Dillon terminates the employment relationship within two (2) years following the occurrence of (i) a transaction or series of transactions other than as a result of a Financial Closing or other equity investment in the Company which results in the family of James J. Wilson not exercising at least fifty percent (50%) of the voting control of the Company; or (ii) a transfer of all or substantially all of the assets of the Company or the merger of the Company into another entity other than an entity at least 50% of the voting control of which is held by either IGC or the Wilson family; or B. Mr. Dillon terminates the employment relationship within six (6) months following the occurrence of (i) the Company materially reducing, diminishing, terminating or otherwise impairing his duties, titles and/or responsibilities despite his written objection delivered to the Board of Directors; (ii) the Company instructing Mr. Dillon, despite his written objection delivered to the Board of Directors, to take any action which is in violation of any law, ordinance or regulation or would require any act of dishonesty or moral turpitude; or (iii) the Company committing a material breach of any of the provisions of this Agreement. IX. RETURN OF COMPANY MATERIALS Upon termination of this employment for any reason, Mr. Dillon shall return to the Company all Company Materials (defined below) and all other items of personal property, including all Company credit cards, telephone cards, keys, identification cards and software, that were in Mr. Dillon's possession, custody or control as of the termination date and that were generated or acquired by him for use in connection with his employment by the Company (collectively "Company Materials"). "Company Materials" shall mean all copies of all written materials, notes, notebooks, minutes, letters, memoranda, books of account, litigation records, files, drawings, photographs, video recordings, audio recordings, electronically or magnetically stored data, charts, plans, specifications, maps and other documents relating to the Company or any of their affiliates, or any of their respective officers, personnel, customers, suppliers, contractors, counsel, accountants or other parties having any business relationship with the Company and any of their affiliates (collectively "Covered Persons"); provided, that, Company Materials shall not include any written materials or other documents relating to the foregoing that have been made generally available to the public without violating any property rights of the Company. X. INDEMNIFICATION The Company agrees to indemnify Mr. Dillon with respect to his performance of his duties described herein, to the maximum extent permitted by law. XI. ARBITRATION; REMEDIES A. Any dispute or controversy arising between Mr. Dillon and the Company relating to this Agreement or otherwise to Mr. Dillon's employment by the Company shall be submitted to private, binding arbitration, upon the written request of either Mr. Dillon or the Company, before a panel of three arbitrators, under the administration of and in accordance with the Commercial Arbitration Rules of the American Arbitration Association ("AAA"). In the event of such dispute or controversy, the Company and Mr. Dillon shall independently and simultaneously select and identify one arbitrator each, both of whom must have no past or present familial or business relationships with the parties and must possess expertise in the area of compensation of senior management employees. In the event that a party has not selected its arbitrator within 60 days of initiation of the arbitration, the AAA shall select such arbitrator. These two arbitrators shall jointly agree upon and select a third arbitrator who also possesses such credentials. These three arbitrators shall hear and decide the dispute or controversy by majority vote, and their decision and award shall be final and conclusive upon the parties, and their heirs, administrators, executors, successors, and assigns. The arbitrators shall have no power or authority to add to, subtract from, or otherwise modify the terms of this Agreement. Wherever the Commercial Arbitration Rules of the AAA conflict with the procedures set forth in this Section, the terms of this Section shall govern. Mr. Dillon and the Company agree that the arbitration must be initiated by personally delivering a statement of claim to the AAA and to the party against whom the claim is asserted no later than ninety (90) days after the basis of the claim becomes known, or reasonably should have been known or discovered, by the party asserting the claim. In the event arbitration is not initiated within such ninety (90) day period, such claim, dispute, or controversy shall be irrevocably time-barred. A judgement based upon such arbitration award may be entered in any court having jurisdiction thereof. B. Notwithstanding the foregoing, any action brought by the Company seeking a temporary restraining order, temporary and/or permanent injunction, and/or a decree of specific performance of the terms of this Agreement may be brought in a court of competent jurisdiction without the obligation to proceed first to arbitration. XII. ASSIGNMENT AND BINDING EFFECT Neither party may assign this Agreement, or any obligation or rights hereunder, to any other person or entity without the express written consent of the other party. This Agreement shall be binding upon Mr. Dillon and his heirs, executors, administrator and successors. XIII. GOVERNING LAW This Agreement shall be governed by the laws of the State of Maryland. XIV. CAPTIONS All captions contained in this Agreement are for convenience only and in no way define or describe the intent of the parties or specific terms hereof. XV. SEVERABILITY If any provision of this Agreement shall to any extent be held invalid or unenforceable, the remaining terms and provisions shall not be affected thereby. XVI. ENTIRE AGREEMENT This Agreement contains the entire agreement between the parties relating to the subject matter hereof. All prior negotiations or stipulations concerning any matter that preceded or accompanied the execution hereof are conclusively deemed to be superceded hereby. No provisions of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by Mr. Dillon and such officer or director as may be specifically designed by the Board of Directors. XVII. NOTICES; MISCELLANEOUS For purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be duly given when delivered by hand or facsimile transmission or when mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Company:   Mr. Mark Augenblick Interstate General Company L.P. 5160 Parkstone Drive Suite 260 B Chantilly, VA 20151   If to Mr. Dillon:   Mr. Paul H. Dillon 3145 Apple Creek Lane Waldorf, MD 20603 or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt. XVIII. WITHHOLDING Anything in this Agreement to the contrary notwithstanding, all payments required to be made by the Company to Mr. Dillon or his estate or beneficiaries shall be subject to the withholding of such amounts relating to taxes as the Company may reasonably determine it should withhold pursuant to any applicable law or regulation. In lieu of withholding such amounts, in whole or in part, the Company may, in their sole discretion, accept other provisions for payment of taxes and withholdings as required by law, provided it is satisfied that all requirements of law affecting its responsibilities to withhold compensation have been satisfied.   IN WITNESS WHEREOF, the parties have executed this Agreement the day and year first set forth below, and the parties represent that they have the capacity and authorization, whether it be personal or by the Board of Directors of the Company, to execute this Agreement.   INTERSTATE GENERAL COMPANY L.P.         Dated: January 1, 2000 By: /s/ Mark Augenblick   Mark Augenblick Vice Chairman, President and Director   PAUL H. DILLON         Dated: January 1, 2000 By: /s/ Paul H. Dillon     In order to induce Mr. Dillon to enter into this Employment Agreement, Interstate Business Corporation, Inc., a Delaware corporation, hereby unconditionally guarantees the performance of the obligations of IGC under this Employment Agreement.   INTERSTATE BUSINESS CORPORATION         Dated: January 1, 2000 By: /s/ J. Michael Wilson   J. Michael Wilson President

Exhibit 10-34 EMPLOYMENT AGREEMENT          EMPLOYMENT AGREEMENT, dated as of May 19, 2000 (the "Agreement"), by and between Energy East Corporation, a New York corporation (the "Company"), and Kenneth M. Jasinski (the "Executive").          The Board of Directors of the Company (the "Board") desires to provide for the employment of the Executive as a member of the management of the Company, in the best interest of the Company and its shareholders. The Executive is willing to commit himself to serve the Company, on the terms and conditions herein provided.          In order to effect the foregoing, the Company and the Executive wish to enter into an employment agreement on the terms and conditions set forth below. Accordingly, in consideration of the premises and the respective covenants and agreements of the parties herein contained, and intending to be legally bound hereby, the parties hereto agree as follows:          1.    Defined Terms. The definitions of capitalized terms used in this Agreement, unless otherwise defined herein, are provided in the last Section hereof.          2.    Employment. The Company hereby agrees to employ the Executive, and the Executive hereby agrees to serve the Company, on the terms and conditions set forth herein, during the term of this Agreement (the "Term").          3.    Term of Agreement. The Term will commence on May 19, 2000, and end on May 18, 2003, unless further extended as hereinafter provided. Commencing on May 19, 2001 and each May 19 thereafter, the Term of this Agreement shall automatically be extended for one (1) additional year unless, not later than the February 18 immediately preceding each such May 19, the Company (upon authorization by the Board) or the Executive shall have given notice not to extend this Agreement.          4.    Position and Duties. The Executive shall serve as Executive Vice President and General Counsel of the Company and shall have such responsibilities, duties and authority that are consistent with such positions as may from time to time be assigned to the Executive by the Board. The Executive shall devote substantially all his working time and efforts to the business and affairs of the Company and its subsidiaries; provided, however, that the Executive may also serve on the boards of directors or trustees of other companies and organizations, as long as such service does not substantially interfere with the performance of his duties hereunder.          5.    Compensation and Related Matters.                   5.1    Base Salary. The Company shall pay the Executive a base salary ("Base Salary") during the period of the Executive's employment hereunder, which shall be at an initial rate of Four Hundred Twenty-Five Thousand Dollars ($425,000.00) per annum. The Base Salary shall be paid in substantially equal bi-weekly installments, in arrears. The Base Salary may be discretionarily increased by the Board from time to time as the Board deems appropriate in its reasonable business judgment. The Base Salary in effect from time to time shall not be decreased during the Term. During the period of the Executive's employment hereunder, the Board shall make an annual review of the Executive's compensation.                   Compensation of the Executive by Base Salary payments shall not be deemed exclusive and shall not prevent the Executive from participating in any other compensation or benefit plan of the Company. The Base Salary payments (including any increased Base Salary payments) hereunder shall not in any way limit or reduce any other obligation of the Company hereunder, and no other compensation, benefit or payment hereunder shall in any way limit or reduce the obligation of the Company to pay the Executive's Base Salary hereunder.                   5.2    Benefit and Incentive Plans. The Executive shall be entitled to participate in or receive compensation and/or benefits, as applicable, under all "employee benefit plans" (as defined in section 3(3) of the Employee Retirement Income Security Act of 1974, as amended from time to time ("ERISA")), all incentive compensation plans, and all employee benefit arrangements made available by the Company now or during the period of the Executive's employment hereunder to its executives and key management employees, subject to and on a basis consistent with the terms, conditions and overall administration of such plans and arrangements; provided, however, that there shall be no duplication of the compensation and benefits created by this Agreement. The Executive's participation in such plans and arrangements shall be on an appropriate level, as determined by the Board.                   Notwithstanding any provision of NYSEG's Supplemental Executive Retirement Plan (or any successor plan) that may be to the contrary, if the Executive's service with the Company or NYSEG from April 29, 1998 exceeds five full years, there shall be paid to the Executive under NYSEG's Supplemental Executive Retirement Plan (or any successor plan) an amount that shall be determined by giving the Executive, for purposes of that plan, service credit for three years of service for each of the Executive's actual years of service. Notwithstanding the foregoing sentence of this Section 5.2, and any provision of NYSEG's Supplemental Executive Retirement Plan (or any successor plan) that may be to the contrary, if the Executive Retires from the Company subsequent to October 15, 2008, there shall instead be paid to the Executive under NYSEG's Supplemental Executive Retirement Plan (or any successor plan) an amount that shall be determined by (i) giving the Executive, for purposes of that plan, service credit for 40 years of service, (ii) deeming the Executive to be a "Key Person" as defined in, and for all purposes under, that plan and (iii) deeming the Executive's "highest three years of earnings within the last ten years of employment" for purposes of that plan to be equal to the Executive's Base Salary at the rate in effect at the time he Retires.                   5.3    Expenses. Upon presentation of reasonably adequate documentation to the Company, the Executive shall receive prompt reimbursement from the Company for all reasonable and customary business expenses incurred by the Executive in accordance with the Company policy in performing services hereunder. The Company agrees to reimburse the Executive for any expenses he incurs in moving himself and his family from Pelham, New York to any state in the Northeast.                   5.4    Vacation. The Executive shall be entitled to five (5) weeks of vacation during each year of this Agreement, or such greater period as the Board shall approve, without reduction in salary or other benefits.          6.    Compensation Related to Disability. During the Term of this Agreement, during any period that the Executive fails to perform the Executive's full-time duties with the Company as a result of incapacity due to physical or mental illness, the Company shall pay the Executive's Base Salary to the Executive at the rate in effect at the commencement of any such period, together with all compensation and benefits payable to the Executive under the terms of any compensation or benefit plan, program or arrangement maintained by the Company during such period, until the Executive's employment is terminated by the Company for Disability; provided, however, that such Base Salary payments shall be reduced by the sum of the amounts, if any, payable to the Executive at or prior to the time of any such Base Salary payment under disability benefit plans of the Company or under the Social Security disability insurance program, which amounts were not previously applied to reduce any such Base Salary payment. Subject to Sections 8 and 9 hereof, after completing the expense reimbursements required by Section 5.3 hereof and making the payments and providing the benefits required by this Section 6, the Company shall have no further obligations to the Executive under this Agreement.          7.    Compensation Related to Termination. If the Executive's employment shall be terminated for any reason during the Term of this Agreement, the Company shall pay the Executive's Base Salary (to the Executive or in accordance with Section 13.2 if the Executive's employment is terminated by his death) through the Date of Termination at the rate in effect at the time the Notice of Termination is given, together with all compensation and benefits payable to the Executive through the Date of Termination under the terms of any compensation or benefit plan, program or arrangement maintained by the Company during such period. Subject to Sections 6, 8 and 9 hereof, after completing the expense reimbursements required by Section 5.3 hereof and making the payments and providing the benefits required by this Section 7, the Company shall have no further obligations to the Executive under this Agreement.          8.    Normal Post-Termination Payments Upon Termination of Employment. If the Executive's employment shall be terminated for any reason during the Term of this Agreement, the Company shall pay the Executive's normal post-termination compensation and benefits to the Executive as such payments become due. Subject to Section 9.1 hereof and the second paragraph of Section 5.2 hereof, such post-termination compensation and benefits shall be determined under, and paid in accordance with, the Company's retirement, insurance and other compensation or benefit plans, programs and arrangements (other than this Agreement).          9.    Severance Payments.                   9.1    The Company shall pay the Executive the payments described in this Section 9.1 (the "Severance Payments") upon the termination of the Executive's employment prior to the end of the Term, in addition to the payments and benefits described in Sections 7 and 8 hereof, unless such termination is (i) by the Company for Cause, (ii) by reason of death, Disability or Retirement, or (iii) by the Executive without Good Reason.          (A)   In lieu of any further salary payments to the Executive for periods subsequent to the Date of Termination, and in lieu of any severance benefit otherwise payable to the Executive, the Company shall pay to the Executive a lump sum severance payment, in cash, equal to three (3) times the sum of: (i)    the Executive's annual Base Salary in effect immediately prior to the occurrence of the event or circumstance upon which the Notice of Termination is based; and (ii)    the average of the three most recent incentive compensation awards earned by the Executive under the Company's Annual Executive Incentive Plan (the "AEIP"), or any successor annual executive incentive compensation plan, before the Date of Termination (or, if the Executive has not earned three such awards, such lesser number of awards which the Executive earned before the Date of Termination); provided that, in each case, any such award earned by the Executive for a year during which the Executive was employed by the Company for less than twelve months shall be divided by the number of full months that the Executive was employed in such year and multiplied by twelve and such annualized amount shall be used for purposes of determining such average.          (B)   Notwithstanding any provision of the AEIP, or any successor annual executive incentive compensation plan, the Company shall pay to the Executive a lump sum amount, in cash, equal to the sum of (i) any incentive compensation which has been allocated or awarded to the Executive for a completed fiscal year preceding the Date of Termination under the AEIP, or any successor annual executive incentive compensation plan, but has not yet been either (x) paid (pursuant to Section 7 hereof or otherwise) or (y) deferred pursuant to the Company's Deferred Compensation Plan for Salaried Employees, and (ii) a pro-rata portion to the Date of Termination of the aggregate value of any contingent incentive compensation award to the Executive for any uncompleted fiscal year under the AEIP or any successor annual executive incentive compensation plan, calculated by assuming that the Maximum Earnings Level (as defined in the AEIP) had been achieved and that the Executive's Level of Achievement (as defined in the AEIP) were one hundred percent (or in the case of any such successor plan, that maximum performance with respect to all applicable performance goals had been achieved), with such pro-rata amount being reduced (but not below zero) by any amounts paid to the Executive with respect to such uncompleted fiscal year pursuant to Article XI(A)(iii) of the AEIP, or any comparable provision of any such successor plan, as a result of a Change-in-Control that occurs during such uncompleted fiscal year.          (C)   The second paragraph of Section 5.2 hereof shall be inapplicable, and notwithstanding any provision of NYSEG's Supplemental Executive Retirement Plan (or any successor plan) that may be to the contrary, the Company shall pay to the Executive under NYSEG's Supplemental Executive Retirement Plan (or any successor plan) an amount that shall be determined by (i) deeming the Executive (a) to have 40 years of service credit, for purposes of that plan, (b) to be at least 60 years of age and (c) to be a "Key Person" as defined in, and for all purposes under, that plan and (ii) deeming the Executive's "highest three years of earnings within the last ten years of employment" for purposes of that plan to be equal to the Executive's Base Salary as determined pursuant to Section 9.1(A)(i) hereof; and such benefits shall be determined without regard to any amendment to NYSEG's Supplemental Executive Retirement Plan (or any successor 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.          Notwithstanding any provision in NYSEG's Supplemental Executive Retirement Plan (or any successor plan) that may be to the contrary, the benefits otherwise payable to the Executive pursuant to this Section 9.1(C) shall be paid to the Executive in a lump sum payment that is equal in amount to the present value (calculated under generally accepted actuarial methods that are consistent with the actuarial methods used in producing the tables of Appendix A of NYSEG's Retirement Benefit Plan (or any successor plan)) of such benefits and such payment shall be in lieu of any payments to which the Executive otherwise would have been entitled under NYSEG's Supplemental Executive Retirement Plan (or any successor plan) and shall satisfy any obligations that the Company would otherwise have to the Executive under NYSEG's Supplemental Executive Retirement Plan (or any successor plan). Such lump sum payment shall be paid to the Executive no later than the due date of the first payment that is or would be due to the Executive under NYSEG's Supplemental Executive Retirement Plan (or any successor plan) assuming that the Executive were entitled to receive payments thereunder.          Notwithstanding the immediately preceding paragraph of this Section 9.1(C), the Executive may elect to have the benefits otherwise payable to the Executive pursuant to this Section 9.1(C) be paid to the Executive in the manner provided for under NYSEG's Supplemental Executive Retirement Plan (or any successor plan) and such method of payment shall be in lieu of a lump sum payment. The Executive shall make such election by sending a letter to the Company in which he states that he has decided to make such election. The election shall not be effective unless the letter is received by the Company (i) at least 90 days prior to the Date of Termination and (ii) prior to the first day of the calendar year in which the Date of Termination occurs. The Executive shall have the right to revoke any such election by sending a letter to the Company in which he states that he has decided to revoke such election. The revocation of such election shall not be effective unless the letter is received by the Company (i) at least 90 days prior to the Date of Termination and (ii) prior to the first day of the calendar year in which the Date of Termination occurs. If the Executive revokes an election, he can make a new election (in the manner, and subject to the timing requirements, set forth in this paragraph), and he can revoke any such new election (in the manner, and subject to the timing requirements, set forth in this paragraph).          (D)   For a thirty-six (36) month period after the Date of Termination, the Company shall arrange to provide the Executive with life, disability, accident and health insurance benefits substantially similar to those which the Executive is receiving immediately prior to the Notice of Termination (without giving effect to any reduction in such benefits constituting a basis for a termination by the Executive of his employment for Good Reason). Benefits otherwise receivable by the Executive pursuant to this Section 9.1(D) shall be reduced to the extent comparable benefits are actually received by or made available to the Executive without cost during the thirty-six (36) month period following the Executive's termination of employment (and any such benefits actually received by the Executive shall be reported to the Company by the Executive). If the benefits provided to the Executive under this Section 9.1(D) shall result in a Gross-Up Payment pursuant to Section 9.2, and these Section 9.1(D) benefits are thereafter reduced pursuant to the immediately preceding sentence because of the receipt of comparable benefits, the Gross-Up Payment shall be recalculated so as to reflect that reduction, and the Executive shall refund to the Company an amount equal to any calculated reduction in the Gross-Up Payment, but only if, and to the extent, the Executive receives a refund of any Excise Tax previously paid by the Executive pursuant to Section 9.2 hereof.                   9.2    (A)   Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment or distribution by the Company to or for the benefit of the Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (a "Payment"), would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Company shall pay to or on behalf of the Executive an additional payment ("Gross-Up Payment") in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.                   (B)   Subject to the provisions of Section 9.2(C) hereof, all determinations required to be made under this Section 9.2, including whether a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be used in arriving at such determinations, shall be made by the Company's principal outside accounting firm (the "Accounting Firm") which shall provide detailed supporting calculations both to the Board and the Executive within fifteen (15) business days of the Date of Termination and/or such earlier date(s) as may be requested by the Company or the Executive (each such date and the Date of Termination shall be referred to as a "Determination Date," for purposes of this Section 9.2(B) and Section 9.3 hereof). All fees and expenses of the Accounting Firm shall be borne solely by the Company. The initial Gross-Up Payment, if any, as determined pursuant to this Section 9.2(B), shall be paid by the Company to the Executive within five (5) days of the receipt of the Accounting Firm's determination. If the Accounting Firm determines that no Excise Tax is payable by the Executive, it shall furnish the Executive with a written opinion that failure to report the Excise Tax on the Executive's applicable federal income tax return would not result in the imposition of a negligence or similar penalty. Any determination by the Accounting Firm under this Section 9.2(B) shall be binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 9.2(C) and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive.                   (C)   The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of an Underpayment. Such notification shall be given as soon as practicable but no later than ten (10) business days after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the thirty (30) day period following the date on which he gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall: (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 effectively to contest such claim, and (iv)  permit the Company to participate in any proceeding relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax, including interest and penalties with respect thereto, imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 9.2(C), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax, including interest or penalties with respect thereto, imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.                   (D)   If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 9.2(C) hereof, the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to the Company's complying with the requirements of Section 9.2(C) hereof) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 9.2(C) hereof, a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of thirty (30) days after such determination, then such advance shall be forgiven and shall not be required to be repaid.                   9.3    Except as otherwise specifically provided in Sections 9.1 and 9.2, the payments provided for in Sections 9.1 and 9.2 hereof shall be made not later than the fifth day following the relevant Determination Date, provided, however, that if the amounts of such payments cannot be finally determined on or before such day, the Company shall pay to the Executive on such day an estimate, as determined by the Executive, of the minimum amount of such payments to which the Executive is clearly entitled 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 than the thirtieth (30th) day after the relevant Determination Date. 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 the Executive, payable on the fifth (5th) business day after demand by the Company (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code).                   9.4    The Company also shall pay to the Executive all legal fees and expenses incurred by the Executive as a result of an event which entitles the Executive to the Severance Payments or any Gross-Up Payments (including all such fees and expenses, if any, incurred in disputing any such termination or in seeking in good faith to obtain or enforce any benefit or right 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 within five (5) business days after delivery of the Executive's written requests for payment accompanied with such evidence of fees and expenses incurred as the Company reasonably may require.          10.    Termination Procedures.                   10.1    Notice of Termination. During the Term of this Agreement, any purported termination of the Executive's employment (other than by reason of death) shall be communicated by written Notice of Termination from one party hereto to the other party hereto in accordance with Section 14 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 the Executive's employment under the provision so indicated. Further, a Notice of Termination for Cause is required to include a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters (3/4) of the entire membership of the Board at a meeting of the Board which was called and held for the purpose of considering such termination (after reasonable notice to the Executive and an opportunity for the Executive, together with the Executive's counsel, to be heard before the Board) finding that, in the good faith opinion of the Board, the Executive was guilty of conduct set forth in clause (i) or (ii) of the definition of Cause herein, and specifying the particulars thereof in detail.                   10.2    Date of Termination. "Date of Termination," with respect to any purported termination of the Executive's employment during the Term of this Agreement shall mean (i) if the Executive's employment is terminated by his death, the date of his death, (ii) if the Executive's employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that the Executive shall not have returned to the full-time performance of the Executive's duties during such thirty (30) day period), and (iii) if the Executive's employment is terminated for any other reason, the date specified in the Notice of Termination (which, in the case of a termination by the Company, shall not be less than thirty (30) days (except in the case of a termination for Cause) and, in the case of a termination by the Executive, shall not be less than fifteen (15) days nor more than sixty (60) days, respectively, from the date such Notice of Termination is given).          11.    No Mitigation. The Company agrees that, if the Executive's employment hereunder is terminated during the Term, the Executive is not required to seek other employment or to attempt in any way to reduce any amounts payable to the Executive by the Company hereunder. Further, the amount of any payment or benefit provided for hereunder (other than pursuant to Section 9.1(D) hereof) shall not be reduced by any compensation earned by the Executive as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Executive to the Company, or otherwise.          12.    Confidentiality and Noncompetition.                   12.1    The Executive will not, during or after the Term, disclose to any entity or person any information which is treated as confidential by the Company or any of its subsidiaries or affiliates and is not generally known or available in the market place, and to which the Executive gains access by reason of his position as an employee or director of the Company or any of its subsidiaries or affiliates (each, an "EE Entity").                   12.2    If, at any time prior to the end of the Term, the Executive terminates his own employment without Good Reason (and not in connection with his Disability, Retirement or death) or the Company terminates his employment with Cause, then for a twelve-month period immediately following his Date of Termination, the Executive shall not, except as permitted by the Company upon its prior written consent, enter, directly or indirectly, into the employ of or render or engage in, directly or indirectly, any services to any person, firm or corporation within the "Restricted Territory," which is a major competitor of any EE Entity with respect to products which any EE Entity is then producing or services any EE Entity is then providing (a "Competitor"). However, it shall not be a violation of the immediately preceding sentence for the Executive to be employed by, or render services to, a Competitor, if the Executive renders those services only in lines of business of the Competitor which are not directly competitive with the primary lines of business of any EE Entity or are outside of the Restricted Territory. For purposes of this Section 12.2, the "Restricted Territory" shall be the states of Connecticut, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island and Vermont.                   If, at any time in connection with or following a Change-in-Control, and prior to the end of the Term, the Executive terminates his own employment with Good Reason (and not in connection with his Disability or Retirement) or the Company terminates his employment without Cause, then for a twelve month period immediately following his Date of Termination, the Executive shall not enter into the employ of any person, firm or corporation or any affiliate thereof (as such term is defined in Rule 12b-2 of the Exchange Act) that caused the Change-in-Control.          13.    Successors; Binding Agreement.                   13.1    In addition to any obligations imposed by law upon any successor to the Company, 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 the Executive to compensation from the Company in the same amount and on the same terms as the Executive would be entitled to hereunder if the Executive were to terminate the Executive's employment for Good Reason, except that, for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination.                   13.2    This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive shall die while any amount would still be payable to the Executive hereunder (other than amounts which, by their terms, terminate upon the death of the Executive) if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the executors, personal representatives or administrators of the Executive's estate.          14.    Notices. 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 prepaid, addressed to 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, except that notice of change of address shall be effective only upon actual receipt: To the Company: Energy East Corporation Post Office Box 1196 Stamford, Connecticut 06904-1196 Attention: Corporate Secretary To the Executive: Kenneth M. Jasinski 145 Corlies Avenue Pelham, NY 10803          15.    Miscellaneous.                   15.1    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 the Executive and such officers as may be specifically designated by the Board. No waiver by any party hereto at any time of any breach by any 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 any party which are not expressly set forth in this Agreement. This Agreement sets forth the entire agreement of the parties hereto in respect of the subject matter contained herein and supersedes all prior agreements, promises, covenants, arrangements, communications, representations or warranties, whether oral or written, by any officer, employee or representative of any party hereto; and any prior agreement of the parties hereto in respect of the subject matter contained herein including without limitation the Employment Agreement between the Company and the Executive dated as of April 23, 1999, is hereby terminated and cancelled. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of New York. All references to sections of the Exchange Act or the Code shall be deemed also to refer to any successor provisions to such sections. There shall be withheld from any payments provided for hereunder any amounts required to be withheld under federal, state or local law and any additional withholding amounts to which the Executive has agreed. The obligations under this Agreement of the Company or the Executive which by their nature and terms require satisfaction after the end of the Term shall survive such event and shall remain binding upon such party.                   15.2    References in this Agreement to employee benefit plans, compensation plans, incentive plans, pension plans, disability policies or similar plans, programs or arrangements of the Company include such plans, programs or arrangements of NYSEG if maintained for the benefit of employees of the Company.          16.    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.          17.    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.          18.    Settlement of Disputes; Arbitration. All claims by the Executive for benefits under this Agreement shall be directed to and determined by the Board and shall be in writing. Any denial by the Board of a claim for benefits under this Agreement shall be delivered to the Executive in writing and shall set forth the specific reasons for the denial and the specific provisions of this Agreement relied upon. The Board shall afford a reasonable opportunity to the Executive for a review of the decision denying a claim and shall further allow the Executive to appeal to the Board a decision of the Board within sixty (60) days after notification by the Board that the Executive's claim has been denied. To the extent permitted by applicable law, any further dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in New York, New York 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.          19.    Definitions. For purposes of this Agreement, the following terms shall have the meaning indicated below:                   (A)   "AEIP" shall have the meaning stated in Section 9.1(A)(ii) hereof.                   (B)   "Base Salary" shall have the meaning stated in Section 5.1 hereof.                   (C)   "Beneficial Owner" shall have the meaning defined in Rule 13-d-3 under the Exchange Act.                   (D)   "Board" shall mean the Board of Directors of the Company.                   (E)   "Cause" for termination by the Company of the Executive's employment, for purposes of this Agreement, shall mean (i) the willful and continued failure by the Executive to substantially perform the Executive's duties with the Company (other than any such failure resulting from the Executive's incapacity due to physical or mental illness or any such actual or anticipated failure after the issuance of a Notice of Termination for Good Reason by the Executive pursuant to Section 10.1) after a written demand for substantial performance is delivered to the Executive by the Board, which demand specifically identifies the manner in which the Board believes that the Executive has not substantially performed the Executive's duties, or (ii) the willful engaging by the Executive in conduct which is demonstrably and materially injurious to the Company or its subsidiaries, monetarily or otherwise. For purposes of clauses (i) and (ii) of this definition, no act, or failure to act, on the Executive's part shall be deemed "willful" unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the Executive's act, or failure to act, was in the best interest of the Company.                   (F)   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 during the Term: (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 or any of its subsidiaries, 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.                   (G)   "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time.                   (H)   "Company" shall mean Energy East Corporation and any successor to its business and/or assets which assumes and agrees to perform this Agreement by operation of law, or otherwise (except in determining, under Section 19(F) hereof, whether or not any Change-in-Control of the Company has occurred in connection with such succession).                   (I)   "Date of Termination" shall have the meaning stated in Section 10.2 hereof.                   (J)   "Determination Date" shall have the meaning stated in Section 9.2(B) hereof.                   (K)   "Disability" shall be deemed the reason for the termination by the Company of the Executive's employment, if, as a result of the Executive's incapacity due to physical or mental illness, the Executive shall have been absent from the full-time performance of the Executive's duties with the Company for the maximum number of months applicable to the Executive under the Company's Disability Policy for Salaried Employees (or any successor policy) (but in no event for less than six (6) consecutive months), the Company shall have given the Executive a Notice of Termination for Disability, and, within thirty (30) days after such Notice of Termination is given, the Executive shall not have returned to the full-time performance of the Executive's duties.                   (L)   "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time.                   (M)   "Excise Tax" shall have the meaning stated in Section 9.2(A) hereof.                   (N)   "Executive" shall mean the individual named in the first paragraph of this Agreement.                   (O)   "Good Reason" for termination by the Executive of the Executive's employment shall mean the occurrence (without the Executive's express written consent) of any one of the following: (I)    the assignment to the Executive of any duties inconsistent with the Executive's status as Executive Vice President and General Counsel of the Company or a substantial alteration in the nature or status of the Executive's responsibilities from those in effect on the date hereof (including, without limitation, any such alteration after a Change-in-Control attributable to the fact that the Company may no longer be a public company), or a requirement that the Executive report to anyone other than Wesley W. von Schack or, following the death, Disability or Retirement of Wesley W. von Schack, his immediate successor as Chief Executive Officer of the Company; (II)    a reduction by the Company in the Executive's annual base salary as in effect on the date hereof or as the same may be increased from time to time; (III)    the relocation of the Company's Stamford, Connecticut executive offices to a location more than fifty (50) miles from the location of such offices on the date hereof or the Company's requiring the Executive to be based anywhere other than the Company's Stamford, Connecticut executive offices except for required travel on the Company's business to an extent substantially consistent with the Executive's present business travel obligations; (IV)    the failure by the Company, without the Executive's consent, to pay to the Executive any portion of the Executive's compensation, or to pay to the Executive 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; (V)    any other material breach of this Agreement by the Company; (VI)    after a Change-in-Control, the failure by the Company to continue the Executive's participation in any compensation plan in which the Executive participates on the date of the Change-in-Control which is material to the Executive's total compensation, including but not limited to the AEIP, NYSEG's Long Term Executive Incentive Share Plan and NYSEG's Supplemental Executive Retirement Plan, or any successor plan, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, on a basis not materially less favorable, both in terms of the amount of benefits provided and the level of the Executive's participation relative to other participants, as existed on the date of the Change-in-Control; (VII)    after a Change-in-Control, the failure by the Company to continue to provide the Executive with benefits not less favorable in the aggregate than those enjoyed by the Executive under any of the Company's pension, life insurance, medical, health and accident, or disability plans in which the Executive was participating on the date of the Change-in-Control, or the taking of any action by the Company which would directly or indirectly materially reduce any of such benefits; (VIII)    the giving by the Company to the Executive of a notice pursuant to Section 3 hereof that the Term shall not be extended; or (IX)    any purported termination of the Executive's employment which is not effected pursuant to a Notice of Termination satisfying the requirements of Section 10.1; for purposes of this Agreement, no such purported termination shall be effective. The Executive's right to terminate the Executive's employment for Good Reason shall not be affected by the Executive's incapacity due to physical or mental illness. The Executive'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. In addition, a termination of the Executive's employment by the Executive, regardless of the reason, during the 30-day period immediately following the first anniversary of a Change-in-Control shall be deemed to be a termination for Good Reason for all purposes of this Agreement.                   (P)   "Gross-Up Payment" shall have the meaning stated in Section 9.2(A) hereof.                   (Q)   "Notice of Termination" shall have the meaning stated in Section 10.1 hereof.                   (R)   "NYSEG" shall mean New York State Electric & Gas Corporation.                   (S)   "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.                   (T)   "Retirement" shall be deemed the reason for the termination by the Company or the Executive of the Executive's employment if such employment is terminated in accordance with the Company's retirement policy, not including early retirement, generally applicable to its salaried employees, or in accordance with any retirement arrangement established with the Executive's consent with respect to the Executive.                   (U)   "Retires" shall, for purposes of the second paragraph of Section 5.2 hereof, refer to the termination of the Executive's employment in accordance with the Company's retirement policy, not including early retirement (except that, on October 15, 2008, and thereafter, the Executive shall be deemed to have satisfied any normal retirement age requirement of that retirement policy), generally applicable from time to time to its salaried employees, or in accordance with any retirement arrangement established with the Executive's consent with respect to the Executive.                   (V)   "Severance Payments" shall mean those payments described in Section 9.1 hereof.                   (W)   "Term" shall have the meaning stated in Section 3 hereof.              IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date first above written. ENERGY EAST CORPORATION By:  /s/ Wesley W. von Schack                         Wesley W. von Schack      Chairman, President, and Chief Executive Officer   /s/ Kenneth M. Jasinski                                KENNETH M. JASINSKI

QuickLinks -- Click here to rapidly navigate through this document TRANSITION AGREEMENT     This Agreement is entered into between Labor Ready, Inc. and its subsidiaries (collectively referred to as "Labor Ready") and Glenn A. Welstad ("Mr. Welstad") in connection with Mr. Welstad's resignation from Labor Ready. The parties agree as follows:     1.  Mr. Welstad hereby submits his resignation as Chairman of the Company effective June 30, 2000. Labor Ready accepts Mr. Welstad's resignation and waives any notice requirement under Paragraph 11(b) of his Executive Employment Agreement (as defined below). Mr. Welstad also hereby submits his resignation as a Director of Labor Ready effective as of June 30, 2000.     2.  Mr. Welstad, on behalf of himself, his marital community, his heirs, executors, administrators and assigns, does hereby waive and release Labor Ready, Inc., its affiliates and related entities, their predecessors, their successors and assigns, their present and former officers, employees, agents and attorneys, (collectively referred to as the "released parties"), both individually and in their representative capacities, from any and all claims (including claims to attorneys' fees), damages, causes of action, or disputes, whether presently known or unknown, occurring or which could be alleged to have occurred on the date of or prior to the execution of this Agreement. This release does not include claims, if any, for vested retirement benefits, or any claim that cannot be lawfully released in this Agreement. Nothing in this Agreement limits or releases any indemnification rights as an officer, director or employee of Labor Ready.     3.  Labor Ready hereby releases Mr. Welstad from any and all claims whether known or unknown, based upon acts or omissions occurring on or before the execution of this Agreement. Nothing in this Agreement limits or waives any indemnification rights or releases any claim based upon acts or omissions which would constitute dishonesty or a crime.     4.  The Executive Employment Agreement between Mr. Welstad and Labor Ready dated as of June 8, 1999 is hereby modified as follows: 4.1Labor Ready shall continue to make the payments provided for in Paragraph 9 (b) for the remainder of the 10 year term provided for therein. 4.2Notwithstanding Paragraph 9 (c) repayment of premiums shall not be required as a result of Mr. Welstad's resignation. The parties agree to execute appropriate documentation to assure that no payments of the cash surrender value will be made to Mr. Welstad until Labor Ready has received reimbursement of its premium payments in accordance with the existing agreements. 4.3Compensation as provided for in Paragraph 3 or otherwise shall cease as of June 30, 2000. 4.4Labor Ready shall continue to provide Mr. Welstad with medical and dental benefits on the same basis generally applicable to employees of Labor Ready until June 30, 2001. 4.5For avoidance of doubt Paragraphs 1, 2, 3, 4, 5, 6, 7, 10 and 11 will cease to have further effect as of June 30, 2000; Paragraphs 12 through 24 shall continue to be in effect; and Paragraphs 8 and 9 shall continue in accordance with the provisions of this Section 4.     5.  Labor Ready shall redeem the shares of Series A Preferred Stock owned by Mr. Welstad in accordance with the terms provided for in the Labor Ready Articles of Incorporation and other governing documents. Alternatively, Labor Ready may designate an individual or entity to purchase such shares on the same terms and conditions. Labor Ready will make its best efforts to complete the redemption or repurchase as soon as practicable with a goal to complete the redemption or repurchase of the shares within 30 days subject to regulatory and notice requirements. --------------------------------------------------------------------------------     6.  Mr. Welstad agrees that he has carefully read the Agreement; knows its contents; has discussed it and its effect with his attorney or personal advisor; has been afforded ample and adequate opportunity to review and analyze this entire agreement; understands its contents and its final and binding effect; and has signed it as his free and voluntary act.     7.  This Agreement shall be binding on Mr. Welstad only if the Press Release provided to the media is identical to exhibit "a" attached hereto, initialed and dated by Mr. Welstad. Date: July 2, 2000     /s/     -------------------------------------------------------------------------------- Glenn A. Welstad           LABOR READY, INC.   Date: July 2, 2000       By   /s/     -------------------------------------------------------------------------------- Robert J. Sullivan -------------------------------------------------------------------------------- QUICKLINKS TRANSITION AGREEMENT

QuickLinks -- Click here to rapidly navigate through this document -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- ASSET PURCHASE AGREEMENT between WESTERN POWER & EQUIPMENT, L.L.C., and WESTERN POWER & EQUIPMENT CORP. -------------------------------------------------------------------------------- Dated as of November 1, 2000 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- --------------------------------------------------------------------------------     This ASSET PURCHASE AGREEMENT (this "Agreement") is entered into as of the 1st day of November, 2000 by and between WESTERN POWER & EQUIPMENT, L.L.C., a Delaware limited liability company ("Purchaser") and WESTERN POWER & EQUIPMENT CORP., a Delaware corporation ("Seller" and, together with Purchaser, the "Parties"). R E C I T A L S     A.  Seller owns all of the issued and outstanding capital stock of Western Power & Equipment Corp. ("Subsidiary"), an Oregon corporation, (the "Shares") which is engaged in the business of selling and leasing construction equipment.     B.  Purchaser desires to purchase from Seller and Seller desires to sell to Purchaser substantially all of the assets of Seller, including, without limitation, the Shares, and Purchaser agrees to assume substantially all of the liabilities of Seller in accordance with the terms and conditions of this Agreement.     NOW, THEREFORE, in consideration of the mutual covenants, representations, warranties and promises contained herein, the Parties hereby agree as follows: ARTICLE 1 DEFINITIONS     1.1 "Acquired Assets" has the meaning set forth in Section 2.2 below.     1.2 "Affiliate" has the meaning set forth in Rule 12b-2 of the regulations promulgated under the Securities Exchange Act.     1.3 "Ancillary Agreements" means the Bill of Sale, the Assumption Agreement, the Purchase Price Promissory Note, the Security Agreement and the Employment Agreements.     1.4 "Approval" means any approval, authorization, consent, qualification, or registration, or any waiver of any of the foregoing, required to be obtained from, or any notice, statement or other communication required to be filed with or delivered to, any Person.     1.5 "Approval Cure Agreement" means one or more agreements described in Section 8.1 below.     1.6 "Assumed Liabilities" has the meaning set forth in Section 2.4 below.     1.7 "Assumption Agreement" has the meaning set forth in Section 11.2(a) below.     1.8 "Closing" has the meaning set forth in Article 4 below.     1.9 "Closing Date" has the meaning set forth in Article 4 below.     1.10  "Code" means the Internal Revenue Code of 1986, as amended.     1.11  "Employee Benefit Plan" means any (a) nonqualified deferred compensation or retirement plan or arrangement, (b) qualified defined contribution retirement plan or arrangement which is an Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or arrangement which is an Employee Pension Benefit Plan (including any Multiemployer Plan), or (d) Employee Welfare Benefit Plan.     1.12  "Employee Pension Benefit Plan" has the meaning set forth in ERISA Sec. 3(2).     1.13  "Employee Welfare Benefit Plan" has the meaning set forth in ERISA Sec. 3(1).     1.14  "Employment Agreement" has the meaning set forth in Section 9.10 below.     1.15  "ERISA" means the Employee Retirement Income Security Act of 1974, as amended.     1.16  "Excluded Assets" has the meaning set forth in Section 2.3 below.     1.17  "Excluded Liabilities" has the meaning set forth in Section 2.5 below. --------------------------------------------------------------------------------     1.18  "FIRPTA Certificate" means a certificate executed by an appropriate officer of Seller stating that Seller is not a "foreign person" for purposes of Section 1445 of the Code and providing such other information that may be required to avoid the withholding of tax under Section 1445.     1.19  "GAAP" means United States generally accepted accounting principles as in effect from time to time.     1.20  "Governmental Authority" means any government or any agency, bureau, board, commission, court, department, official, political subdivision, tribunal or other instrumentality of any government, whether federal, state or local, domestic or foreign.     1.21  "Income Tax" or "Income Taxes" means any federal, state, local or foreign income tax, franchise tax, gross income tax or similar income tax, including any interest, addition or penalty thereon, whether disputed or not, but excluding any Transfer Taxes.     1.22  "Intellectual Property" means (a) all inventions (whether patentable or unpatentable and whether or not reduced to practice), all improvements thereto, and all patents, patent applications, and patent disclosures, together with all reissuances, continuations, continuations-in-part, revisions, extensions, and reexaminations thereof, (b) all trademarks, service marks, trade dress, logos, and trade names (including, without limitation, the name "Western Power & Equipment"), together with all translations, adaptations, derivations, and combinations thereof and including all goodwill associated therewith, and all applications, registrations, and renewals in connection therewith, (c) all copyrightable works, all copyrights, and all applications, registrations, and renewals in connection therewith, (d) all mask works and all applications, registrations, and renewals in connection therewith, (e) all trade secrets and confidential business information (including, research, know-how, formulae, compositions, manufacturing and production processes and techniques, technical data, designs, drawings, specifications, customer and supplier lists, mailing lists, pricing and cost information, and business and marketing plans and proposals), and (f) all computer software (including data and related documentation).     1.23  "Law" means any federal, state, local, municipal, foreign, international, multinational, or other administrative order, constitution, law, ordinance, principle of common law, regulation, statute or treaty.     1.24  "Liability" means any liability, whether known or unknown, asserted or unasserted, absolute or contingent, accrued or unaccrued, liquidated or unliquidated, and due or to become due, of any nature whatsoever, and any costs, expenses or damages.     1.25  "Lien" means any charge, claim, encumbrance, lien, option, pledge, security interest or right of first refusal, including without limitation any (a) mechanics, materialmen or similar lien relating to repairs or improvements to real or personal property, (b) lien for Taxes and (c) lien securing rental payments under any lease agreement.     1.26  "Material Adverse Effect" means a material adverse effect on the assets, business, condition (financial or otherwise), operations or prospects of Seller or Subsidiary.     1.27  "Merger Agreement" has the meaning set forth in Section 10.9 below.     1.28  "Mergers" has the meaning set forth in Section 9.7.     1.29  "Parties" has the meaning set forth in the preface above.     1.30  "Person" means an individual, a partnership, a limited liability company, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, or a governmental entity (or any department, agency, or political subdivision thereof).     1.31  "Prohibited Transaction" has the meaning set forth in ERISA Sec. 406 and Code Sec. 4975.     1.32  "Purchase Price" has the meaning set forth in Section 3.1 below.     1.33  "Purchaser" has the meaning set forth in the preface above. --------------------------------------------------------------------------------     1.34  "Securities Act" means the Securities Act of 1933, as amended.     1.35  "Securities Exchange Act" means the Securities Exchange Act of 1934, as amended.     1.36  "Seller" has the meaning set forth in the preface above.     1.37  "Shares" has the meaning set forth in the recitals above.     1.38  "Subsidiary" has the meaning set forth in the recitals above.     1.39  "Tax" or "Taxes" means any federal, state, local, or foreign income, gross receipts, branch profits, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, ad valorem, excise, customs duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, business, occupational, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition thereto, whether disputed or not, imposed, assessed or collected by or under the authority of any Governmental Authority or payable pursuant to any tax-sharing agreement or any other contract relating to the sharing or payment of any such tax.     1.40  "Tax Return" means any return, declaration, report, claim for refund, form or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.     1.41  "Threatened" means a claim, proceeding, dispute, action, or other matter in respect of which any demand or statement has been made (orally or in writing) or any notice has been given (orally or in writing), or if any other event has occurred or any other circumstances exist, that would lead a prudent Person to conclude that such a claim, proceeding, dispute, action, or other matter is likely to be asserted, commenced, taken, or otherwise pursued in the future.     1.42  "Transfer Taxes" or "Transfer Tax" means all excise, sales, use, transfer, real estate transfer, value added, documentary, stamp registration and similar Taxes and fees (but not Income Taxes), together with any interest, additions, or penalties, resulting directly from the sale and transfer by Seller to Purchaser of the Acquired Assets and Assumed Liabilities. ARTICLE 2 SALE OF ASSETS     2.1  Purchase and Sale of Assets.  On the terms and conditions set forth in this Agreement, at the Closing, Seller shall sell, transfer, assign, convey, and deliver to Purchaser, and Purchaser shall purchase and acquire from Seller, all of the right, title and interest of Seller in and to the Acquired Assets.     2.2  Definition of Acquired Assets.  The Acquired Assets consist of all of Seller's right, title and interest in, to and under all of the assets, capital stock, cash, properties, interests, contracts and claims of every kind and description, wherever located, owned, used or held by Seller, real, personal or mixed, tangible or intangible, with such changes, deletions or additions thereto as may occur from the date of this Agreement to the Closing and consistent with the terms and conditions of this Agreement, including but not limited to Seller's right, title and interest in and to the Shares, but in all cases excluding any Excluded Assets (collectively, the "Acquired Assets").     2.3  Excluded Assets.  The assets of Seller being excluded from the Assets sold, conveyed and transferred to Purchaser (collectively, the "Excluded Assets") are the following:     (a) the corporate charter, qualifications to conduct business as a foreign corporation, taxpayer identification numbers, seals, minute books, stock transfer books, blank stock certificates, and other documents relating to the organization, maintenance, and existence of Seller as a corporation;     (b) all portions of all books, records, ledgers, files, documents and correspondence which relate solely or in part to Excluded Assets or Excluded Liabilities; --------------------------------------------------------------------------------     (c) all of Seller's right, title and interest in, to and under this Agreement, the Ancillary Agreements and all related documents;     (d) all claims, causes of action, counterclaims, and proceeds of insurance which relate to Excluded Liabilities or Excluded Assets, in each case as listed on Schedule 2.3(d); and     (e) an amount of cash, if any, equal to the difference between (i) $450,000, and (ii) (A) the amount of Seller's costs and expenses incurred with respect to this Agreement, the Ancillary Agreements, the Merger Agreement and all exhibits and schedules attached hereto and thereto, and the transactions contemplated hereby and thereby, plus (B) the amount of Purchaser's fees and expenses which are payable to Kaye, Scholer, Fierman, Hays & Handler, LLP ("KS"); provided, however, that for purposes of this calculation, the amount payable to KS may not exceed $75,000.     2.4  Assumption of Certain Liabilities.  At the Closing, Purchaser shall assume, pay, perform, defend and discharge, if and when due, to the extent not paid, performed, defended or discharged on or prior to the Closing Date, all of Seller's liabilities incurred on or prior to the Closing Date, other than Excluded Liabilities (collectively, the "Assumed Liabilities").     2.5  Excluded Liabilities.  Purchaser shall not be obligated to assume, and Seller agrees and acknowledges that Purchaser is not assuming, "Excluded Liabilities," defined to mean Liabilities, obligations and expenses of Seller relating to obligations and Liabilities of Seller under Article 12 of this Agreement. ARTICLE 3 CONSIDERATION     3.1  Purchase Price and Payment.  The aggregate consideration for the transfer of the Acquired Assets hereunder shall be equal to $4,100,000 (the "Purchase Price"). At the Closing, Purchaser shall pay the Purchase Price by executing a promissory note substantially in the form of Exhibit A hereto (the "Purchase Price Promissory Note") and causing Subsidiary to execute and deliver to Seller a security agreement securing the Purchase Price Promissory Note substantially in the form of Exhibit B hereto (the "Security Agreement").     3.2  Allocation of Purchase Price.  The aggregate amount of the Purchase Price and any Assumed Liabilities that are properly included in Purchaser's tax basis for the Acquired Assets shall be allocated as determined and agreed upon by the Parties in accordance with the requirements of Section 1060 of the Code. To facilitate such agreement, Purchaser shall provide a schedule of allocations to Seller within 120 days following the Closing Date and deliver same to Seller, whose approval shall not be unreasonably delayed or withheld, absent manifest error. Such allocations shall be used by the Parties in preparing and filing all relevant Tax Returns, and the Parties agree to cooperate with each other in good faith in preparing any such Tax Returns, including IRS Form 8594 (or any successor form) and any required exhibits thereto (or other forms required pursuant to Section 1060 of the Code, or other applicable tax laws); provided, however, that in determining the adjusted basis of Purchaser with respect to any of the Acquired Assets, Purchaser may increase the amount allocated to any of the Acquired Assets to the extent permissible under applicable tax laws for Purchaser's additional costs and expenses that are neither actually received nor treated as received by Seller pursuant to such tax laws. ARTICLE 4 CLOSING     4.1  Closing.  The consummation of the transactions contemplated by this Agreement (the "Closing") shall take place at the offices of Mintz & Fraade, P.C. within [five] days of the satisfaction or waiver of all conditions precedent of Purchaser and Seller, as set forth in Articles 9 and 10, respectively, or at such other time, date or place as Purchaser and Seller mutually may agree (the -------------------------------------------------------------------------------- "Closing Date"). The parties intend that the Closing will occur simultaneously with the closing of the Mergers.     4.2  Delivery and Payment.  On the Closing Date, Purchaser and Seller shall deliver to each other such documents as are required pursuant to Articles 9 and 10 hereof, including delivery by Seller of all instruments and certificates necessary to transfer to Purchaser all right, title and interest in and to the Acquired Assets, including, without limitation, the Shares, and Purchaser shall deliver to Seller the Purchase Price in the manner set forth in Section 3.1. ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF SELLER     Seller represents and warrants to Purchaser as of the date of this Agreement and as of the Closing Date as follows:     5.1  Organization of Seller.  Seller is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware and Subsidiary is a corporation duly organized, validly existing, and in good standing under the laws of the State of Oregon.     5.2  Authority of Seller.  Seller has full corporate power and authority to execute, deliver, and perform this Agreement and the Ancillary Agreements to which it is a party and has taken all corporate action required by Law and its organizational documents to authorize the execution and delivery of this Agreement and the Ancillary Agreements to which it is a party and the consummation of the transactions contemplated by this Agreement and the Ancillary Agreements, subject to obtaining approval of the shareholders of Seller. This Agreement and the Ancillary Agreements to which Seller is a party and all instruments and documents required to be executed and delivered by Seller pursuant to this Agreement and the Ancillary Agreements and the consummation by Seller of the transactions contemplated by this Agreement and the Ancillary Agreements have been duly and validly authorized by the board of directors of Seller, and, except for Seller obtaining approval of its stockholders, no other corporate proceedings on the part of Seller or Subsidiary are necessary to authorize this Agreement or the Ancillary Agreements or to consummate the transactions contemplated hereby or thereby. Each of this Agreement and the Ancillary Agreements to which Seller is a party constitutes a valid and binding agreement of Seller enforceable against Seller in accordance with its terms, subject to Seller obtaining approval of its stockholders (except as the enforceability thereof may be limited by bankruptcy, bank moratorium or similar laws affecting creditors' rights generally and laws restricting the availability of equitable remedies and may be subject to general principles of equity whether or not such enforceability is considered in a proceeding at Law or in equity).     5.3  Capitalization.  Seller is the lawful record and beneficial owner of the Shares and owns the Shares free and clear of all Liens. Upon delivery of the Shares, Purchaser will acquire the record, beneficial and legal title to the Shares, free and clear of all Liens. Except as set forth on Schedule 5.3, no legend or other reference to any purported Lien appears on any certificate representing the Shares. Except for the Shares, as of the Closing, Subsidiary shall not have outstanding any capital stock or securities convertible or exchangeable for any shares of its capital stock, nor shall it have outstanding any rights or options to subscribe for or to purchase its capital stock or any stock or securities convertible into or exchangeable for its capital stock or any stock appreciation rights or phantom stock plans. There are no statutory or contractual stockholders' preemptive rights or rights of refusal with respect to the sale or issuance of Subsidiary's capital stock.     5.4  Absence of Conflicts.  The execution and delivery by Seller of this Agreement and the Ancillary Agreements to which it is a party and all other instruments and documents required to be executed by Seller pursuant to this Agreement and the Ancillary Agreements, the transfer of the Acquired Assets and assumption of the Assumed Liabilities, and the consummation by Seller of the transactions contemplated by this Agreement and the Ancillary Agreements do not and shall not conflict with or result in a breach of any provision of Seller's certificate of incorporation or bylaws. Seller has no knowledge that any of the following will cause Seller or Subsidiary to violate or -------------------------------------------------------------------------------- contravene any provision of Law or any rule or regulation of any Governmental Authority: the execution and delivery by Seller of this Agreement and the Ancillary Agreements to which Seller is a party; the execution and delivery by Seller of all other instruments and documents required to be executed by Seller and/or Subsidiary pursuant to this Agreement and the Ancillary Agreements; the transfer of the Acquired Assets, including, without limitation, the Shares; and the consummation by the Seller of the transactions contemplated by this Agreement and the Ancillary Agreements.     5.5  Title to Assets; Condition of Assets.  Except as set forth in Schedule 5.5, Seller has good and marketable title to each of the Acquired Assets owned by it, and the Acquired Assets which are owned by Seller are owned free and clear of all Liens, claims, and encumbrances, except for Liens for current Taxes not yet due or payable.     5.6  No Finder or Broker.  None of E-Mobile, Inc., E-Mobile Holdings, Inc. or any party acting on behalf of either of the foregoing has paid or has become obligated to pay any fee or commission to any broker, finder or intermediary, for or on account of the transactions contemplated by this Agreement.     5.7  Accuracy of Representations and Warranties.  All representations and warranties of Seller set forth in this Agreement and in any agreement, certificate or other document required to be delivered or given to Purchaser by Seller pursuant to this Agreement or referred to in this Agreement or in any such other agreement, certificate or document will be true and correct at the Closing Date with the same force and effect as if made on that date.     5.8  Disclosure.  No representation or warranty contained in this Agreement and none of the information furnished by Seller set forth herein, in the exhibits or schedules hereto or in any other document required to be delivered by Seller or Subsidiary to Purchaser, or its accountants, counsel or other advisers pursuant to this Agreement or referred to in this Agreement or in any such other document, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements herein or therein not misleading. ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF PURCHASER     Purchaser represents and warrants to Seller as of the date of this Agreement and as of the Closing Date as follows:     6.1  Organization of Purchaser.  Purchaser is a limited liability company duly organized, validly existing, and in good standing under the laws of the State of Delaware, with all requisite power and authority to carry on its business.     6.2  Authority of Purchaser.  Purchaser has full power and authority to execute, deliver, and perform this Agreement and the Ancillary Agreements to which Purchaser is a party and has taken all action required by Law and its organizational documents to authorize the execution and delivery of this Agreement and the Ancillary Agreements to which Purchaser is a party and the consummation of the transactions contemplated by this Agreement and the Ancillary Agreements. This Agreement and the Ancillary Agreements to which Purchaser is a party and all instruments and documents required to be executed and delivered by Purchaser pursuant to this Agreement and the Ancillary Agreements to which Purchaser is a party, and the consummation by Purchaser of the transactions contemplated by this Agreement and the Ancillary Agreements to which Purchaser is a party, have been duly and validly authorized, executed, and delivered by Purchaser, and each constitutes a valid and binding obligation of Purchaser enforceable in accordance with their terms (except as the enforceability thereof may be limited by bankruptcy, bank moratorium or similar laws affecting creditors' rights generally and laws restricting the availability of equitable remedies and may be subject to general principles of equity whether or not such enforceability is considered in a proceeding at Law or in equity). --------------------------------------------------------------------------------     6.3  Absence of Conflicts.  The execution and delivery by Purchaser of this Agreement and the Ancillary Agreements to which Purchaser is a party and all other instruments and documents required to be executed by Purchaser pursuant to this Agreement and the Ancillary Agreements to which Purchaser is a party, the acquisition of the Acquired Assets and assumption of the Assumed Liabilities, and the consummation by Purchaser of the transactions contemplated by this Agreement and the Ancillary Agreements to which Purchaser is a party (a) do not and will not conflict with or result in a breach of any provision of Purchaser's certificate of formation or operating agreement, (b) do not and will not conflict with or result in a breach of contract to which Purchaser is a party or by which its assets are bound, (c) do not result in a breach of and will not result in any Prohibited Transaction nor cause Purchaser to violate or contravene any provision of Law, any governmental rule or regulation or any order, writ, judgment, injunction, decree, determination or award, and (d) will not require any Approval on the part of Purchaser.     6.4  Litigation and Administrative Proceedings.  There are no material legal, judicial, administrative, or arbitration actions or proceedings filed, or charges or other actions, proceedings, or governmental investigations pending or, to the knowledge of Purchaser, Threatened against Purchaser which, if adversely determined, would materially and adversely affect the business or financial condition of Purchaser or which seeks to enjoin or obtain damages with respect to the consummation of the transactions contemplated by this Agreement.     6.5  No Finder or Broker.  Neither Purchaser nor any party acting on Purchaser's behalf has paid or has become obligated to pay any fee or commission to any broker, finder or intermediary for or on account of the transactions contemplated by this Agreement.     6.6  Accuracy of Representations and Warranties.  All representations and warranties of Purchaser set forth in this Agreement and in any agreement, certificate or other document required to be delivered or given to Seller by Purchaser pursuant to this Agreement or referred to in this Agreement or in any such other agreement, certificate or document will be true and correct at the Closing Date with the same force and effect as if made on that date.     6.7  Disclosure.  No representation or warranty contained in this Agreement and none of the information furnished by Purchaser set forth herein, in the exhibits or schedules hereto or in any other document required to be delivered by Purchaser to Seller, or its accountants, counsel or other advisers pursuant to this Agreement or referred to in this Agreement or in any such other document, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements herein or therein not misleading. ARTICLE 7 COVENANTS OF SELLER     Seller covenants with Purchaser as follows:     7.1  Change of Name.  Seller agrees from and after the Closing Date, to cease any and all use of any of the Seller's and Subsidiary's Intellectual Property, and Seller will, on the Closing Date, amend its corporate charter to change its corporate name to one not including the words "Western Power & Equipment" or any element or portion thereof, or any other confusingly similar name.     7.2  Transfer Taxes.  All Transfer Taxes shall be borne by Seller when due, and Seller shall file all necessary Tax Returns and other documentation with respect to all such Transfer Taxes and shall pay all expenses in connection therewith.     7.3  Further Assurances.  Effective upon the Closing, Seller hereby authorizes Purchaser, and its permitted successors and assigns, in the name of Purchaser, or in the name of Seller, on behalf of, and for the benefit of, Purchaser, to collect all accounts receivable included in the Acquired Assets and other items being transferred, conveyed and assigned to Purchaser as part of, the Acquired Assets, to endorse, without recourse, checks, notes and other instruments in the name of Seller that constitute Acquired Assets, to institute and prosecute, in the name of Seller or otherwise, all proceedings which -------------------------------------------------------------------------------- Purchaser may deem proper in order to collect, assert or enforce any claim, right or title of any kind in or to the Acquired Assets and to defend, subject to Article 12 below, legal proceedings relating thereto. Seller further agrees that Purchaser shall retain for its own account any amounts collected pursuant to the foregoing authorization, and Seller shall promptly transfer and deliver to Purchaser any cash or other property received by Seller after the Closing Date in respect of any accounts receivable included in the Acquired Assets, if any. Seller further agrees to notify, immediately after the Closing, all financial institutions at which it conducts business that Purchaser has acquired the Acquired Assets and that such financial institutions shall deliver to Purchaser all monies collected and to be collected by such institutions relating to the Acquired Assets from and after the Closing Date.     7.4  Books; Records; Access.  At the Closing, Seller shall deliver to Purchaser all the Books and Records of Seller and Subsidiary relating to the Acquired Assets. Until the sixth anniversary of the Closing Date, Purchaser and Seller agree to retain all Books and Records pertaining to the Acquired Assets and Subsidiary in existence on the Closing Date and to make the same available after the Closing Date for inspection and copying by the other or its agents at such Party's expense, upon reasonable request and upon reasonable notice.     7.5  Competition and Solicitation.       (a) In consideration of Purchaser's obligations hereunder, for a period of five years from the Closing Date, each of Seller and its Affiliates shall not anywhere in the United States, in any capacity, whether for its own account or for any other person or organization, directly or indirectly, with or without compensation, (i) own, operate, manage, or control, or (ii) serve as a partner, agent, consultant, advisor or developer or in any similar capacity to or (iii) have any financial interest in, or aid or assist anyone else in the conduct of, any person or enterprise which competes with any product line of or service offered by Subsidiary at the time of the Closing, provided, however, that Seller and its Affiliates shall be permitted to have an ownership interest in a publicly-held corporation, which does not exceed two percent (2%) of the issued and outstanding shares of such publicly-held corporation.     (b) For a period of five years from the Closing Date, none of Seller or any of its Affiliates shall offer any product or service which is competitive with the products or services offered by Seller or Subsidiary prior to the Closing.     (c) For a period of five years from the Closing Date, none of Seller or any of its Affiliates shall, directly or indirectly, call upon, solicit, divert, take away or attempt to solicit any employee of Purchaser or Subsidiary with a view to inducing or encouraging such employee to leave the employ of Purchaser or Subsidiary.     (d) Seller acknowledges that the provisions of this Section 7.6 are reasonable, fair and equitable in scope, term and duration, are necessary to protect the legitimate business interests of Purchaser, and are necessary for the protection of Purchaser and that Purchaser will be irrevocably damaged if such covenants are not specifically enforced. Accordingly, Seller agrees that it will not challenge the enforceability of this Section or any provision hereof nor will it raise any equitable defenses to such enforcement and that, in addition to any other relief to which Purchaser may be entitled in the form of actual or punitive damages, Purchaser shall be entitled to seek and obtain injunctive relief from a court of competent jurisdiction for the purpose of restraining Seller from any actual or Threatened breach of such covenants. To the extent that a court finds that any provision hereof is unenforceable, such court shall seek to enforce the intention of the Parties as set forth herein to the greatest extent allowable by Law.     7.6  Shareholder Approval.  Seller shall take all actions necessary to obtain shareholder approval of the transactions contemplated by this Agreement in accordance with Delaware General Corporation Law, Oregon Corporation Law, the rules and regulations of the National Association of Securities Dealers, all federal and state securities laws and all other applicable laws. -------------------------------------------------------------------------------- ARTICLE 8 MUTUAL COVENANTS     8.1  Best Efforts.  Purchaser and Seller each shall use their best efforts to perform or satisfy each covenant or condition to be performed or satisfied by each of them before and after the Closing, including without limitation obtaining the Approvals listed on Schedule 9.4. If any of the Approvals listed on Schedule 9.4 is not obtained prior to the Closing Date, at Purchaser's option, Purchaser and Seller shall enter into one or more agreements in form and substance reasonably satisfactory to each Party (such as service agreements, sublease agreements, or independent contractor agreements; any one or more of the foregoing, an "Approval Cure Agreement") which will permit the transactions contemplated hereby to be consummated and pursuant to which Purchaser will have the ability to operate Subsidiary's business on terms that are no more burdensome or costly to Purchaser or Seller than the terms which would have existed had such Approvals been obtained. To the extent necessary to effectuate the foregoing, Seller shall agree to act as agent for, and to act for the account of, Purchaser. In any such case, Purchaser and Seller shall continue, subsequent to the Closing Date, to use their best efforts to obtain any such Approvals which have not been obtained prior to the Closing Date. Notwithstanding the foregoing, none of Purchaser or Seller shall be obligated to enter into any agreement or take any action or refrain from taking any action which would result in any material breach of any agreement to which Purchaser or Seller is a party, or by which its assets are bound or would result in a violation of any Law, regulation, order, permit, or similar requirement of any Governmental Authority.     8.2  Governmental Filings.  Purchaser and Seller shall, and Seller shall cause Subsidiary to, cooperate with each other in filing any necessary applications, reports, government novations, assignments or other documents with any governmental authority having jurisdiction with respect to the transactions contemplated by this Agreement and in seeking necessary consultation with and favorable action by any such authority, in all cases, at Purchaser's expense. For purposes of this Section 8.2, "necessary applications" includes any document which must be filed in order either to transfer from Seller to Purchaser a license, permit, or governmental authorization necessary to operate Subsidiary's business or to apply for and successfully prosecute an application for a new license, permit or governmental authorization in the name of Purchaser.     8.3  Delivery of Documents.  The Parties will execute and deliver all documents required to be delivered pursuant to Sections 11.1 and 11.2 below.     8.4  Notice of Developments and Updates.  Each Party will give prompt written notice to the other Party of any act, event or occurrence that may cause or constitute a breach of any of its own representations and warranties in Article 5 and Article 6 above. Each Party shall have the right to correct or supplement the Schedules attached hereto to disclose matters that were not required to be disclosed as of the date of this Agreement and which arose after the date of this Agreement other than as a result of a breach by the disclosing party of any representation, warranty, covenant or obligation under this Agreement; provided, however, any correction or supplement that relates to a matter which, if not corrected, would have caused the representations and warranties in Article 5 or Article 6 not to be true, shall be subject to the other Party's prior written consent (and, otherwise, such consent is not required).     8.5  Cooperation After Closing.  After the Closing Date, Purchaser and Seller shall execute, acknowledge, and deliver, or cause to be executed, acknowledged, and delivered, any and all further instruments as may be necessary or expedient to consummate the transactions provided in this Agreement.     8.6  No Public Announcement.  None of the Parties hereto shall without the approval of the other Party (which may not be unreasonably withheld), and Seller shall not permit Subsidiary without Purchaser's approval (which may not be unreasonably withheld) to, make any press release or other public announcement or communicate with any customer, competitor or supplier of Seller or Subsidiary concerning the transactions contemplated by this Agreement, except as and to the extent that such -------------------------------------------------------------------------------- Party shall determine is required by Law (which determination shall be made by such Party based upon the advice of its counsel), in which case the other Party shall be advised and the Parties shall use their best efforts to cause a mutually agreeable release or announcement to be issued.     8.7  Successor Employee.  Seller and Purchaser agree that pursuant to the "Alternate Procedure" provided in Section 5 of Revenue Procedure 96-60, 1996-2 C.B. 399, with respect to preparing, filing and furnishing Internal Revenue Service Forms W-2, W-3, W-4, 941 and W-5, Seller and Purchaser shall report using the "Alternate Procedure" as set forth therein.     8.8  Confidentiality.  Subject to compliance by each Party with federal securities laws, from and after the date of this Agreement, Purchaser and Seller shall, and Seller shall cause Subsidiary to, maintain in confidence, and shall cause their respective directors, officers, employees, agents, advisors and Affiliates to maintain in confidence, any written, oral or other information obtained in confidence from another Party or Subsidiary in connection with this Agreement or the transactions contemplated hereby. If the transactions contemplated hereby are not consummated, each Party shall, and Seller shall cause Subsidiary to, return or destroy as much of such written information as the other Party may reasonably request.     8.9  Registrations; Consents; Filings.  Purchaser and Seller shall, and Seller shall cause Subsidiary to, cooperate and use their respective best efforts to make all registrations, filings and applications, to give all notices and to obtain the Approvals set forth on Schedule 9.4 or any other governmental consents, transfers, approvals, orders, qualifications and waivers necessary for the consummation of the transactions contemplated hereby, except that none of Seller, Purchaser or Subsidiary shall be required to incur any significant current or future expense or liability or to consent to any modification of the terms of any contract which, taking into account the nature of Purchaser, Seller, Subsidiary and Subsidiary's business, is significant.     8.10  Employee Benefits.       (a) Effective as of the Closing Date, Purchaser and Seller shall take all actions necessary for Purchaser to assume the sponsorship of any Employee Benefit Plans maintained by Seller that were qualified within the meaning of Section 401(a) of the Code and in which any employees of Seller or Subsidiary participated as of such Closing Date. Seller shall have no further responsibility with respect to any such Employee Benefit Plan following the Closing Date.     (b) Purchaser shall establish or provide Employee Welfare Benefit Plans for the employees of Seller and Subsidiary that it employs on or after the Closing Date which are comparable in the aggregate to those covering such employees on the Closing Date. To the extent practicable, Purchaser may satisfy such obligation by assuming any such Employee Welfare Benefit Plan maintained by Seller prior to the Closing Date. ARTICLE 9 CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS     The obligation of Purchaser to purchase the Acquired Assets, assume the Assumed Liabilities, and to carry out its other obligations under this Agreement and the Ancillary Agreements shall be subject to the fulfillment of the following express conditions precedent on the Closing Date, unless waived in writing by Purchaser or as otherwise provided herein:     9.1  Representations and Warranties.  The representations and warranties of Seller made in this Agreement shall be true and correct in all material respects as of the Closing Date with the same force and effect as though such representations were made on and as of the Closing Date.     9.2  Compliance with Agreement.  All the terms, covenants and conditions of this Agreement to be complied with and performed by Seller on or before the Closing Date shall have been duly complied with or performed. --------------------------------------------------------------------------------     9.3  Absence of Litigation.  No action, suit or proceeding shall have been instituted and remain pending before a court or other governmental body by any applicable government or agency thereof or any person to restrain or prohibit the consummation of the transactions contemplated by this Agreement.     9.4  Approvals.  Seller, Subsidiary or Purchaser shall have obtained the Approvals listed on Schedule 9.4 or the Parties shall have entered into an Approval Cure Agreement with respect to any Approvals not obtained.     9.5  Officer's Certificate.  Seller shall have delivered to Purchaser a certificate of its President and Secretary to the effect that each of the conditions specified above in Sections 9.1, 9.2, 9.3 and 9.4 are satisfied in all respects.     9.6  Instruments of Transfer.  Seller shall have delivered to Purchaser:     (a) executed Ancillary Agreements without any material changes to the forms attached as Exhibits to this Agreement;     (b) all documents described in Section 11.1 below; and     (c) such other instruments or documents as may be reasonably requested by Purchaser or Purchaser's counsel to fully and effectively convey the Acquired Assets to Purchaser.     9.7  Merger.  The mergers contemplated by the Agreement and Plan of Reorganization and Merger by and among Seller, E-Mobile, Inc., and E-Mobile Holdings, Inc. dated as of November 1, 2000 (the "Mergers") shall be consummated simultaneously with the Closing.     9.8  No Material Adverse Effect.  Since June 30, 2000, none of Seller, Subsidiary or Subsidiary's business shall have suffered a Material Adverse Effect and the Acquired Assets shall not have been lost, damaged or otherwise materially impaired.     9.9  No Liens.  There shall be no Lien upon, or with respect to, the Acquired Assets which was created pursuant to the Merger Agreement or pursuant to any document or agreement executed in connection with the Merger Agreement.     9.10  Employment Agreements.  Purchaser shall have entered into Employment Agreements to be effective upon the Closing with the persons listed on Schedule 9.10 substantially upon the terms of the Employment Agreement attached hereto as Exhibit 9.10 (the "Employment Agreements"). ARTICLE 10 CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS     The obligations of Seller to transfer and deliver to Purchaser all of Seller's rights, title, and interest in and to the Acquired Assets and to carry out its other obligations under this Agreement and the Ancillary Agreements shall be subject to the fulfillment of the following express conditions precedent on the Closing Date, unless waived in writing by Seller:     10.1  Representations and Warranties.  The representations and warranties of Purchaser made in this Agreement shall be true and correct in all material respects as of the Closing Date with the same force and effect as though such representations and warranties were made on and as of the Closing Date.     10.2  Compliance with Agreement.  All the terms, covenants, and conditions of this Agreement to be complied with and performed by Purchaser on or before the Closing Date shall have been duly complied with or performed.     10.3  Approvals.  Seller, Subsidiary or Purchaser shall have obtained the Approvals listed on Schedule 9.4 or the Parties shall have entered into an Approval Cure Agreement with respect to any Approvals not obtained. --------------------------------------------------------------------------------     10.4  Absence of Litigation.  To Purchaser's knowledge, no action or proceeding shall have been instituted and remain pending before a court or other applicable governmental body or agency thereof or any person to restrain or prohibit the consummation of the transactions contemplated by this Agreement.     10.5  Purchase Price.  Purchaser shall have delivered to Seller the Purchase Price Promissory Note and the Security Agreement.     10.6  Officer's Certificate.  Purchaser shall have delivered to Seller a certificate of its President and Secretary to the effect that each of the conditions specified above in Sections 10.1, 10.2, 10.3 and 10.4 are satisfied in all respects.     10.7  Instruments of Transfer.  Purchaser shall have delivered to Seller:     (a) executed Ancillary Agreements without any material changes to the forms attached as Exhibits to this Agreement;     (b) all documents described in Section 11.2 below; and     (c) such other instruments or documents as may be reasonably requested by Seller or Seller's counsel.     10.8  Fairness Opinion.  Seller shall have received an opinion from Capital Link Inc. reasonably satisfactory to Seller that the consideration to be received by Seller from Purchaser for the Acquired Assets is fair to Seller from a financial point of view (the "Fairness Opinion").     10.9  Merger.  The mergers contemplated by the Agreement and Plan of Reorganization and Merger by and among Western Power & Equipment Corp., E-Mobile, Inc., and E-Mobile Holdings, Inc. dated as of November 1, 2000 (the "Merger Agreement") shall be consummated simultaneously with the Closing.     10.10  Employment Agreements.  Purchaser shall have entered into the Employment Agreements. ARTICLE 11 DELIVERIES AT CLOSING     All transactions at the Closing shall be deemed to take place simultaneously and no transaction at the Closing shall be deemed to have been completed until all documents set forth in this Article 11 have been delivered by the Parties hereto except as waived by the Party to which such document is to be delivered.     11.1  Obligations of Seller.  At the Closing, Seller shall deliver the following instruments and documents to Purchaser:     (a) a Bill of Sale substantially in the form of Exhibit 11.1(a);     (b) a certificate representing the Shares, duly endorsed or accompanied by a duly executed stock power;     (c) duly endorsed certificates of title in respect of all vehicles included in the Acquired Assets;     (d) the executed certificate described in Section 9.5 above;     (e) resolutions of Seller's board of directors and shareholders certified by a secretary or assistant secretary of Seller, in a form satisfactory to Purchaser, authorizing the execution and performance of the Agreement and all other actions to be taken by Seller hereunder;     (f)  all Approvals listed on Schedule 9.4;     (g) an opinion of Seller's counsel in the form attached hereto as Exhibit 11.1(g); --------------------------------------------------------------------------------     (h) all consents necessary for the consummation of the transactions contemplated by this Agreement, including, inter alia, the consents necessary for the valid execution, delivery and performance of the transfer and assignment of the Acquired Assets;     (i)  a FIRPTA Certificate;     (j)  the Employment Agreements; and     (k) such other instruments or documents as may be reasonably requested by Purchaser or Purchaser's counsel to fully and effectively convey the Acquired Assets to Purchaser and retain the Excluded Liabilities in accordance with the provisions of this Agreement.     11.2  Obligations of Purchaser.  At the Closing, Purchaser shall deliver to Seller:     (a) the Assumption Agreement in the form of Exhibit 11.2(a) (the "Assumption Agreement");     (b) the executed certificate described in Section 10.6;     (c) certified copies of resolutions of the board of managers and, to the extent legally required, interest holders of Purchaser authorizing this transaction;     (d) an opinion of Purchaser's counsel in the form attached hereto as Exhibit 11.2(d);     (e) the Employment Agreements;     (f)  the Purchase Price Promissory Note;     (g) the Security Agreement; and     (h) such other instruments and documents as may be reasonably requested by Seller or Seller's counsel to fully and effectively evidence the assumption of liabilities and obligations of Seller pursuant hereto. ARTICLE 12 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION     12.1  Survival of Representations and Warranties; Limitations.  The representations and warranties provided in Sections 6.3, 6.4, 6.6 and 6.7 or in any certificate delivered by Purchaser pursuant to this Agreement shall survive until the two-year anniversary of the Closing and thereafter only to the extent of claims for which a notice has been given on or before such date in accordance with the terms of this Agreement (the "Time Limitations"). The representations and warranties contained in Sections 5.3, 5.5, 5.6, 6.1, 6.2 and 6.5 shall survive until the expiration of the applicable statutes of limitations with respect thereto. In no event shall Purchaser be liable to Seller unless and until all claims for which Damages (as defined below) are recoverable hereunder by Seller exceed $100,000 (the "Basket"); provided, however, that once the level of Damages exceeds the amount of the Basket, Seller shall be entitled to receive the entire amount of such Damages. In the event that Seller is liable to Purchaser for Damages, Purchaser shall only be entitled to Damages up to $100,000 (the "Claims Limit"). Notwithstanding the foregoing, the Time Limitations, the Basket and the Claims Limit shall not apply to (i) fraud or (ii) any intentional misrepresentation or breach of a representation, warranty or covenant or (iii) Section 12.2(a)(2)(ii), Section 12.2(a)(2)(iii) or Section 12.2(a)(3)(ii).     12.2  Indemnification.       (a) Subject to the Time Limitations, the Basket and the Claims Limit, and paragraph (b) hereof, Seller, on the one hand, and Purchaser, on the other hand (each an "Indemnifying Party"), shall indemnify the other and their respective shareholders, partners, directors, affiliates, agents, officers, employees and successors thereof (each an "Indemnified Party"), against and in respect of all loss, liability, damage and expense (including, without limitation, reasonable attorneys' fees and other reasonable costs of investigation or defense) (collectively, "Damages") resulting, (1) in the -------------------------------------------------------------------------------- case of Seller as the Indemnifying Party, from (i) any breach by Seller of the representations and warranties contained in Sections 5.3, 5.5 or 5.6, (ii) any liabilities arising from any lawsuit, claim or action filed by any of Seller's stockholders which relates to the transactions contemplated by this Agreement or the Merger Agreement and (iii) any fees or expenses owing to any broker or finder engaged by E-Mobile, Inc., E-Mobile Holdings, Inc. or any party acting on behalf of either of the foregoing, and (2) in the case of Purchaser as the Indemnifying Party, from (i) any breach by Purchaser of its representations and warranties contained in this Agreement or in any certificate delivered by Purchaser pursuant to this Agreement, and (ii) any Assumed Liability.     (b) Seller shall indemnify, reimburse and hold harmless Purchaser and its shareholders, partners, directors, Affiliates, agents, officers, employees and successors from and against all liabilities for Transfer Taxes of Seller, Subsidiary and their respective Affiliates imposed as a result of the transactions contemplated by this Agreement.     12.3  Method of Asserting Claims, etc.  To be entitled to indemnity hereunder, an Indemnified Party must send notice of a claim to the Indemnifying Party within the applicable Time Limitations and within 15 business days of the Indemnified Party becoming aware of the state of facts underlying the claim, but the failure to notify the Indemnifying Party within such time period will not relieve the indemnifying party of any liability that it may have to any Indemnified Party, except to the extent that the Indemnifying Party demonstrates that the defense of such action is actually prejudiced by the Indemnified Party's failure to give such notice. All claims for indemnification by any Indemnified Party hereunder shall be asserted and resolved as set forth in this Section 12.3. In the event that any written claim or demand for which an Indemnifying Party would be liable to any Indemnified Party hereunder is asserted against or sought to be collected from any Indemnified Party by a third party, such Indemnified Party shall promptly, but in no event more than 15 business days following such Indemnified Party's receipt of such claim or demand, notify the Indemnifying Party of such claim or demand (providing sufficient details with respect to such claim or demand to put the Indemnifying Party on notice of such claim or demand) and the amount or the estimated amount thereof to the extent such estimate is then feasible (which estimate shall not be conclusive of the final amount of such claim and demand) (the "Claim Notice"). The Indemnifying Party shall promptly notify the Indemnified Party (a) whether or not the Indemnifying Party disputes the liability of the Indemnifying Party to the Indemnified Party hereunder with respect to such claim or demand and (b) whether or not it desires to defend the Indemnified Party against such claim or demand. All costs and expenses incurred by the Indemnifying Party in defending such claim or demand shall be a liability of, and shall be paid by, the Indemnifying Party. Except as hereinafter provided, in the event that the Indemnifying Party promptly notifies the Indemnified Party that it accepts liability hereunder with respect thereto and elects to defend the Indemnified Party against such claim or demand, the Indemnifying Party shall have the right to defend the Indemnified Party by appropriate proceedings with counsel reasonably satisfactory to the Indemnified Party and shall have the sole power to direct and control such defense. If any Indemnified Party desires to participate in any such defense it may do so at its sole cost and expense. The Indemnified Party shall not settle a claim or demand without the consent of the Indemnifying Party, unless (i) the Indemnifying Party shall have failed to promptly assume the defense thereof and (ii) within 10 days after the Indemnified Party shall have given the Indemnifying Party written notice of the proposed settlement, the Indemnifying Party shall not have given the Indemnified Party written notice accepting liability hereunder with respect thereto and of its election to assume the defense of such claim or demand, in which event the Indemnified Party may enter into the proposed settlement and the Indemnifying Party shall not be entitled to object to the terms thereof. The Indemnifying Party shall not, without the prior written consent of the Indemnified Party, settle, compromise or offer to settle or compromise any such claim or demand on a basis which would result in (i) the imposition of a consent order, injunction or decree which would restrict the future activity or conduct of the Indemnified Party's business or any subsidiary or Affiliate thereof, (ii) any remedy other than damages payable in full by the Indemnifying Party or (iii) any admission of a violation of Law that would constitute a crime or any other admission of a violation of Law that would impair in any material respect the Indemnified Party's conduct of its business or would establish, by collateral estoppel or by legally admissible evidence, the basis of any other claim against the Indemnified Party -------------------------------------------------------------------------------- which would not be subject to full indemnity hereunder. If the Indemnifying Party elects not to defend the Indemnified Party against such claim or demand, whether by not giving the Indemnified Party timely notice as provided above or otherwise, then the amount of any such claim or demand, or, if the same be contested by the Indemnified Party, then that portion thereof as to which such defense is unsuccessful (and the reasonable costs and expenses pertaining to such defense) shall be the liability of the Indemnifying Party hereunder, subject to the limitations set forth in Section 12.1 hereof.     12.4  Indemnification Payments.  All indemnification payments shall promptly be paid in cash. Except in the case of intentional misrepresentation or intentional breach of any representation, warranty or covenant or fraud, the indemnification provisions of this Article 12 are the sole remedies for Damages and for any other causes of action in connection with this Agreement. ARTICLE 13 TERMINATION     13.1  Method of Termination.  This Agreement may be terminated prior to Closing, by any of the following methods:     (a) mutual consent of Purchaser and Seller;     (b) by written notice from either of Purchaser or Seller if the Closing does not occur on or before March 31, 2001 (the "Outside Date"); provided, however, that if the Closing shall not have occurred by the Outside Date, the Outside Date shall automatically be extended until July 31, 2001 (the "Extension Date") unless both parties object in writing to such extension; provided, further, however, that if the Closing shall not have occurred by the Extension Date as a result of any action taken, or failure to act, by any governmental or regulatory authority including, but not limited to, the withholding of, or a delay in, any approval in connection with any aspect of the transactions contemplated hereby, then the Extension Date shall automatically be extended until a date which is a reasonable time subsequent to the date upon which such governmental or regulatory action is resolved which will allow the parties to complete the procedures required to consummate the transactions contemplated hereby; and provided, further, however, that the right to terminate this Agreement pursuant to this Section 13.1(b) shall not be available to any party whose failure to fulfill any obligation pursuant to this Agreement has been the cause of or resulted in the failure of the Closing to occur on or before such date;     (c) by Seller if there is a material breach of any representation or warranty set forth in Article 6 hereof or any material covenant or agreement to be complied with or performed by Purchaser pursuant to the terms of this Agreement or the failure of a condition set forth in Article 10 to be satisfied (and such condition is not waived in writing by Seller) on or prior to the Closing Date, or the occurrence of any event which results in the failure of a condition set forth in Article 10 to be satisfied on or prior to the Closing Date; provided, that, Seller may not terminate this Agreement prior to Closing if Purchaser has not had an adequate opportunity to cure such failure;     (d) by Purchaser if there is a material breach of any representation or warranty set forth in Article 5 hereof or any material covenant or agreement to be complied with or performed by Seller pursuant to the terms of this Agreement or the failure of a condition set forth in Article 9 to be satisfied (and such condition is not waived in writing by Purchaser) on or prior to the Closing Date, or the occurrence of any event which results in the failure of a condition set forth in Article 9 to be satisfied on or prior to the Closing Date; provided, that, Purchaser may not terminate this Agreement prior to Closing if Seller has not had an adequate opportunity to cure such failure; or     (e) by Purchaser or Seller if a court of competent jurisdiction or other Governmental Entity shall have issued a non-appealable final order, decree or ruling or taken any other non-appealable final action, in each case having the effect of permanently restraining, enjoining or otherwise prohibiting the transactions contemplated hereby.. --------------------------------------------------------------------------------     13.2  Effect of Termination.  In the event that this Agreement is terminated pursuant to the provisions of Section 13.1, this Agreement shall become null and void and shall have no further effect, and no Party shall have any liability with respect thereto, except that Section 14.1 shall survive the termination of this Agreement; provided, however, that such termination shall not relieve any Party hereto of any liability for any breach of this Agreement. ARTICLE 14 MISCELLANEOUS     14.1  Expenses.  Each Party to this Agreement shall bear and pay its own costs and expenses incurred in connection with the preparation, execution, and delivery of this Agreement and the Ancillary Agreements, and the transactions contemplated hereby and thereby.     14.2  Notices.  All notices, claims, certificates, requests, demands and other communications under this Agreement shall be made in writing and shall be sent by prepaid telex, cable or telecopy, or sent, postage prepaid, by registered, certified or express mail, or reputable overnight courier service, and shall be deemed given when so delivered by hand, telexed, cabled or telecopied, or if mailed, seven (7) days after mailing (one (1) business day in the case of express mail or overnight courier service) to the Parties at the following addresses (or at such other address for a Party as shall be specified by like notice):    If to Seller:  Western Power & Equipment Corp. c/o Michael Sanders, Esq. Vanderkam & Sanders 440 Louisiana Street, Suite 475 Houston, Texas 77002 Attn: Michael Sanders, Esq. Telecopy: (713) 547-8910 With a copy to:  Berkman-Wechsler Law Offices 6 Wissotzky Street Tel Aviv, Israel 62338 Attention: Ofira Gordon Telecopy: 011-972-3-604-5775 If to Purchaser:  Western Power & Equipment, L.L.C. 4601 N.E. 77th Avenue Vancouver, WA 98662 Attention: Charles Dean McLain Telecopy: (360) 892-7927 With a copy to:  Kaye, Scholer, Fierman, Hays & Handler, LLP 425 Park Avenue New York, NY 10022 Attention: Rory A. Greiss Telecopy: (212) 836-8689     14.3  Amendments.  This Agreement may be amended or modified only by a written instrument executed by the Parties to this Agreement.     14.4  Assignment.  This Agreement may not be assigned, by operation of Law or otherwise; provided, however, that Purchaser may assign this Agreement, to any Affiliate of Purchaser. This Agreement shall be binding upon and inure to the benefit of successors and assigns of the Parties hereto.     14.5  Benefits; No Third Party Rights.  Nothing expressed or referred to in this Agreement is intended or shall be construed to give any person or entity, other than the Parties, or their respective successors and assigns, any legal or equitable right, remedy or claim under or in respect thereof or any -------------------------------------------------------------------------------- provision contained herein, it being the intention of the Parties that this Agreement is for the sole and exclusive benefit of such Parties, and such successors and assigns of this Agreement and for the benefit of no other person or entity.     14.6  Headings.  The paragraph and other headings contained in this Agreement are for reference purposes only and shall not constitute a part hereof or be deemed to limit or expand the scope of any provision of this Agreement.     14.7  Governing Law; Venue.  This Agreement shall, in accordance with Section 5-1401 of the General Obligation Law of New York, be governed by and construed in accordance with the Laws of the state of New York without regard to any conflicts of law principles thereof that would call for the application of the laws of any other jurisdiction. Each Party hereto hereby (a) irrevocably and unconditionally submits in any legal action or proceeding relating to this Agreement, or for recognition and enforcement of any judgment in respect thereof, to the general jurisdiction of the state and federal courts in the State of New York, and appellate courts thereof, and (b) consents that any 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.     14.8  Counterparts.  This Agreement may be executed in counterparts, each of which shall be deemed as original, but all of which taken together shall constitute one and the same agreement.     14.9  Severability.  If any provision of this Agreement, or any covenant, obligation or agreement contained herein is determined by a court to be invalid or unenforceable, such determination shall not affect any other provision, covenant, obligation or agreement, each of which shall be construed and enforced as if such invalid or unenforceable provision were not contained herein. Such invalidity or unenforceability shall not affect any valid and enforceable application thereof, and each such provision, covenant, obligation or agreement, shall be deemed to be effective, operative, made, entered into or taken in the matter and to the full extent permitted by Law.     14.10  Entire Agreement.  This Agreement, including the Schedules and Exhibits attached hereto and hereby incorporated herein, together with the Ancillary Agreements, constitutes the entire agreement of the Parties with respect to the subject matter of this Agreement and supersedes all prior agreements, understandings, or representations relating to the subject matter of this Agreement. [Signature page follows] --------------------------------------------------------------------------------     IN WITNESS WHEREOF, Purchaser and Seller have caused their respective duly authorized officers to execute this Asset Purchase Agreement as of the day and year first above written.     WESTERN POWER & EQUIPMENT, L.L.C.           By:   /s/ ROBERT RUBIN    -------------------------------------------------------------------------------- Robert Rubin Manager           WESTERN POWER & EQUIPMENT CORP. (DE)           By:   /s/ CHARLES DEAN MCLAIN    -------------------------------------------------------------------------------- Charles Dean McLain President and Chief Executive Officer -------------------------------------------------------------------------------- QUICKLINKS R E C I T A L S ARTICLE 1 DEFINITIONS ARTICLE 2 SALE OF ASSETS ARTICLE 3 CONSIDERATION ARTICLE 4 CLOSING ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF SELLER ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF PURCHASER ARTICLE 7 COVENANTS OF SELLER ARTICLE 8 MUTUAL COVENANTS ARTICLE 9 CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS ARTICLE 10 CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS ARTICLE 11 DELIVERIES AT CLOSING ARTICLE 12 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION ARTICLE 13 TERMINATION ARTICLE 14 MISCELLANEOUS

EXHIBIT 10.i.(c)   FOURTH AMENDMENT AND AGREEMENT UNDER THE PARTNERSHIP AGREEMENT      This Fourth Amendment and Agreement Under the Partnership Agreement (this "Amendment") is dated as of June 26, 2000 by and among (i) IMC Global Operations Inc., a Delaware corporation ("Operations "), (ii) Phosphate Resource Partners Limited Partnership, a Delaware limited partnership ("PLP"), (iii) IMC-Agrico MP, Inc., a Delaware corporation (the "Managing Partner"), and (iv) IMC-Agrico Company, a Delaware general partnership (the " Partnership").   WITNESSETH      WHEREAS , Operations, PLP and the Managing Partner are parties to an Amended and Restated Partnership Agreement dated as of July 1, 1993, as further amended and restated as of May 26, 1995, as further amended by the Amendment and Agreement under the Partnership Agreement dated January 23, 1996, as further amended by the Second Amendment and Agreement under the Partnership Agreement dated January 1, 1997 (as amended, the "Partnership Agreement"), as further amended by the Third Amendment and Agreement under the Partnership Agreement dated August 1, 1997 and as further amended by the Fourth Amendment and Agreement under the Partnership Agreement dated December 22, 1997 ;      WHEREAS , Operations, PLP, the Managing Partner and the Partnership desire to amend the Partnership Agreement to change the name of the Partnership;      NOW, THEREFORE , in consideration of the covenants and agreements herein set forth and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:      1.   The first sentence of Section 2.02 of the Agreement is hereby amended and replaced in its entirety with the following:      "The Partnership is to be known as "IMC Phosphates Company" or such other name as the Partners shall unanimously decide."      IN WITNESS WHEREOF, the parties have signed this Amendment as of the date first written above. IMC GLOBAL OPERATIONS INC. By: /s/ Mary Ann Hynes Name: Mary Ann Hynes Title: Senior Vice President   PHOSPHATE RESOURCE PARTNERS, LIMITED PARTNERSHIP, by IMC GLOBAL INC., its Administrative Managing Partner By: /s/ Mary Ann Hynes Name: Mary Ann Hynes Title: Senior Vice President   IMC-AGRICO MP, INC. By: /s/ Mary Ann Hynes Name: Mary Ann Hynes Title: Vice President   IMC AGRICO COMPANY By: IMC-Agrico MP, Inc., its managing general partner By: /s/ Mary Ann Hynes Name: Mary Ann Hynes Title: Vice President    

QuickLinks -- Click here to rapidly navigate through this document NASH-FINCH COMPANY PROFIT SHARING PLAN 1994 REVISION Eighth Declaration of Amendment     Pursuant to the retained power of amendment contained in Section 11.2 of the instrument entitled "Nash-Finch Company Profit Sharing Plan—1994 Revision," the undersigned hereby amends the said instrument by adding a new Exhibit E in the form attached hereto.     The amendment set forth above is effective as of January 31, 2000.     IN WITNESS WHEREOF, the undersigned has caused this instrument to be executed by its duly authorized officers this 24th day of October, 2000.       NASH FINCH COMPANY   Attest:   /s/ NORMAN R. SOLAND    -------------------------------------------------------------------------------- Secretary       By:   /s/ RON MARSHALL    -------------------------------------------------------------------------------- President -------------------------------------------------------------------------------- NASH-FINCH COMPANY PROFIT SHARING PLAN EXHIBIT E Special Provisions Applicable to the Adoption of the Plan by Hinky Dinky Supermarkets, Inc.     This Exhibit E sets forth special provisions of the Plan applicable to the adoption of the Plan by Hinky Dinky Supermarkets, Inc. ("HDSI") effective as of January 31, 2000. 1.Service Credit.  Service completed as an employee with HDSI or Hinky Dinky Auburn, L.L.C., Hinky Dinky Beatrice, L.L.C., H.D. Crete, L.L.C., Hinky Dinky Falls City, L.L.C., Hinky Dinky Holdrege, L.L.C., Hinky Dinky Leavenworth, L.L.C., Hinky Dinky Lincoln #9, L.L.C., Hinky Dinky Lincoln #11, L.L.C., Hinky Dinky McCook, L.L.C., Hinky Dinky O'Neill, L.L.C. and Hinky Dinky Wahoo-Seward, L.L.C. prior to the date on which HDSI became an Affiliated Organization, will be taken into account under the Plan for all purposes in accordance with the provisions of Article X but only with respect to any individual who was an Employee on January 31, 2000. 2.Entry Dates.  A Qualified Employee who is entitled to prior service credit pursuant to this Exhibit E will become eligible to participate in the Plan as follows: •For the purpose of having a rollover or transfer made on his or her behalf pursuant to Section 3.3, on January 31, 2000; •For the purpose of having Pre-Tax Contributions made on his or her behalf pursuant to Section 3.1, on (a) January 31, 2000 if the Qualified Employee was a participant in the Hinky Dinky Supermarkets, Inc. 401(k) Profit Sharing Plan on January 31, 2000 or (b) the last day of the three-month period that begins on the day on which he or she first completes an Hour of Service of the type specified at Section 10.3(A)(1); and •For the purpose of being eligible to share in the allocation of Profit Sharing Contributions made pursuant to Section 3.2, on the later of (a) April 1, 2000 and (b) the first day of the calendar quarter that falls on or next follows the last day of the Computation Period during which he or she first completes two Years of Service. -------------------------------------------------------------------------------- QUICKLINKS NASH-FINCH COMPANY PROFIT SHARING PLAN 1994 REVISION Eighth Declaration of Amendment NASH-FINCH COMPANY PROFIT SHARING PLAN EXHIBIT E Special Provisions Applicable to the Adoption of the Plan by Hinky Dinky Supermarkets, Inc.

Exhibit 10.28 Amendment To Impulse! Buy Network, Inc. 1997 Stock Plan The Impulse Buy Network, Inc. 1997 Stock Plan is hereby amended effective March 29, 2000 as follows (the “Plan”): A.  Section 2 is amended by adding the following definitions: “Cause” means (i) any act of personal dishonesty taken by the Optionee in connection with his responsibilities as an employee and intended to result in substantial personal enrichment of the Optionee, (ii) the conviction of a felony, (iii) a willful act by the Optionee that constitutes gross misconduct and that is injurious to the Company, (iv) for a period of not less than thirty (30) days following delivery to the Optionee of a written demand for performance from the Company that describes the basis for the Company’s belief that the Optionee has not substantially performed his duties, continued violations by the Optionee of the Optionee’s obligations to the Company that are demonstrably willful and deliberate on the Optionee’s part or (v) as otherwise provided in an option agreement. “Change of Control” means the occurrence of any of the following:               (i)  Any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) becomes the “beneficial owner” (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the total voting power represented by the Company’s then outstanding voting securities entitled to vote generally in the election of directors;               (ii)  Any action or event occurring within a two-year period, as a result of which fewer than a majority of the directors are Incumbent Directors. “Incumbent Directors” shall mean directors who either (A) are directors of the Company as of the date hereof, or (B) are elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but shall not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company);               (iii)  The consummation of 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 or the entity that controls such surviving entity) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company, such surviving entity or entity that controls such surviving entity outstanding immediately after such merger or consolidation; or               (iv)   The consummation of the sale or disposition by the Company of all or substantially all of the Company’s assets. B.  Section 9(b) is amended by deleting the previous Section 9(b) and replacing it in its entirety as follows:               9(b)  Termination of Employment or Consulting Relationship. Notwithstanding the exercise periods set forth in the Stock Option Agreement, exercise of an Option shall always be subject to the following:    If the Optionee is Terminated for any reason except death or Disability, then Optionee may exercise such Optionee’s Options only to the extent that such Options would have been exercisable upon the Termination Date no later than three (3) months after the Termination Date (or such shorter time period as may be specified in the Stock Option Agreement), but in any event, no later than the expiration date of the Options. Notwithstanding the foregoing, if the Company or any successor thereto terminates the Optionee’s employment without Cause within twelve months following a Change of Control, the Optionee’s Options, and restricted stock acquired upon exercise of the Optionee’s Options or otherwise granted under the Plan shall become 100% vested and exercisable; provided, however, that no such acceleration shall occur in the event that it would preclude accounting for any business combination of the Company involving a Change of Control as a “pooling of interes ts.”       Notwithstanding any other provisions of the Plan or any Award Agreement, other related agreement, in the event that any payment or benefit received or to be received by the Optionee (whether pursuant to     -------------------------------------------------------------------------------- the terms of the Plan, any Award Agreement or other related agreement, or other plan, arrangement or agreement with the Company, any person whose actions result in a Change in Control or any person affiliated with the Company or such person) (all such payments and benefits being hereinafter called “Total Payments”) would be subject (in whole or part), to any excise tax imposed under Section 4999 of the Code (the “Excise Tax”), then, after taking into account any reduction in the Total Payments provided by reason of Section 280G of the Code in such other plan, arrangement or agreement, the payment or benefit received or to be received by the Optionee (whether pursuant to the terms of the Plan, any Option Agreement, Restricted Stock Purchase Agreement or other related agreement) shall be reduced, to the extent necessary so that no portion of the Total Payments is subject to the Excise Tax but only if (A) the net amount of such Total Payments, as so reduced (an d after subtracting the net amount of federal, state and local income taxes on such reduced Total Payments) is greater than or equal to (B) the net amount of such Total Payments without such reduction (but after subtracting the net amount of federal, state and local income taxes on such Total Payments and the amount of Excise Tax to which the Optionee would be subject in respect of such unreduced Total Payments).     Unless the Company and the Optionee otherwise agree in writing, any determination required under this Section shall be made in writing by the Company’s independent public accountants (the “ Accountants”), whose determination shall be conclusive and binding upon the Optionee and the Company for all purposes. For purposes of making the calculations required by this Section, the Accountants 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 Code. The Company and the Optionee shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this Section. The Company shall bear all costs the Accountants may reasonably incur in connection with any calculations contemplated by this Section.

CONNECTICUT NATURAL GAS CORPORATION UNION EMPLOYEE SAVINGS PLAN AS AMENDED AND RESTATED (Effective except where otherwise indicated as of January 1, 2000) CONNECTICUT NATURAL GAS CORPORATION UNION EMPLOYEE SAVINGS PLAN AS AMENDED AND RESTATED TABLE OF CONTENTS SECTION   Page SECTION 1 PURPOSE OF PLAN 1 SECTION 2 DEFINITIONS 1 SECTION 3 ELIGIBILITY AND PARTICIPATION 16 SECTION 4 SALARY REDUCTION AND EMPLOYEE CONTRIBUTIONS; TESTING; ROLLOVER CONTRIBUTIONS 18 SECTION 5 MATCHING CONTRIBUTIONS BY THE COMPANY 28 SECTION 6 LIMITATION ON CONTRIBUTIONS 29 SECTION 7 INVESTMENT OF CONTRIBUTIONS 35 SECTION 8 ACCOUNTS AND PARTICIPANTS 38 SECTION 9 VESTING OF INTERESTS 40 SECTION 10 DISTRIBUTION OF ACCOUNTS 41 SECTION 11 WITHDRAWAL BY A PARTICIPANT 47 SECTION 12 ADMINISTRATION 53 SECTION 13 TRUST AGREEMENT 57 SECTION 14 FIDUCIARY RESPONSIBILITIES 57 SECTION 15 TERMINATION OR AMENDMENT OF PLAN 59 SECTION 16 GENERAL PROVISIONS 62 CONNECTICUT NATURAL GAS CORPORATION UNION EMPLOYEE SAVINGS PLAN AS AMENDED AND RESTATED (Effective except where otherwise indicated as of January 1, 2000) Section 1 PURPOSE OF PLAN 1.01 The Connecticut Natural Gas Corporation (hereafter called "CNG") Union Employee Savings Plan (the "Plan") is designed to (i) encourage and assist eligible employees in a long-range program of savings, and (ii) enable them to acquire ownership of Common Stock as herein defined. The participating employees may use this Plan as a means of adding to their retirement income, although the Plan permits earlier withdrawals. 1.02 This document amends and restates, effective except where otherwise indicated as of January 1, 2000, the Plan which was originally adopted on December 19, 1983. The provisions of the Plan, as so amended and restated, are effective in respect of Plan Years, as herein defined, beginning on or after January 1, 2000. Any provisions of the amended and restated Plan that are effective prior to January 1, 2000 shall be deemed to amend as of the applicable effective dates the corresponding provisions of the Plan as in effect before this amendment and restatement. Section 2 DEFINITIONS 2.01 "Account" shall mean the account established and maintained for each Participant's share of contributions made to the Plan, and earnings thereon, and such term shall include the various subaccounts contemplated by Section 8, which subaccounts are sometimes referred to as "sources of money." 2.01A "Affiliate" shall mean any member of a controlled group of corporations (as defined in Section 414(b) of the Code) of which CNG a member, any member of a group of trades or businesses which are under common control (as defined in Section 414(c) of the Code) of which CNG is a member, any member of an affiliated service group (as defined in Section 414(m) of the Code) of which CNG is a member, and any other organization deemed to be affiliated with CNG under Section 414(o) of the Code. Any entity, however, shall be considered an Affiliate hereunder only during the period it is or was such a member or affiliated organization. Following the consummation of the merger of CTG Resources, Inc. with and into Oak Merger Co. pursuant to the Agreement and Plan of Merger, dated as of June 29, 1999, by and among CTG Resources, Inc., Energy East Corporation ("EEC") and Oak Merger Co., EEC will be the common parent of an "affiliated group" (the "EEC Group") within the meaning of Section 1504 of the Code of which CNG is a member and EEC will be an Affiliate of CNG. Anything to the contrary notwithstanding, the Plan shall be interpreted and administered at all times in accordance with the terms of the Code and the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), as applicable to the EEC Group and those members thereof which are Affiliates. 2.02 "Anniversary Date" shall mean the last day of December of any year. 2.03 "Beneficiary" shall mean the beneficiary or beneficiaries entitled to the Benefits upon the death of a Participant, as designated by the Participant by written designation on file with the Committee, of if no such designation shall be on file, the Participant shall be conclusively deemed to have so designated his surviving spouse, if any, and if none his living issue equally, per stirpes, and if none, his estate. Notwithstanding the foregoing, in the event of the death of a Participant who has at least one Hour of Service under the Plan or at least one hour of paid leave on or after August 23, 1984, his Account shall be paid to his surviving spouse, unless (1) the spouse of the Participant consents in writing to a different designation of Beneficiary (including any class of beneficiaries or contingent beneficiaries), the spouse's consent acknowledges the effect of such election, and such election is witnessed by a Plan representative or a notary public; or (2) the Participant does not have a spouse at the time of his death. Any consent by a Participant's spouse shall only be effective with respect to that spouse. 2.04 "Benefits" shall mean the distributions provided for herein to each Participant, or to his Beneficiary. 2.05 "Board of Directors" shall mean the Board of Directors of CNG. 2.05A "Change of Control" shall mean (i) the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either 1) the then outstanding shares of common stock of the Corporation (the "Outstanding Common Stock") or 2) the combined voting power of the then outstanding voting securities of the Corporation entitled to vote generally in the election of directors (the "Outstanding Voting Securities"); provided, however, that for purposes of this subsection (i), the following acquisitions shall not constitute a Change of Control: 1) any acquisition directly from the Corporation, 2) any acquisition by the Corporation, 3) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Corporation or any corporation controlled by the Corporation or 4) any acquisition by any corporation pursuant to a transaction which complies with clauses 1), 2) and 3) of subsection (iii) of this Section 2.05A; or (ii) Individuals who, as of January 1, 2000, constitute the Board of Directors (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board of Directors; provided, however, that any individual becoming a director subsequent January 1, 2000 whose election, or nomination for election by the Corporation's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board of Directors; or (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, 1) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Common Stock and Outstanding Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation 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 Common Stock and Outstanding Voting Securities, as the case may be, 2) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Corporation or related corporation or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and 3) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board of Directors, providing for such Business Combination; or (iv) Approval by the shareholders of the Corporation of a complete liquidation or dissolution of the Corporation. Following the effective date of an Agreement and Plan of Exchange, pursuant to which outstanding shares of CNG common stock were exchanged for shares of the common stock of CTG Resources, Inc., the term 'Corporation,' as used in this Section 2.05A, shall mean CTG Resources, Inc., or any successor thereto. As used in this Section 2.05A, the terms "Incumbent Board" or "Board of Directors" are intended to refer to the Board of Directors of CTG Resources, Inc. 2.06 "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, and as interpreted from time to time by any regulations issued pursuant thereto, and references to any section thereof shall be deemed to refer to the like section of any subsequent federal Internal Revenue law. 2.07 "Committee" shall mean the Administrative Committee described in Section 12. 2.07A "Common Stock" shall mean (i) prior to the consummation of the merger of CTG Resources, Inc. with and into Oak Merger Co. pursuant to the Agreement and Plan of Merger, dated as of June 29, 1999, by and among CTG Resources, Inc., Energy East Corporation and Oak Merger Co., the common stock of CTG Resources, Inc., and (ii) on and after the date of the consummation of such merger, the common stock of Energy East Corporation or its successor or successors. 2.08 "Company" shall mean CNG, and any Affiliate (or any division of CNG or its Affiliates) which, with the consent of CNG, shall adopt this Plan for its employees. 2.09 "Compensation" shall mean: (a) the basic regular remuneration in the form of salary or wages paid to an Employee for services rendered to the Company, increased by the amount set aside by the Company under salary reduction agreement with such Employee for contribution to this Plan or under a cafeteria plan as described in Section 125 of the Code, and excluding commissions, bonuses, pay for overtime or special pay, the Company's cost for any public or private employee benefit plan including this Plan and any other form of additional compensation. (b) When "Net Compensation" is referred to herein, it shall mean such basic regular remuneration without any increase on account of amounts set aside under any salary reduction agreement. (c) In addition to other applicable limitations set forth in the Plan, and notwithstanding any other provision of the Plan to the contrary, for Plan Years beginning on or after January 1, 1997, the annual Compensation of each Employee taken into account under the Plan shall not exceed the OBRA '93 annual compensation limit. The OBRA '93 annual compensation limit is $150,000, as adjusted by the Commissioner for increases in the cost of living in accordance with Section 401(a) (17) (B) of the Code. The cost-of-living adjustment in effect for a calendar year applies to any period, not exceeding 12 months, over which compensation is determined (determination period) beginning in such calendar year. If a determination period consists of fewer than 12 months, the OBRA '93 annual compensation limit will be multiplied by a fraction, the numerator of which is the number of months in the determination period, and the denominator of which is 12. For Plan Years beginning on or after January 1, 1997, any reference in this Plan to the limitation under Section 401(a) (17) of the Code shall mean the OBRA '93 annual compensation limit set forth in this provision. 2.10 "Continuous Service" shall mean the aggregate Periods of Employment by the Company in any capacity which may not be disregarded under subsection (c) of this Section and subject to the provisions of subsection (b) of this Section. Continuous Service shall be measured in full years and completed months, rounded, after termination of Continuous Service, to the nearest full month (16 or more days being deemed an additional month). Continuous Service prior to January 1, 1984 shall be computed under the rules of the Pension Plan relating to Continuous Service as in effect from time to time, including service under those rules for The Hartford Gas Company, The New Britain Gas Light Company and The Greenwich Gas Company. (a) Definitions. The terms used in this Section 2.10 shall have the following meanings: (i) Employment Commencement Date - the day on which a person first completes an Hour of Service in any capacity for the Company. (ii) Reemployment Commencement Date - the day on which a person formerly employed by the Company again first completes an Hour of Service in any capacity for the Company. (iii) Severance from Service Date - the first to occur of (A) the date of quit, discharge, retirement or death, and (B) the first anniversary of the beginning date of a continuous period in which a person employed by the Company in any capacity is absent from active employment (with or without pay) other than for a cause set forth in (A). Failure to return to active employment when due shall constitute a quit on that date. (iv) Period of Employment - the period of service from an Employment or Reemployment Commencement Date to a Severance from Service Date. (v) Period of Severance - the period of absence from service commencing on a Severance from Service Date and ending on the day before the first Hour of Service is completed after such severance. (b) Temporary Absences. (i) If a person employed by the Company quits, is discharged or retires, his Continuous Service shall include any continuous period of less than twelve (12) months during which he is absent from active employment by the Company, with or without pay (a Period of Severance or other absence) within which less than twelve (12) month period such person returns to active employment. If a person employed by the Company is absent for any other reason (such as vacation, leave of absence, lay-off, etc.), and then quits, is discharged or retires, the period of time during which he may return and receive credit for Continuous Service (for the period between the Severance from Service Date and the return) begins on the Severance from Service Date and ends twelve (12) months after the first day of absence. Continuous Service shall be preserved during any leave of absence authorized by the Company in excess of twelve (12) months, and during any lay-off (but not in excess of two (2) years from the date of initial absence). (ii) Requests for leaves of absence shall be dealt with by the Company on a uniform, nondiscriminatory basis. (iii) Military Service: Military service in the armed forces of the United States or, effective on or after December 12, 1994, qualified military service shall be deemed while reemployment rights are protected by law to be an authorized leave of absence expiring with the expiration of such reemployment rights. Furthermore, during any such period of military service or qualified military service and thereafter while reemployment rights are so protected, Continuous Service shall be counted to the extent required by such law, including effective on or after December 12, 1994, Section 414(u) of the Code. "Qualified military service" means any service in the uniformed services (as defined in chapter 43 of the United States Code) by any individual if such individual is entitled to reemployment rights under such chapter with respect to such service. (iv) Absence due to Disability: Continuous Service shall be preserved during any period of disability. Any period of disability during which a person receives sick leave in accordance with the Company's established sick leave policy (other than under the Company's Long Term Disability Plan) shall be counted as Continuous Service. Any other period of disability (including while a person is receiving benefits under the Company's Long Term Disability Plan) shall be deemed to be authorized leave of absence expiring upon recovery from disability, including the counting of Continuous Service for the balance of the first twelve (12) months of any disability. As used in this clause (iv), disability shall mean the inability by reason of physical or mental illness or injury to perform the normal duties of one's employment by the Company or any other comparable employment. The Committee may, no more frequently than once each three months, require an Employee to undergo a physical examination at Company expense by a medical doctor, registered nurse or paramedic selected by the Committee to verify the continuation of a disability. If an Employee shall refuse to submit to such examinations, he will be deemed to have quit. (v) Change in Job Category: Any period during which a person is employed by CNG or any of its Affiliates, but not as an Employee within the meaning of Section 2.13, shall be considered as Continuous Service to the extent it would have been considered Continuous Service under the rules of this Section 2.10 had the person been an Employee of the Company. Notwithstanding the preceding sentence, any such period of employment with an Affiliate which has not adopted the Plan will not be considered as Continuous Service for purposes of Section 5.01. (vi) Less Than Full Time Employment: All periods of less than full time employment will count as Continuous Service so long as there is no Severance from Service Date. (vii) If an individual is considered to be employed by CNG or an Affiliate pursuant to Section 414(n) of the Code, then he shall receive credit for Continuous Service pursuant to this Section 2.10 as if he were employed by the Company. (viii) In the case of a person who is absent from employment for any period (1) by reason of the pregnancy of the individual, (2) by reason of the birth of a child of the individual, (3) by reason of the placement of a child with the individual in connection with the adoption of such child by the individual, or (4) for purposes of caring for such child for a period immediately following such birth or placement, Continuous Service shall be preserved for a period of twelve (12) months measured from the date which would otherwise constitute the Severance from Service Date; provided that such period shall not be counted as Continuous Service. (c) Reinstatement of Service. Upon reemployment by the Company, the following rules shall apply: (i) Prior to beginning of vesting: (1) In the event a person who had not attained any vested interest under Section 9.03 on his Severance from Service Date is reemployed after a period of absence of less than a complete twelve (12) months or of lesser duration than his prior Continuous Service, he shall be reinstated in his prior Continuous Service. (2) In the event a person who had not attained any such vested interest on his Severance from Service Date is reemployed after a period of absence of a complete twelve (12) months duration and of equal or greater duration than his prior Continuous Service, his prior Continuous Service shall be disregarded unless, effective January 1, 1985, his period of absence is less than five (5) years, in which case it shall not be disregarded. (ii) After beginning of vesting: In the event a person who had attained any such vested interest on his Severance from Service Date is reemployed at any time, his Continuous Service shall be reinstated. (d) The manner of determining Continuous Service hereunder shall be consistent with the manner of so doing under the Pension Plan, except that the special rule set forth therein relating to the counting of service for vesting purposes with G. Fox & Company (The May Company) shall not apply. 2.11 "Disability" or "Disabled" shall mean total and permanent disability within the meaning of the Pension Plan, and any final determination of disability under said Plan of a Participant who is also a member of said Plan shall be conclusive for purposes of this Plan and shall be binding upon the Company and the Participant. Disability shall be determined without regard to any applicable service requirement under the Pension Plan. 2.12 "Effective Date" shall mean the effective date of this restatement, which is January 1, 2000 unless otherwise indicated. 2.13 "Employee" shall mean any regular employee of the Company whose normal employment is for 20 or more Hours of Service per week and who is covered by a collective bargaining agreement between the Company and any union and which agreement provides for participation under this Plan. Any employee of the Company who would not otherwise be considered to be a regular employee, and who is covered by a collective bargaining agreement between the Company and the union, shall nonetheless be considered an Employee as of his date of hire or rehire if he actually completes 1,000 Hours of Service in the 12 consecutive month period commencing with his date of hire or rehire, or as of the first day of any Plan Year commencing after such date during which he is employed on a regular basis or actually completes 1,000 Hours of Service. The term "Employee" may in context include an inactive employee, terminated employee or employee in another job category not covered under this Plan who has otherwise met the eligibility requirements of this Plan and retains contingent rights to benefits hereunder. 2.14 "Fiscal Year" shall mean the fiscal year of CNG. 2.15 "Highly Compensated Employee" shall mean shall mean with respect to any Plan Year beginning on or after January 1, 1997, any individual who is a Highly Compensated active Employee or Highly Compensated former Employee. (a) A Highly Compensated active Employee includes any Employee who performs service for the Company during the determination year and who, during the look-back year, received compensation (as defined in Section 414(q)(4) of the Code) from CNG and its Affiliates in excess of $80,000 (as adjusted pursuant to Section 415(d) of the Code) and, if CNG elects application for such look-back year by amending the Plan to provide that it has made such election, was a member of the top-paid group for such look-back year. The term Highly Compensated active Employee also includes Employees who are 5 percent owners (as defined in Section 416(i)(1) of the Code) of CNG or any Affiliate at any time during the look-back year or determination year. (b) For this purpose, the determination year shall be the Plan Year. The look-back year shall be the prior Plan Year. (c) A Highly Compensated former Employee includes any Employee who separated from service (or was deemed to have separated) prior to the determination year, performs no service for the Company during the determination year, and was a Highly Compensated active Employee as defined in the Plan for either the separation year or any determination year ending on or after the Employee's 55th birthday. (d) The determination of who is a Highly Compensated Employee, including the determinations of the number and identity of Employees in the top-paid group, will be made in accordance with Section 414(q) of the Code and the regulations thereunder. 2.16 "Hour of Service" shall mean: (a) Each hour for which an Employee is paid, directly or indirectly, or entitled to be paid by the Company: (i) on account of services as an Employee; (ii) on account of a period of time during which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence, provided that not more than 501 Hours of Service shall be credited under this clause (ii) for any single continuous period (whether or not such period occurs in a single computation period); (iii) as a result of any award of back pay, without regard to mitigation of damages; (b) Each hour which an Employee would have normally been scheduled to work during absence from service while in the Armed Services of the United States or, effective on or after December 12, 1994, qualified military service (as defined in Section 2.10(b)(iii)) and during such period as reemployment rights are protected by law, but only if such Employee returns to service with the Company within the time after discharge from the Armed Services or qualified military service as reemployment rights are so protected; and (c) Each hour for which an individual employed by CNG or any of its Affiliates would have received credit for an Hour of Service under the preceding rules but for the fact that he was employed in a job category not included in the definition of Employee set forth in Section 2.13, and each hour for which an individual would have received credit for an Hour of Service under such rules but for the fact that, rather than being employed by the Company, he was an employee of an Affiliate which has not adopted the Plan. If an individual is considered to be employed by CNG or an Affiliate pursuant to Section 414(n) of the Code, then he shall also receive credit for Hours of Service pursuant to this Section 2.16 as if he were employed by CNG or an Affiliate, but he shall not be entitled to participate. (d) Each hour shall be credited for the computation period for which earned or for which payment was made or awarded. No hour shall be credited more than once, and hours worked at premium pay rates shall be counted the same as regular time hours. In lieu of maintenance of actual Hours of Service records for all or any class of individuals entitled to Hours of Service credit hereunder, credit may be given for 45 Hours of Service for each week for which credit would be required for at least one Hour of Service under this Section. Any uncertainties regarding the crediting of hours shall be resolved in accordance with regulations of the U.S. Department of Labor (currently Section 2530.200b-2 et. seq.), where applicable, and in the absence of regulations, under uniform, non-discriminatory practices adopted by the Committee. 2.17 "Normal Retirement Date" of each Participant shall mean the first day of the calendar month next following the date he attains age 65. 2.18 "Participant" shall mean any eligible Employee who elects to make contributions under the Plan. If an Employee is eligible to participate but does not elect to have salary reduction contributions made on his behalf or to make employee after-tax contributions he shall nevertheless be considered to be a Participant who is reducing zero percent (0%) of his salary or contributing zero percent (0%) on an after-tax basis. 2.19 "Payroll Period" shall mean any period on account of which Compensation is paid to a Participant. 2.20 "Plan Year" shall mean the fiscal period on which the records of the Plan are maintained and shall be the twelve (12) month period ending with an Anniversary Date. 2.21 "Pension Plan" shall mean THE CONNECTICUT NATURAL GAS CORPORATION PENSION PLAN B, or THE CONNECTICUT NATURAL GAS CORPORATION RETIREMENT PLAN, depending on which Plan the union Employee is covered under. 2.22 "Trust" shall mean the Trust created by CNG for the purpose of receiving and investing contributions to the Plan and income and gain therefrom, and Trustee shall mean the trustee from time to time administering the Trust. 2.23 "Trust Fund" shall mean the assets of the Trust consisting of all contributions thereto and earnings and gains thereon, net of investment losses and net of expenses of the Trust not paid for by the Company, less amounts withdrawn by or distributed to Participants or their Beneficiaries. 2.24 "Change Date" shall mean January 1, April 1, July 1 and October 1 of each year. 2.25 "Valuation Date" shall mean the date as of which a Participant's Account is valued hereunder, as determined in accordance with the provisions of Section 8. 2.26 Whenever the context requires, the masculine gender herein shall include the feminine and the singular form shall include the plural. Section 3 ELIGIBILITY AND PARTICIPATION 3.01 Each Employee shall be eligible to become a Participant hereunder on the last to occur of the following: (a) when he has been employed by CNG or an Affiliate one year or more; (b) when he has completed 1,000 or more Hours of Service during the twelve (12) months beginning on the day of his first Hour of Service, or if he does not complete 1,000 or more Hours of Service during such twelve (12) months, when he first completes 1,000 or more Hours of Service during any Plan Year beginning after the day he completes his first Hour of Service; (c) when he attains the age of twenty-one (21) years; and (d) when he becomes an Employee within the meaning of Section 2.13. (e) On or after July 1, 1999, each Employee (as defined in Section 2.13) who has not previously met the service requirement for eligibility, as provided in Section 3.01(a) and (b) above, shall be eligible to make salary reduction (CODA) contributions and voluntary unmatched after-tax contributions within the limits prescribed under Section 4.01 of the Plan beginning with the last to occur of (1) the first Payroll Period beginning on or after July 1, 1999, or (2) the first Payroll Period beginning on or after the first day of the month following the Employee's date of employment as an Employee, or (3) the first Payroll Period beginning on or after the first day of the month following the Employee's attainment of age twenty-one (21). Such individuals shall also be eligible to make contributions by way of rollover or direct transfer in accordance with Section 4.11 hereof. The provisions of the Plan regarding elections and changes thereto applicable to Participants generally shall also apply to such individuals. However, notwithstanding anything to the contrary in Section 5 or elsewhere in the Plan, such Employees shall not be entitled to begin receiving allocations of matching contributions until the time they are otherwise entitled to participate in the Plan, determined in accordance with the provisions of this Section 3.01 (other than this Section 3.01(e)) and Section 3.04. 3.02 Active participation in the Plan shall cease when the Participant ceases to be an Employee. A rehired Employee who retains any Continuous Service from his prior period of employment shall be eligible to resume active participation hereunder on his date of rehire. Any other rehired Employee must again satisfy the requirements of Section 3.01. 3.03 An Employee who is eligible may elect to participate in the Plan by executing such authorization forms as shall be prescribed for that purpose by the Company. Such forms shall consist generally of a salary reduction agreement and a payroll deduction election to be executed and delivered to the Company (which shall inform the Committee of such authorization and any changes therein or suspensions thereof). The time or times within which an eligible Employee may elect to participate in the Plan shall be governed by the applicable Plan provisions relating thereto. 3.04 Unless otherwise provided by the Committee, participation in the Plan shall commence (a) prior to July 1, 2000, as of the first full Payroll Period of the month following the date upon which the Employee satisfies the requirements for eligibility, provided that the Company has received the notice referred to in Section 3.03 at least fifteen (15) days prior to the commencement of that Payroll Period or (b) on and after July 1, 2000, as of the first full Payroll Period practicable that begins on or after the beginning of the month following the date upon which the Employee who has satisfied the requirements for eligibility provides to the Company the notice referred to in Section 3.03. An Employee who does not elect to participate when first eligible may elect to participate (a) prior to July 1, 2000, as of the first full Payroll Period coincident with or next following any subsequent Change Date, provided that the Company has received the notice referred to in Section 3.03 at least fifteen (15) days prior thereto, or (b) on and after July 1, 2000, as of the beginning of the first full Payroll Period practicable after the Company has received the notice referred to in Section 3.03. Section 4 SALARY REDUCTION AND EMPLOYEE CONTRIBUTIONS; TESTING; ROLLOVER CONTRIBUTIONS 4.01 Each Participant shall, by salary reduction agreement and payroll deduction authorization, cause to be contributed to the Plan the amount that may be authorized by him in the manner provided for by Section 3.03. Unless otherwise permitted under rules prescribed by the Committee, the following limitations shall apply to such contributions: (a) Contributions (referred to as "CODA" contributions or "salary reduction" contributions) may be made in whole percentage amounts of between 1% and 16% of a Participant's Compensation. However, Participants who are entitled to at least a 4 1/2% match under Section 5.01(b) shall be entitled to have CODA contributions made at the 4 1/2% level. (b) Voluntary unmatched after-tax contributions are permitted in whole percentage amounts of between 1% and 10% of such Participant's Compensation. The maximum amount of voluntary unmatched after-tax contributions which may be made by payroll deduction on account of any calendar year shall be 10% of such Participant's Compensation for such Year, except that if the Company shall have in effect for the same Participants more than one employee retirement plan which is "qualified" under Section 401(a) of the Code, voluntary (unmatched) contributions by a Participant during any year to all such plans including this Plan shall not exceed ten percent (10%) of such Participant's Compensation for such Year. (c) Subject to the limits under Section 415 of the Code, the maximum amount of such contributions which may be made on account of any calendar year shall be the sum of the amounts allowed under paragraphs (a) and (b). (d) Any contribution amounts shall be set as a whole percentage of the Participant's Compensation; except that Participants who are eligible for at least a 4-1/2% of Compensation match shall be entitled to have CODA contributions made at the 4-1/2% level. 4.02 (a) The provisions of this Section 4.02(a) shall be applicable prior to July 1, 2000. A Participant may change the amounts of his authorized salary reduction and payroll deduction (within the limits specified in Section 4.01) as of the first full Payroll Period coincident with or following a Change Date, provided that the Company has received notice of such change at least fifteen (15) days prior to the applicable Change Date. Unless otherwise prescribed by the Committee, changes may be made on a quarterly basis as of the date specified in the preceding sentence. A change in both authorized salary reduction and payroll deduction amounts may be made at the same time. A Participant may suspend his salary reduction and payroll deduction authorization at any time, provided that at least fifteen (15) days prior written notice is given to the Company. Such suspension shall be effective as of the beginning of the first Payroll Period of the month coincident with or next following the expiration of the fifteen (15) day notice period. Unless otherwise provided by the Committee, a Participant who has suspended his contributions may re-enter the Plan as of the first day of the first full Payroll Period coincident with or next following a subsequent Change Date, provided that the suspension has been in effect for a period of at least three (3) months on that subsequent Change Date and the Company has received notice thereof at least fifteen (15) days prior to that subsequent Change Date. (b) The provisions of this Section 4.02(b) shall be applicable on and after July 1, 2000. A Participant may change the amounts of his authorized salary reduction and payroll deduction (within the limits specified in Section 4.01) at any time by giving prior written notice to the Company. Such change shall be effective as of the beginning of the first Payroll Period practicable commencing after the Company has received notice of such change. A change in both authorized salary reduction and payroll deduction amounts may be made at the same time. A Participant may suspend his salary reduction and payroll deduction authorization at any time by giving prior written notice to the Company. Such suspension shall be effective as of the beginning of the first Payroll Period practicable commencing after the Company receives such notice. Unless otherwise provided by the Committee, a Participant who has suspended his contributions may re-enter the Plan at any time by giving prior written notice to the Company. Such re-entry shall be effective as of the beginning of the first Payroll Period practicable after the Company has received such notice. 4.03 Without becoming subject to the limitations of Section 4.02(a), a Participant may, by written notice to the Company, suspend or change the amount of his authorized salary reduction and payroll deduction for any period or periods during which (a) he is on authorized leave of absence at less than full pay; or (b) no contributions are made under the Plan by the Company. Any such suspension or change shall become effective with the beginning of the Payroll Period following receipt of such notice by the Company. 4.04 If a Participant remains an Employee but ceases to receive Compensation, his salary reduction and payroll deduction shall be automatically suspended. 4.05 Participant contributions to this Plan which (i) are not made pursuant to salary reduction agreement and (ii) are not matched by Employer contributions and (iii) otherwise conform to applicable Code requirements, (a) shall be treated as qualified voluntary employee contributions as contemplated by Code Section 219, and (b) shall not be included as voluntary (unmatched) contributions in applying the limitations of Section 4.01(b) on voluntary (unmatched) contributions. The Committee shall establish procedures (including time limits) consistent with applicable law whereby Participants may designate any part or all of such contributions made during a calendar year as not being qualified voluntary employee contributions. Once during each calendar year a Participant may make one contribution to the Plan, other than through payroll deduction, which contribution will be subject to the overall limitations of Section 4.01, will be treated as qualified voluntary employee contribution and will not in any event be subject to matching contribution by the Company. No contributions may be made to the Plan pursuant to this Section 4.05 after December 31, 1986. 4.05 In the event the total Company contributions (including salary reduction contributions and matching contributions) made for any Plan Year exceed fifteen percent (15%) of the total W-2 earnings of all Participants, or such lesser or greater percentage of total compensation paid to Participants during such Plan Year as may from time to time qualify for deduction from gross income under the provisions of the Code, then the Company shall arrange for a limitation on the amount of salary reduction contributions, or shall suspend such contributions entirely, in order that such limitation is not exceeded. 4.06 (a) No Participant shall be permitted to have Elective Deferrals made under this Plan, or any other qualified plan maintained by CNG or an Affiliate, during any taxable year of the Participant, in excess of the dollar limitation contained in Section 402(g) of the Code in effect at the beginning of such taxable year. This amount is $10,500 for 2000, and as indexed thereafter as provided in Section 402(g)(5) of the Code. (b) A Participant may assign to this Plan any Excess Elective Deferrals made during a taxable year of the Participant by notifying the Committee on or before March 1 of the following taxable year of the amount of the Excess Elective Deferrals to be assigned to the Plan, and certifying such amounts are Excess Elective Deferrals. If a Participant has Excess Elective Deferrals under this Plan and other plans of CNG or an Affiliate, however, then the Participant shall be deemed to have made such designation. An Employee who has Excess Elective Deferrals for a taxable year may receive a corrective distribution of Excess Elective Deferrals during the same year, provided that the corrective distribution is made after the date on which the Plan received the Excess Elective Deferral, and the Plan designates the distribution as a distribution of Excess Elective Deferrals. (c) Notwithstanding any other provision of the Plan, Excess Elective Deferrals, plus any income and minus any loss allocable thereto, shall be distributed no later than April 15 to any Participant to whose account Excess Elective Deferrals were assigned for the preceding year and who claims Excess Elective Deferrals for such taxable year, or on whose behalf Excess Elective Deferrals are deemed to have been claimed. (d) Definitions: (1) "Elective Deferrals" shall mean any Company contributions made to the Plan at the election of the Participant, in lieu of cash compensation, and shall include contributions made pursuant to a wage or salary reduction agreement or other deferral mechanism. With respect to any taxable year, a Participant's Elective Deferral is the sum of all Company or Affiliate contributions made on behalf of such Participant pursuant to an election to defer under any qualified CODA as described in Section 401(k) of the Code, any simplified employee pension cash or deferred arrangement as described in Section 402(h)(1)(B), any plan as described under Section 501(c)(18), and any employer contributions made on the behalf of a Participant for the purchase of an annuity contract under Section 403(b) pursuant to a salary reduction agreement. (2) "Excess Elective Deferrals" shall mean those Elective Deferrals that are includible in a Participant's gross income under Section 402(g) of the Code to the extent such Participant's Elective Deferrals for a taxable year exceed the dollar limitation under such Code Section. (e) Determination of income or loss: Excess Elective Deferrals shall be adjusted for any income or loss for the taxable year. The income or loss allocable to Excess Elective Deferrals under this Plan is the income or loss allocable to the Participant's Pre-Tax Account for the taxable year multiplied by a fraction, the numerator of which is such Participant's Excess Elective Deferrals under this Plan for the year and the denominator is the Participant's Pre-Tax Account without regard to any income or loss occurring during such taxable year. 4.07 (a) The Actual Deferral Percentage (hereinafter "ADP") for Participants who are Highly Compensated Employees for each Plan Year beginning on or after January 1, 1997 must satisfy one of the following tests: (1) The ADP for Participants who are Highly Compensated Employees for the Plan Year shall not exceed the ADP for the next preceding Plan Year for Participants who are Non-highly Compensated Employees for such next preceding Plan Year multiplied by 1.25; or (2) The ADP for Participants who are Highly Compensated Employees for the Plan Year shall not exceed the ADP for the next preceding Plan Year for Participants who are Non-highly Compensated Employees for such next preceding Plan Year multiplied by 2.0, provided that the ADP for Participants who are Highly Compensated Employees for the Plan Year does not exceed the ADP for the next preceding Plan Year for Participants who are Non-highly Compensated Employees for such next preceding Plan Year by more than two (2) percentage points. (b) Special Rules: (1) The ADP for any Participant who is a Highly Compensated Employee for the Plan Year and who is eligible to have salary reduction contributions allocated to his accounts under two or more arrangements described in Section 401(k) of the Code that are maintained by CNG or an Affiliate, shall be determined as if such contributions were made under a single arrangement. If a Highly Compensated Employee participates in two or more such cash or deferred arrangements that have different Plan Years, all cash or deferred arrangements ending with or within the same calendar year shall be treated as a single arrangement. Notwithstanding the foregoing, certain plans shall be treated as separate if mandatorily disaggregated under regulations under Section 401(k) of the Code. (2) In the event that this Plan satisfies the requirements of Sections 401(k), 401(a) (4), or 410(b) of the Code only if aggregated with one or more other plans, or if one or more other plans satisfy the requirements of such Sections of the Code only if aggregated with this Plan, then this Section shall be applied by determining the ADP of employees as if all such plans were a single plan. Plans may be aggregated in order to satisfy Section 401(k) of the Code only if they have the same Plan Year. (3) For purposes of applying the ADP test for any Plan Year, CNG may elect, by amending the Plan to provide that it has made such election, to use the ADP for the Plan Year for Non-highly Compensated Employees for the Plan Year rather than the ADP for the next preceding Plan Year for Non-highly Compensated Employees for such next preceding Plan Year, but if such an election is made, it may not be changed except to the extent provided in applicable governmental regulations, rulings or announcements. In accordance with the preceding sentence, CNG hereby elects to use the ADP for the Plan Year for Non-highly Compensated Employees for the Plan Year for purposes of applying the ADP test for Plan Years commencing on or after January 1, 1997, and the Plan is hereby amended to so provide. (4) For purposes of determining the ADP test, salary reduction contributions must be made before the last day of the twelve-month period immediately following the Plan Year to which contributions relate. (5) The Company shall maintain records sufficient to demonstrate satisfaction of the ADP test. (6) The determination and treatment of the ADP amounts of any Participant shall satisfy such other requirements as may be prescribed by the Secretary of the Treasury. (c) "Actual Deferral Percentage" shall mean, for a specified group of Participants for a Plan Year, the average of the ratios (calculated separately for each Participant in such group) of (1) the amount of Company contributions actually paid over to the trust on behalf of such Participant for the Plan Year to (2) the Participant's compensation for such Plan Year. Company contributions on behalf of any Participant shall include: (1) any Elective Deferrals made pursuant to the Participant's salary reduction election, including Excess Elective Deferrals of Highly Compensated Employees, but excluding (a) Excess Elective Deferrals of Non-highly Compensated Employees that arise solely from Elective Deferrals made under the Plan or plans of CNG or its Affiliates and (b) Elective Deferrals that are taken into account in any applicable Average Contribution Percentage test (provided the ADP test is satisfied both with and without exclusion of these Elective Deferrals). (d) Notwithstanding any other provisions of this Plan, Excess Contributions, plus any income and minus any loss allocable thereto, shall be distributed no later than the last day of each Plan Year to Participants to whose Accounts such Excess Contributions were allocated for the preceding Plan Year. If such excess amounts are distributed more than 2-1/2 months after the last day of the Plan Year in which such excess amounts arose, a ten (10) percent excise tax will be imposed on the Company with respect to such amounts. Such distributions shall be made to Highly Compensated Employees on the basis of the respective portions of the Excess Contributions attributable to each of such employees. The respective portions of the Excess Contributions for a Plan Year attributable to each Highly Compensated Employee shall be determined by allocating the Excess Contributions for the Plan Year to Highly Compensated Employees beginning with the Highly Compensated Employees with the highest amount of Company contributions taken into account in computing the ADP for the Plan Year and continuing in descending order until the aggregate amount of Excess Contributions has been fully allocated. (e) Determination of Income or Loss: Excess Contributions shall be adjusted for any income or loss for the Plan Year. The income or loss allocable to Excess Contributions is the income or loss allocable to the Participant's Pre-Tax Account for the Plan Year multiplied by a fraction, the numerator of which is such Participant's Excess Contributions for the year and the denominator is the Participant's Pre-Tax Account without regard to any income or loss occurring during such Plan Year. (f) Accounting for Excess Contributions: Excess Contributions shall be distributed from the Participant's Pre-Tax Account for the Plan Year. (g) "Excess Contributions" shall mean, with respect to any Plan Year, the excess of: (1) The aggregate amount of Company contributions actually taken into account in computing the ADP of Highly Compensated Employees for such Plan Year, over (2) The maximum amount of such contributions permitted by the ADP test (determined by hypothetically reducing contributions made on behalf of Highly Compensated Employees in order of the ADPs, beginning with the highest of such percentages, until such test is met). (h) This Section 4.08 is effective for Plan Years beginning on or after January 1, 1997. The Committee may apply this Section separately with respect to separate bargaining units or may combine such bargaining units for testing purposes to the extent permitted by law, and may also apply this Section separately in respect of any Participants or unit of Participants who have not met the service requirement for eligibility as provided in Sections 3.01(a) and (b). Any combination of units must be determined on a basis which is reasonable and reasonably consistent from year to year. 4.08 No provisions have been included relating to the satisfaction of the requirements of Section 401(m) of the Code (relating to employee and matching contributions) since the Plan is maintained pursuant to one or more collective bargaining agreements 4.9 (a) If during the course of the Plan Year the Company determines that the ADP test may not be met, the Company may take appropriate action by limiting salary reduction contributions by Highly Compensated Employees in order that the Plan meet one of the percentage tests described earlier. (b) In performing the ADP test, the Committee may elect to (1) take into account compensation while the individual is an eligible Participant in the Plan for the relevant Plan Year, and (2) use any definition of compensation that satisfies Section 414(s) of the Code; provided that all Participants are treated on a uniform basis for the relevant Plan Year. 4.10 Effective January 1, 1993, a Participant may contribute to the Plan, or have transferred directly on his behalf from another qualified plan, cash amounts which constitute an "eligible rollover distribution" as defined in Section 402(c)(4) of the Code. In the case of amounts which the Participant contributes by way of rollover, such amount must be received by the Trustee within sixty (60) days of the Participant's receipt of the distribution. Only cash may be rolled over or transferred directly, and no property transfers will be accepted. In no event shall the portion of any distribution that represents the return of after-tax contributions be transferred or rolled over. Section 5 MATCHING CONTRIBUTIONS BY THE COMPANY 5.01 Except as provided in Section 3.01(e), the Company shall contribute for the benefit of each Participant an amount equal to the lesser of (A) his CODA contributions and (B) whichever of the following amounts is applicable: (a) four and one-half percent (4 1/2%) of the Participant's Compensation during the Payroll Period in the case of a Participant who as of the preceding Change Date had either (i) attained the age of forty-five (45) years or (ii) completed twenty (20) years of Continuous Service; (b) three percent (3%) of the Participant's Compensation during the Payroll Period in the case of a Participant who as of the preceding Change Date had either (i) attained the age of thirty-five (35) years or (ii) completed ten (10) years of Continuous Service; or (c) two percent (2%) of the Participant's Compensation during the Payroll Period with respect to all other Participants. (d) Such contributions need not be made out of net operating profits; the Plan is intended to be a discretionary profit sharing plan in accordance with Section 401(a) (27) of the Code, and is not intended to be a plan subject to the funding requirements of Section 412 of the Code. (e) The provisions of this Section 5.01, applied with respect to Participants represented by the Utility Workers Union of America Local 380 (Greenwich Union), effective July 1, 1998; provided, however, that any Participant in the Plan who is represented by the Greenwich Union as of that date and who, as of the preceding Change Date, April 1, 1998, had either (i) attained the age of fifty (50) years or (ii) completed thirty (30) years of Continuous Service, shall continue to be entitled to a matching contribution of up to six percent (6%) of the Participant's Compensation during the Payroll Period, or the amount of his CODA contributions for the Payroll Period, if less. (f) It is the intent of the Company, and the Plan is so interpreted, so as to not penalize Participants whose salary reduction (CODA) contributions are required to cease as a result of the limitation under Section 402(g) of the Code (currently $10,500); and accordingly, matching contributions shall continue for such Participants for the balance of the year as determined by the Committee at the rate of match applicable to such Participant in order that the Participant not be penalized by the timing of such salary reduction (CODA) contributions. 5.02 The portion of any Participant's Company Matching Account (as defined in Section 8) which is forfeited because of termination of employment before full vesting as provided for in Section 9 shall be regarded as a contribution by the Company and applied as a credit against the next succeeding contribution or contributions of the Company under Section 5.01. Section 6 LIMITATION ON CONTRIBUTIONS 6.01 If the Participant does not participate in, and has never participated in another qualified plan maintained by the Company or a welfare benefit fund, as defined in Section 419(e) of the Code maintained by the Company, or an individual medical account, as defined in Section 415(1) (2) of the Code, maintained by the Company, which provides an Annual Addition, the amount of Annual Additions which may be credited to a Participant's Account for any Limitation Year shall not exceed the lesser of the Maximum Permissible Amount or any other limitation in this Plan. If the Company contribution that would otherwise be contributed or allocated to the Participant's Account would cause the Annual Additions for the Limitation Year to exceed the Maximum Permissible Amount, the amount contributed or allocated will be reduced so that Annual Additions for the Limitation Year will equal the Maximum Permissible Amount. The Committee may suspend or reduce salary reduction and/or payroll deduction contributions in order to satisfy such limitations. 6.03 Prior to determining the Participant's actual Compensation for the Limitation Year, the Company may determine the Maximum Permissible Amount on the basis of a reasonable estimation of the Participant's annual Compensation for the Limitation Year, uniformly determined for all Participants similarly situated. 6.04 As soon as is administratively feasible after the end of the Limitation Year, the Maximum Permissible Amount for the Limitation Year will be determined on the basis of the Participant's actual Compensation for the Limitation Year. 6.05 If, pursuant to Section 6.03 or as a result of allocation of forfeitures, there is an Excess Amount with respect to a Participant for the Limitation Year, such Excess Amount will be disposed of as follows: (a) Any voluntary after-tax contributions, to the extent they would reduce the Excess Amount, will be returned to the Participant, and if an Excess Amount still exists, any salary reduction contributions, to the extent they would reduce the Excess Amount, will be distributed Participant. (b) If after the application of paragraph (a) an Excess Amount still exists, and the Participant is covered by the Plan at the end of the Limitation Year, the Excess Amount in the Participant's Account will be used to reduce Company contributions (including any allocation of forfeitures) for such Participant in the next Limitation Year, and each succeeding Limitation Year if necessary. (c) If after the application of paragraph (a) an Excess Amount still exists, and any Participant is not covered by the Plan at the end of a Limitation Year, the Excess Amount will be held unallocated in a suspense account. The suspense account will be applied to reduce future Company contributions (including allocation of any forfeitures) for all remaining Participants in the next Limitation Year, and each succeeding Limitation Year, if necessary. (d) If a suspense account is in existence at any time during a Limitation Year pursuant to this Section, it will participate in the allocation of the Trust's investment gains or losses. If a suspense account is in existence at any time during a particular Limitation Year, all amounts in the suspense account must be allocated and reallocated to Participants' Accounts before any Employer or Employee contributions may be made to the Plan for that Limitation Year. Except as provided in paragraph (a) above, Excess Amounts may not be distributed to Participants or former Participants. 6.06 This Section applies if, in addition to this Plan, the Participant is covered under another qualified defined contribution plan maintained by the Company, a welfare benefit fund, as defined in Section 419(e) of the Code maintained by the Company, or an individual medical account, as defined in Section 415(l)(2) of the Code, maintained by the Company, which provides an Annual Addition, during any such Limitation Year. The Annual Additions which may be credited to a Participant's Account under this Plan for any such Limitation Year will not exceed the Maximum Permissible Amount, reduced by the Annual Additions credited to a Participant's Account under such other plans and welfare benefit funds for the same Limitation Year. If the Annual Additions with respect to the Participant under other defined contribution plans and welfare benefit funds maintained by the Company are less than the Maximum Permissible Amount and the Company contribution that would otherwise be contributed or allocated to the Participant's Account under this Plan would cause the Annual Additions for the Limitation Year to exceed this limitation, the amount contributed or allocated will be reduced so that the Annual Additions under all such plans and funds for the Limitation Year will equal the Maximum Permissible Amount. If the Annual Additions with respect to the Participant under such other defined contribution plans and welfare benefit funds in the aggregate are equal to or greater than the Maximum Permissible Amount, no amount will be contributed or allocated to the Participant's Account under this Plan for the Limitation Year. 6.07 Prior to determining the Participant's actual Compensation for the Limitation Year, the Company may determine the Maximum Permissible Amount in the manner described in Section 6.02. 6.08 As soon as administratively feasible after the end of the Limitation Year, the Maximum Permissible Amount for the Limitation Year will be determined on the basis of the Participant's actual Compensation for the Limitation Year. 6.09 If, pursuant to Section 6.07 or as a result of the allocation of forfeitures, a Participant's Annual Additions under this Plan and such other plans result in an Excess Amount, the Excess Amount will be deemed to consist of the Annual Additions last allocated, except that Annual Additions attributable to a welfare benefit fund or individual medical account will be deemed to have been allocated first regardless of the actual allocation date. 6.010 If any Excess Amount was allocated to a Participant on an allocation date of this Plan which coincides with an allocation date of another Plan, the Excess Amount attributed to this Plan will be the product of: (a) the total Excess Amount allocated as of such date, times (b) the ratio of (i) the Annual Additions allocated to the Participant for the Limitation Year as of the date under this Plan, to (ii) the total Annual Additions allocated to the Participant for the Limitation Year as of such date under this and all the other qualified defined contribution plans. 6.11 Any Excess Amount attributed to this Plan under Section 6.09 will be disposed in the manner described in Section 6.04. 6.12 For purposes of this Section 6, the following definitions shall apply: (a) Annual Additions: The sum of the following amounts credited to a Participant's Account for the Limitation Year: (1) Company contributions (including without limitation salary reduction contributions); (2) forfeitures; and (3) voluntary after-tax contributions. For this purpose, any Excess Amount applied under Section 6.04 in the Limitation Year to reduce Company contributions will be considered Annual Additions for such Limitation Year. Amounts allocated, after March 31, 1984, to an individual medical account, as defined in Section 415(l)(2) of the Code, which is part of a pension or annuity plan maintained by the Company, are treated as Annual Additions to a defined contribution plan. Also, amounts derived from contributions paid or accrued after December 31, 1985, in taxable years ending after such date, which are attributable to post-retirement medical benefits allocated to the separate account of a Key Employee, as defined in Section 419A(d)(3) of the Code, under a welfare benefit fund, as defined in Section 419(e) of the Code, maintained by the Company, are treated as Annual Additions to a defined contribution plan. (b) Company: For purposes of this Section 6, Company shall mean the Company that adopts this Plan, and all members of a controlled group of corporations (as defined in section 414(b) as modified by section 415(h) of the Code), all commonly controlled trades or businesses (as defined in Section 414(c) as modified by 415(h) of the Code), or all members of an affiliated service group (as defined in Section 414(m) of the Code) of which the Company is a part, and any other entity required to be aggregated with the Company pursuant to the regulations under Section 414(0) of the Code. (c) Compensation: A Participant's wages as defined in Section 3401(a) of the Code and all other payments of compensation to an Employee by the Company (in the course of the Company's trade or business) for which the Company is required to furnish the Employee a written statement under Sections 6041(d) and 6051(a)(3) of the Code, but determined without regard to any rules that limit the remuneration included in wages based on the nature or location of the employment or the service performed (such as the exception for agricultural labor in Section 3401(a)(2)). For purposes of applying the Limitations of this Section 6, Compensation for a Limitation Year is the Compensation actually paid or includible in gross income during such year. Effective on and after January 1, 1998, Compensation shall be adjusted to include amounts specified in Section 415(c)(3)(D) of the Code. (d) Excess Amount: The excess of the Participant's Annual Additions for the Limitation Year over the Maximum Permissible Amount. (e) Limitation Year: The Plan Year. (f) Maximum Permissible Amount: The Maximum Annual Addition that may be contributed or allocated to a Participant's Account under the Plan for any Limitation Year shall not exceed the lesser of (1) $30,000 (or, effective for Limitation Years beginning prior to January 1, 1995, if greater, one-fourth of the defined benefit dollar limitation set forth in Section 415(b)(1) of the Code), or (2) twenty-five percent (25%) of the Participant's Compensation (as defined in Section 6.11(c) hereof) for the Limitation Year. The Compensation limitation referred to in (2) shall not apply to any contribution for medical benefits (within the meaning of Section 401(h) or Section 419A(f) (2) of the Code) which is otherwise treated as an Annual Addition under Section 415(1) (1) or Section 419A(d) (2) of the Code. If a short Limitation Year is created because of an amendment changing the Limitation Year to a different 12-consecutive month period, the Maximum Permissible Amount will not exceed the defined contribution dollar limitation set forth in (1) multiplied by the following fraction: number of months in short Limitation Year divided by 12. Section 7 INVESTMENT OF CONTRIBUTIONS 7.01 The Company shall pay over to the Trustee at least monthly the amount of the total salary reductions and payroll deductions withheld by the Company during such month, together with the corresponding contributions to be made by the Company, but in no event shall such amounts be paid over to the Trustee later than the 15th business day after the end of such month. At its option, the Company may, in lieu of cash, deliver to the Trustee on account of any contribution payable by it hereunder, or any portion thereof, shares of Common Stock, such shares to be applied against such contribution at an amount equal to their market value at the time of delivery, such market value to be determined by taking the mean between the high and low trading price of the stock on the New York Stock Exchange for the next preceding trading day. 7.02 Participants (including terminated Participants, retirees and Beneficiaries with Account balances under the Plan) may direct the Trustee as to the investment of the following Accounts from among the investment options provided under the Plan: (1) Pre-Tax Account; (2) Employee After-Tax Contribution Account; (3) IRA Account; and (4) Rollover Account. The investment options under the Plan are a Common Stock Fund and such additional funds as the Committee agrees to offer for investment under the Plan. The underlying investment for each such additional fund shall be a mutual fund or other pooled investment fund, and at least four (4) such funds shall be offered. Separate investment elections may be chosen for existing Account balances (sources of money) and future contributions, although a single investment election shall apply with respect to all existing investment fund Account balances for which investment directions are permitted and a single investment election shall apply with respect to all future contributions for which investment elections are permitted. Investment elections shall be made in increments of 5%. Changes in the investment elections for existing Account balances and for future contributions are permitted at any time. Any changes in the investment elections may be made on a daily basis (any business day), subject to any restrictions imposed by the Trustee on the movement between funds or timing thereof. Common Stock investments shall be made by purchase by the Trustee, in the open market or otherwise, at not more than market price at the time of purchase, of shares of such stock, and dividends and other increments thereon will be likewise invested. 7.03 (a) Each Participant (including a terminated Participant, retiree or Beneficiary with an Account balance under the Plan) shall be entitled to direct the Trustee as to the manner in which any shares of Common Stock allocated to his Account (including any fractional shares) are to be voted, tendered in the case of a tender offer, or converted in the case of a conversion election, in accordance with the rules and procedures set forth in the Trust Agreement 7.04 (a) Participants (including terminated Participants, retirees and Beneficiaries with Account balances under the Plan) shall be entitled to direct the investment of their Company Matching Accounts. The investment options available with respect to the Company Matching Account shall include Common Stock and the same other investments available to Participants with respect to other contributions under the Plan for which investment direction is available. Participants shall have the option of reallocating the investment of the Company Matching Account at any time, at the same time as the option is exercised and subject to the same rules with respect to the other existing Accounts under the Plan for which the Participant has the ability to direct investments (i.e., the Pre-Tax Account, the Employee After-Tax Contribution Account, the IRA Account and the Rollover Account) . However, the Participant may elect separate investment allocation percentages for the Company Matching Account and for such other Accounts. All investment elections shall be in increments of 5%. Unless the Participant affirmatively elects otherwise as part of an election change with respect to existing Account balances, or except as otherwise provided in the Plan, his Company Matching Account shall continue to be invested in Common Stock. (b) Participants (including terminated Participants, retirees and Beneficiaries with Account balances under the Plan) shall be entitled to direct the investment of their Paysop Transfer Account subject to the same rules regarding direction of investment of Company Matching Accounts described in Section 7.04(a). However, the Participant may elect separate investment allocation percentages for the Paysop Transfer Account and for the Company Matching Account. Amounts in a Participant's Paysop Transfer Account shall continue to be invested in Common Stock unless the Participant affirmatively elects otherwise as part of an election change with respect to existing Account balances, or except as otherwise provided in the Plan. (c) The Committee is authorized to adopt administrative rules and procedures to effectuate the intent of the provisions of this Section 7.04, including, without limitation, reasonable estimation of shares to be transferred and allocated, rounding of share amounts, and the like. (d) It is recognized that sales of Common Stock in order to effectuate investment directions shall be done as soon as is reasonably practicable by the Trustee, based upon market conditions and similar considerations. (e) Future matching contributions made to the Plan will be accounted for under the Company Matching Account. Such future matching contributions shall be invested in Common Stock unless the Participant affirmatively elects otherwise (as part of and subject to the same rules as the Participant's election change with respect to future contributions) or except as otherwise provided in the Plan. Unless otherwise prescribed by the Committee, any such affirmative election to direct that future matching contributions be invested other than in Common Stock shall apply to all future matching contributions and shall pattern the Participant's election with respect to future contributions to other Accounts under the Plan, e.g., to the Pre-Tax Account. Section 8 ACCOUNTS AND PARTICIPANTS 8.01 The Committee shall cause the unsegregated Account of each Participant to be separated into separate unsegregated subaccounts, as follows: (a) The Company Matching Account containing all amounts contributed as matching contributions and earnings thereon; (b) The Pre-Tax Account containing all salary reduction contributions made on behalf of the Participant and earnings thereon; (c) The Employee After-Tax Contribution Account containing after-tax payroll deduction contributions made by the Participant and earnings thereon; (d) The IRA Account containing contributions made pursuant to Section 4.05 and earnings thereon; (e) The Rollover Account containing any rollover or direct transfer amounts added under Section 4.12 and earnings thereon; and (f) The Paysop Transfer Account, as described below in Section 8.06. 8.02 Except as otherwise provided in Section 12.08, dividends on shares of Common Stock shall be used to purchase additional shares of Common Stock for the Account of the Participant so invested. The Account of Plan Participants (including terminated Participants, retirees and Beneficiaries with Account balances under the Plan) shall increase or decrease in value based upon the performance of the various investment options and the allocation of such Accounts among such investment alternatives. 8.03 Valuations of a Participant's Account shall be performed on a daily basis (as of a business day). The Committee shall require the Trustee to provide accounts of its transactions under the Trust Agreement on a quarterly basis. 8.04 For purposes of this Section, a Participant shall be continued to be treated as such, even after his employment has terminated, until final valuation of his Account is made as provided for in Section 10. 8.05 The Committee may keep such additional accounts or subaccounts as it deems necessary or proper to accomplish the purposes of this Plan. 8.06 An additional Account shall be established for a Plan Participant which represents amounts attributable to shares (and fractions thereof) of common stock which were transferred to the Trustee hereunder in connection with the termination of the Connecticut Natural Gas Corporation Tax Credit Stock Ownership Plan. Such account shall be referred to herein as the Participant's "Paysop Transfer Account." The amounts in a Participant's Paysop Transfer Account shall remain invested in Common Stock unless the Participant directs otherwise as provided in the Plan. Dividends payable in Common Stock shall be used to purchase additional shares of Common Stock, except as otherwise provided in the Plan. The Plan Participant shall have a 100% vested interest in such Paysop Transfer Account. The provisions of Section 7.03, regarding voting of Common Stock, shall also apply to this Account. The payment of benefits from said Account shall generally be governed by the rules respecting distributions from the Plan. However, the following special rules shall apply: (a) Each Participant shall be permitted to elect to receive a distribution of all or a portion of his Paysop Transfer Account once annually at any time during the Plan Year. The Plan shall then distribute to the Participant the portion of his Paysop Transfer Account which is covered by the election, as soon as practicable following such election. (b) If a Participant separates from service for any reason, then distribution of the Participant's Paysop Transfer Account balance will begin not later than one (1) year after the close of the Plan Year in which the event occurs, unless the Participant otherwise elects. Furthermore, distributions from a Participant's Paysop Transfer Account shall be made in substantially equal annual installments over a period of five (5) years, unless the Participant elects to receive the distribution in a lump sum. Payments shall be made in whole shares of Common Stock and any fractional shares shall be paid in cash. In no event shall such distribution period exceed the period permitted under Section 401(a)(9) of the Code. Section 9 VESTING OF INTERESTS 9.01 A Participant shall always have a fully vested interest in his Pre-Tax Account, Employee After-Tax Contributions Account, IRA Account, Rollover Account, and Paysop Transfer Account. 9.02 Upon total or partial termination of the Plan, or complete discontinuance of contributions under the Plan by the Company, an affected Participant's interest in his Company Matching Account shall become fully vested. Any Participant who dies, becomes Disabled or reaches his 65th birthday while a Participant in the employment of CNG or an Affiliate shall likewise have a fully vested interest in such Account. 9.03 Except as provided in Section 9.02, each Participant shall have a vested interest in his Company Matching Account equal to 20% thereof for each full year of Continuous Service determined under Section 2.10, so that a Participant shall be fully vested in such Account after five (5) full years of Continuous Service. Notwithstanding the foregoing, effective as of the date of a Change of Control, as defined in Section 2.05A, each Participant who is employed by CNG or any of its parent, subsidiaries or other affiliates (e.g., The Energy Network, Inc.) or any successor thereto on or after the effective date of such Change of Control shall have a fully vested interest in his Company Matching Account without regard to the number of years of Continuous Service completed . Effective immediately prior to the effective time of the consummation of the merger of CTG Resources, Inc. with and into Oak Merger Co. pursuant to the Agreement and Plan of Merger, dated as of June 29, 1999, by and among CTG Resources, Inc., Energy East Corporation and Oak Merger Co., the last sentence of the preceding paragraph shall be revised automatically and without further action to read as follows: Notwithstanding the foregoing, effective as of the date of a Change of Control, as defined in Section 2.05A, each Participant who both is employed by CNG or any of its parent, subsidiaries or other affiliates (e.g., The Energy Network, Inc.) and is a Participant immediately prior to the effective time of the consummation of the merger of CTG Resources, Inc. with and into Oak Merger Co. pursuant to the Agreement and Plan of Merger, dated as of June 29, 1999, by and among CTG Resources, Inc., Energy East Corporation and Oak Merger Co., shall have a fully vested interest in his Company Matching Account without regard to the number of years of Continuous Service completed. 9.04 If a former Participant whose employment terminated is readmitted to the Plan, his vested percentage in amounts credited to his Company Matching Account for Plan Years subsequent to his readmission shall be based on Continuous Service determined under Section 2.10. Section 10 DISTRIBUTION OF ACCOUNTS 10.01 (a) Upon the termination of the Participant's employment with CNG and its Affiliates as the result of (i) his retirement on or after his Normal Retirement Date or Early Retirement Date, (ii) his death, or (iii) his Disability, his Account shall be paid to the Participant or his Beneficiary in a lump sum. As used herein, a Participant shall meet the requirements for an Early Retirement Date if he had attained age 55 and completed at least ten (10) years of Continuous Service. (b) Payment shall be made to a retired Participant as soon as practicable following (i) the date of termination of employment or (ii) a later date if the Participant has made the election to defer distribution provided for in Section 10.01(d). (c) Payment shall be made to a Disabled Participant as soon as practicable following (i) the date on which the Participant is found to be Disabled, or (ii) a later date if he has made the election provided for in Section 10.01(e). (d) In the case of termination by retirement, a Participant may, at any time before his Account becomes distributable, elect to defer payment of his Account until a future date by filing written notice of such election with the Committee on the form prescribed by the Committee, and if a Participant has not attained his Normal Retirement Date, payment shall be deferred until his Normal Retirement Date unless he elects otherwise. The Participant need not at that time identify the date upon which payment is to be made, and may at a future date notify the Committee of his intention to receive such payment. Payment must in any event be made by April 1 of the calendar year following the year in which the Participant attains age 70-1/2 or, if later, terminates his employment with CNG and its Affiliates. Furthermore, notwithstanding the foregoing, distribution shall in any event be made or commence by April 1 of the calendar year following the calendar year in which a Participant attains age 70-1/2, if he is then still employed and he (i) attained age 70-1/2 prior to January 1, 2001 or (ii) is a 5% owner (as defined in Section 416 of the Code), and shall be made in accordance with Treasury Department Regulations over a period not extending beyond his actuarial life expectancy (with recalculation permitted on an annual basis, and with life expectancy determined in accordance with Section 1.72-9 of IRS regulations). Clause (i) of the preceding sentence shall not apply if the Participant attained age 70-1/2 prior to January 1, 1988; and installment distributions shall not be permitted except as provided in the preceding sentence. Any such installment distributions shall terminate at the time of the Participant's termination of employment, at which time the provisions of Section 10.01(a) shall be applicable. All Plan distributions shall comply with Section 401(a) (9) of the Code, including the minimum distribution incidental benefit rule. (e) In the event of termination as the result of the Disability of the Participant, the Participant may defer payment of his Account until a future date not later than his Normal Retirement Date, if the value of his Account exceeds $5,000, and payment shall be deferred until his Normal Retirement Date unless he elects otherwise. The Participant need not at that time identify the date upon which payment is to be made, and may at a future date notify the Committee of his intention to receive such payment, which shall in any event be made by the time he attains his Normal Retirement Date. (f) A retiree shall be entitled to receive his Company Matching Account at a time different than the time for distribution of his other Accounts. (g) All payments upon the death of a Participant shall be payable as a lump sum as soon as practicable following the Participant's death and in no event later than five years following the Participant's death. 10.02 (a) If the employment of a Participant is terminated for any reason other than a reason specified in Section 10.01, and if the Participant's vested Account exceeds $5,000, then the terminated Participant may defer the payment of the vested portion of his Account until any future date not later than his Normal Retirement Date. If such vested Account exceeds $5,000, no distribution may be made prior to the Participant's Normal Retirement Date without his consent. (b) If the vested Account does not exceed $5,000, the then vested portion of his Account shall be paid as soon as practicable following the date of termination (or January 1, 2000 if he terminated prior to January 1, 2000). If the Participant's Account exceeds $5,000, it may be paid at that time but shall not be paid until his Normal Retirement Date without his consent. (c) If a payment is made to a Participant prior to the time the Participant incurs a five year Period of Severance, under the authority of Section 10.02(b), of less than the entire balance of the Participant's Account, and such Participant is less than 100% vested at the time of such payment, the remaining portion of the Participant's Account shall be maintained as a separate account until such Participant incurs a five year Period of Severance. If the Participant returns to the service of CNG or an Affiliate before he has incurred a five year Period of Severance, the following formula shall be used to determine his vested portion in such separate account: (Fo-F) X=(AB)---------    Fo Where X is the vested portion, AB is the separate account balance at the time the determination is being made, Fo is the non-vested percentage at the time of distribution and F is the non-vested percentage at the time the determination is being made. In each case the non-vested percentage is 100% less the vested percentage. (d) In the event that an ex-Participant resumes participation in the Plan following a five year Period of Severance at a time at which his Account was more than 0% and less than 100% vested, if the vested portion was not distributed to him prior to resumption of participation, it shall thereafter be held in a separate subaccount within his Account so that his vested share of subsequent contributions to his Account can be determined. (e) The nonvested portion of such Participant's Account shall be held therein until such Participant has incurred a Period of Severance as defined in Section 2.10 of five years, whereupon it shall be forfeited and applied in accordance with Section 5.02. If such Participant returns to the employ of CNG or any Affiliate prior to a five year Period of Severance, no forfeiture shall occur. 10.03 (a) Payments out of all Accounts under the Plan shall be made in shares of Common Stock or cash, depending on the manner in which such amounts are invested. A Participant or Beneficiary may elect, however, to have such amounts converted to cash or Common Stock, at market value, prior to such payment. Any such election must be made prior to the date for which distribution is to be made. (b) The Committee in its discretion may adopt non-discriminatory policies, uniformly applied, which provide for the crediting of dividends on Common Stock earned prior to the distribution date to the Participant entitled to the distribution of such Common Stock, and such dividends may similarly be used to purchase additional shares of Common Stock to be distributed. (c) The amount of a distribution to a Plan Participant shall be based upon his Account as of the date of distribution. 10.04 Anything herein to the contrary notwithstanding, unless the Participant otherwise elects, payment of benefits to him under the Plan will begin not later than the 60th day after the close of the Plan Year in which occurs the last to occur of (a) the date on which such Participant attains age 65; (b) the tenth anniversary of the year in which such Participant commenced participation in the Plan; and (c) the date of termination of such Participant's employment. If the amount of the payment required to begin on the day above stated cannot be ascertained by such day, a payment retroactive to such day may be made no later than sixty (60) days after the earliest date on which the amount of such payment can be ascertained under the Plan. 10.05 In the event that the Company adopts an amendment to the Plan which revises the vesting schedule, the following rules shall apply: (a) the vested amount of a Participant's Account, determined as of the later of (1) the date such amendment is adopted or (2) the date it becomes effective, shall not be reduced thereby; and (b) each Participant as of the later of such dates who has at least three (3) years of Continuous Service and whose vested percentage is or may be reduced by such amendment may elect to have his vested percentage determined under the prior vesting schedule. Any such election must be made by the last to occur of (1) the date which is sixty (60) days after the day the amendment is adopted, (2) the date which is sixty (60) days after the day the amendment becomes effective, or (3) the date which is sixty (60) days after the date the Participant is given written notice of the amendment by the Company or Committee. 10.06 Distributions from the Paysop Transfer Account are governed by Section 8.06 hereof. 10.07 (a) If the value of a Participant's Account exceeds $5,000, the Participant must consent to any distribution of such Account prior to his Normal Retirement Date. The consent of the Participant shall be obtained within the 90-day period ending on the first day of the first period for which an amount is paid under the Plan. The Committee shall notify the Participant of such right to defer any distribution. Such notification shall be provided not less than 30 days and no more than 90 days prior to the date benefits are to be paid. (b) Distributions may occur less than 30 days after the notice is given, provided that: (1) The Committee 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 (2) the Participant, after receiving the notice, affirmatively elects a distribution. Section 11 WITHDRAWAL BY A PARTICIPANT 11.01 A Participant may, prior to termination of employment, elect to withdraw a portion or all of his Employee After-Tax Contribution Account and/or his IRA Account at any time during the calendar year; provided that only one withdrawal may be made under this Section 11.01 in any calendar year. Elections to make withdrawals shall be made in writing, on the form prescribed by the Committee, and shall be filed with the Committee within such time period prior to the date on which such withdrawal is to be made as the Committee may prescribe. Upon the filing of the election with the Committee, the Committee shall forthwith notify the Trustee of the Participant's intent to withdraw. The Committee shall instruct the Trustee to make payment of the amount of the withdrawal as soon as practicable after the date as of which it is to be effective. The Committee shall prescribe and adhere to non-discriminatory rules to implement the provisions of this Section 11.01. 11.02 (a) Upon application of a Participant, the Committee may authorize distribution by the Trustee of any part or all of the total amount of contributions to a Participant's Pre-Tax Account (but in no event earnings on such contributions earned after December 31, 1988) as soon as practicable thereafter if in the opinion of the Committee the amount to be withdrawn is needed to defray part or all of the expenses incurred or to be incurred by the Participant as a result of hardship. For purpose of this Section, hardship shall mean an immediate and heavy financial need of the Participant, but only to the extent the amount required to meet such need is not reasonably available from other resources of the Participant. (b) The following are the financial needs considered immediate and heavy: (1) expenses for medical care described in Section 213(d) of the Code previously incurred by the Participant, his spouse, or dependents (as defined in Section 152 of the Code) or necessary for these persons to obtain medical care described in Section 213 of the Code; (2) costs directly related to the purchase of a principal residence for the Participant (excluding mortgage payments); (3) payment of tuition and related educational fees for the next 12 months of post-secondary education for the Participant, or his spouse, children or dependents (as defined in Section 152 of the Code); (4) payments necessary to prevent the eviction of the Participant from the Participant's principal residence or foreclosure on the mortgage on that residence; or (5) immediate and heavy financial debt and/or taxes incurred by the Participant which make the threat of personal bankruptcy or foreclosure imminent. (c) A distribution will be considered as necessary to satisfy an immediate and heavy financial need of the Employee only if: (1) The Employee has obtained all distributions, other than hardship distributions, and all nontaxable loans available under all plans maintained by CNG and its Affiliates; (2) The Participant's salary reduction contributions and payroll deduction contributions under this Plan and all other plans of CNG and its Affiliates, other than pursuant to its cafeteria plan and health insurance program, will be suspended for twelve months after receipt of the hardship distribution. The Participant must agree to this provision and take action consistent with its requirements as a condition to receipt of a hardship distribution; (3) The distribution is not in excess of the immediate and heavy financial need. The amount of an immediate and heavy financial need may include any amounts necessary to pay any federal, state or local income taxes or penalties reasonably anticipated to result from the distribution; and (4) All plans maintained by CNG and its Affiliates provide (and by inclusion of this provision, this Plan does provide) that the Employee may not make wage or salary deferral contributions for the Employee's taxable year immediately following the taxable year of the hardship distribution in excess of the applicable limit under Section 402(g) of the Code for such taxable year less the amount of such Employee's wage or salary deferral contributions for the taxable year of the hardship distribution. (c) The Employee must represent that the need cannot be satisfied through reimbursement or compensation by insurance or otherwise, by reasonable liquidation of the Employee's assets (to the extent it would not itself cause an immediate and heavy financial need), by cessation of contributions under the Plan, or by other distributions or loans from plans maintained by the Company or any other employer, or by borrowing from commercial sources on reasonable commercial terms.. (d) No more than one withdrawal may be made by a Participant in any twelve (12) month period. The Committee shall follow uniform nondiscriminatory principles and procedures in application of this Section 11.02, and shall permit the Participant to direct the Fund or Funds from which the withdrawal will take place (if one is permitted). Except as provided in this Section 11.02 (and Section 10.01(d)), no distribution may be made from a Participant's Pre-Tax Account while the Participant remains in the employ CNG or any Affiliate. 11.03 (a) Notwithstanding any provision of the Plan to the contrary that would otherwise limit a distributee's election under the Plan, a distributee may elect, at the time and in the manner prescribed by the Committee, and subject to such rules as the Committee may adopt consistent with the provisions of the Code and regulations thereunder, to have any portion of an eligible rollover distribution paid directly to an eligible retirement plan specified by the distributee in a direct rollover. (b) Definitions. (1) Eligible rollover distribution: An eligible rollover distribution is 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 includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities). (2) Eligible retirement plan: An eligible retirement plan is an individual retirement account described in Section 408(a) of the Code, an 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. (3) Distributee: A distributee includes an Employee or former Employee. In addition, the Employee's or former Employee's surviving spouse and the Employee's or former Employee's 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 spouse or former spouse. (4) Direct rollover: A direct rollover is a payment by the Plan to the eligible retirement plan specified by the distributee. 11.04 An active Participant, and any terminated Participant or Beneficiary with an Account balance under the Plan who qualifies as a "party in interest" under Section 3(14) of ERISA, will be permitted to direct the investment of a portion of his Account in a loan to himself, subject to the following rules: (a) No purpose for the loan need be shown; however, see paragraph (e) as it relates to the duration of loans; (b) There is a minimum loan amount of $1,000; (c) The maximum amount of a loan, when added to the outstanding balance of all other loans to the Participant from all qualified plans of CNG and its Affiliates, shall be $50,000; provided that the $50,000 limit shall be reduced by the highest outstanding loan balance of such loans during the one-year period ending on the day before the date of any new loan and provided further that the maximum amount of a loan, when added to the outstanding balance of all other loans from the Plan, shall in no event exceed one-half (1/2) of the Participant's vested interest in his Account; (c) Loans may not be made from a Participant's Paysop Transfer Account, although the vested portion of such Account shall be taken into consideration in determining the maximum available loan amount; (d) The loan must be payable in full within five (5) years following the date made, except that a loan which is made for the purpose of financing the acquisition of the principal residence of the Participant (a "principal residence" loan) must be payable in full within fifteen (15) years following the date made; (e) A Participant may not have more than one "general purpose" loan outstanding at any time, or more than one "principal residence" loan outstanding at any time (maximum two (2) loans); (f) Loans will be made available to eligible Participants on a reasonably equivalent basis and shall not be made available to Highly Compensated Participants in an amount greater than to other eligible Participants; (g) Loans shall require level amortization with payments to be made at least quarterly; (h) Loans must be adequately secured, utilizing one-half (1/2) of the Participant's vested interest in his Account as security; (i) Interest will be at a reasonable rate, as determined by the Committee based upon prevailing rates offered by commercial lenders for comparable loans. Unless otherwise prescribed by the Committee pursuant to written procedures, the interest rate shall be the prime rate (as published in The Wall Street Journal) in effect on the first business day of the calendar quarter in which the loan is made, plus one percent (1%); (j) Loans to Plan Participants who are active Employees shall be repaid through payroll deduction. The Committee is authorized to prescribe rules relating to the circumstances under which loan prepayments shall be permitted. Loan refinancings shall not be allowed; (k) Default shall occur in accordance with the terms of the promissory note and security agreement. Furthermore, unless otherwise provided by the Committee, separation from service shall constitute a default requiring full repayment of the balance due on any outstanding loan within such period of time as the Committee shall determine. Foreclosure on the portion of the Account used as security through offset (to the extent of the security interest) shall not occur, however, until a distributable event occurs under the Plan; (l) Loan repayments shall be invested in accordance with the Participant's direction as to future contributions; and (m) If the Participant is married, a Plan loan made prior to May 1, 2000 shall also be conditioned upon the consent of the Participant's spouse to the loan and to the use of a portion of the Participant's vested Account as security for the loan. Such consent must be given within ninety (90) days in advance of the date the loan is made. The consent of the spouse must be witnessed by a Plan Representative or a Notary Public and must acknowledge the effect thereof. The Committee shall administer the loan program and may establish reasonable written procedures for the loan program, which shall be consistent with the foregoing (but which may set forth additional provisions and requirements), and which are hereby incorporated by reference. No loans shall be made in any manner which would constitute a prohibited transaction under Section 4975 of the Code. The administrative charges associated with the establishment and maintenance of Plan loans may be charged to the Account of the Participant as the Committee shall direct. Loans shall be processed by the Trustee. Section 12 ADMINISTRATION 12.01 (a) CNG shall be designated as Plan Administrator and a named fiduciary with respect to the Plan. CNG shall have the power, by action of the Compensation Committee of the Board of Directors, to designate an Administrative Committee (the "Committee") of not less than three persons. The Committee shall be a named fiduciary and shall have full power, authority, discretion and responsibility to direct, manage and administer the Plan, except to the extent that such power, authority and responsibility is committed to the Trustee under the Trust established pursuant to Section 13. (b) Any person appointed to be a member of the Committee shall signify his acceptance in writing to the Compensation Committee of the Board of Directors. Any member of the Committee may resign by delivering his written resignation to the Compensation Committee of the Board of Directors and such resignation shall become effective upon delivery or at any later date specified therein. The members of the Committee shall serve without compensation for services as such, but the Committee shall be paid or reimbursed for all its reasonable expenses in accordance with Section 12.06. (c) A majority of the members of the Committee at the time in office may do any act which the Plan authorizes or requires the Committee to do, and the action of such majority of the members expressed from time to time by a vote at a meeting, or in writing without a meeting, shall constitute the action of the Committee and shall have the same effect for all purposes as if assented to by all the members at the time in office. (c) The Committee may, by a writing signed by a majority of its members, delegate to any member or members of the Committee or to any employee of the Company severally or jointly, the authority to perform any ministerial or routine act in connection with the administration of the Plan. The Committee may engage clerical assistance, and such legal, accounting, actuarial or other assistance as may be required, or hire employees to provide such assistance as they may require. 12.02 Subject to the limitations of the Plan, the Committee, as a named fiduciary, may make such rules and regulations as it deems necessary or proper for the administration of the Plan and the transaction of business thereunder; has the sole and absolute discretionary authority to interpret and construe the Plan (including, without limitation, by supplying omissions, correcting deficiencies in, or resolving inconsistencies or ambiguities in, the language of the Plan) and decide on questions of fact, including, but not limited to, the eligibility of any person to receive benefits and the amount of such benefits; may authorize the payment of benefits in such manner and at such times as it may determine; may prescribe forms to be used for making various elections under the Plan, for designating beneficiaries or for changing or revoking such designations, for applying for benefits and for any other purposes of the Plan, which prescribed forms in all cases must be executed and filed with the Committee (unless the Committee shall otherwise determine); and may take such other action and make such determinations in accordance with the Plan as it deems appropriate in the exercise of its authority and fulfillment of its duties hereunder. Notwithstanding the above or any other provision of the Plan to the contrary, the Committee may establish procedures for the use of electronic media in communication and transactions between the Plan and Trust or the Committee and Participants, terminated Participants and Beneficiaries. Electronic media may include, but are not limited to, e-mail, the Internet, intranet systems and telephone response systems. 12.03 Any discretionary actions to be taken under this Plan by the Committee with respect to the classification of the Employees or benefits shall be uniform in their nature and applicable to all Employees similarly situated. With respect to employment with CNG or an Affiliate, leaves of absence and other similar matters, the Committee shall administer the Plan in accordance with the applicable personnel records and regular personnel policies at the time in effect. 12.04 The Committee shall: (a) maintain the records of Participants' Accounts; (b) notify the Participants at least once each year of the balance in their Accounts; (c) give to the Participant's such other information concerning the Plan and their rights thereunder as may be required by law; (d) notify each Participant, three months prior to his Normal Retirement Date, or anticipated actual retirement, if known, of the options which may be available to such Participant; (e) direct the Trustee to make such payments as may be required to retired, disabled or terminated Participants, or to the Beneficiaries of deceased Participants; (f) select investment funds pursuant to Section 7.02 hereof, and perform the duties assigned to the Administrator under the Trust Agreement referred to in Section 13; (g) establish written procedures for determining the qualified status of domestic relations orders and for administering distributions pursuant thereto. 12.05 The Committee shall prepare and submit to the Compensation Committee of the Board of Directors of CNG an annual report showing in reasonable detail the assets and liabilities of the Trust Fund and giving a brief account of the operation of the Plan for such Year. 12.06 Reasonable expenses of administering the Plan and Trust shall be paid from the Trust Fund unless paid by the Company. The Company shall pay record-keeping expenses for overall Plan transactions; however, expenses relating to distributions or other processing relating directly to a particular Participant may be charged to that Participant's Account. 12.07 Notwithstanding any provision of the Plan to the contrary, during any conversion period relating to a merger or spin off of all or part of the Plan or a change in Trustee, recordkeeper or investment fund options under the Plan, in accordance with procedures established by the Committee, the Committee may temporarily suspend, in whole or in part, certain provisions of the Plan, which may include, but are not limited to, a Participant's right to change his contribution election, a Participant's right to change his investment election and a Participant's right to borrow or withdraw form his Account or obtain a distribution from his Account. 12.08 Notwithstanding any provision of the Plan to the contrary, during a period (the "Transition Period") as determined by the Committee beginning prior to and ending after the date of the consummation of the merger of CTG Resources, Inc. with and into Oak Merger Co. pursuant to the Agreement and Plan of Merger, dated as of June 29, 1999, by and among CTG Resources, Inc., Energy East Corporation and Oak Merger Co., all contributions, loan repayments and other additions directed for investment in Common Stock Fund under the Plan and dividends paid on Common Stock held under the Plan will be invested in the Putnam Stable Value Fund. No changes of investment fund elections for existing Account balances may be made to or from the Common Stock Fund during the Transition Period, and no new loans or withdrawals may be made under Section 11 of the Plan or distributions under Section 10 of the Plan during the Transition Period from the portion of a Participant's Account balance held in the Common Stock Fund. Section 13 TRUST AGREEMENT 13.01 CNG, by trust agreement with a corporation having trust powers, has established or will establish a Trust of which such corporation with trust powers will be the Trustee for the purpose of holding, safe-keeping, investing and reinvesting the Trust Fund. The authority, duties, rights and obligations of the Trustee, as well as the authority of the Company, CNG, the Compensation Committee, and the Committee relating to the Trust Fund, are or shall be set forth in the Trust Agreement. Section 14 FIDUCIARY RESPONSIBILITIES 14.01 The duties and responsibilities of the Trustee from time to time serving hereunder shall be those set forth in the Trust Agreement. 14.02 The Committee' shall have sole and exclusive responsibility and authority for those matters committed to it in Section 12 and under the Trust Agreement, except to the extent that it may have delegated any such responsibilities in writing pursuant to procedures specified in Section 12, in which case the Committee shall thereafter be responsible only to periodically review the actions of the fiduciary so designated. 14.03 CNG, acting by the Compensation Committee of its Board of Directors, shall have the sole and exclusive responsibility and authority to: (a) appoint a Trustee and remove any person so appointed; (b) appoint and remove the members of the Committee; (c) prior to May 1, 2000, direct the Trustee as to the voting of unvoted shares of Common Stock pursuant to the Trust Agreement; and (d) generally supervise and periodically report to the Board of Directors on the operation of the Plan. 14.04 The Board of Directors shall have sole and exclusive responsibility and authority to: (a) suspend Company contributions to be made under the Plan; (b) appoint and remove the members of the Compensation Committee of the Board of Directors; and (c) amend and terminate the Plan. 14.05 CNG, under the direction of the Compensation Committee of the Board of Directors, shall have sole and exclusive responsibility and authority for all matters of Plan management and administration not herein expressly committed to another. 14.06 Each fiduciary or person named herein or identified pursuant to procedures provided in the Plan as having any fiduciary responsibility for the maintenance and administration of the Plan or management of any part of the assets of the Fund shall have sole and exclusive authority and responsibility in the area or areas committed to it. Any person or group of persons may serve in more than one fiduciary capacity with respect to the Plan. Except as herein expressly provided to the contrary, all fiduciary duties and responsibilities hereunder shall be several only, and exclusively committed as above set forth, and there shall be no joint fiduciary responsibility or liability. 14.07 No fiduciary or person named herein or identified pursuant to procedures provided in the Plan as having any fiduciary responsibility under the Plan shall have any responsibility or authority in any area of the maintenance and administration of the Plan and the management of its assets other than that responsibility and authority expressly delegated to such fiduciary or other person. 14.08 No such fiduciary or other person guarantees the Trust Fund in any manner against investment loss or depreciation of asset value, nor guarantees the sufficiency of the assets in the Trust Fund to provide the benefits accrued under the Plan at any given time. Section 15 TERMINATION OR AMENDMENT OF PLAN 15.01 While CNG intends to establish a permanent Plan hereby, it nonetheless reserves the right to terminate, partially or completely, the Plan, or to suspend contributions (consistent with applicable laws) to the Plan or to amend the Plan in any particular. CNG is hereby irrevocably constituted the agent for all other employers who have adopted this Plan for the purpose of such termination or amendment. Any such employer may terminate this Plan with respect to its own employees. In the event of any such action, the following provisions shall apply: (a) In case of a complete termination, all Participants' Accounts shall be fully vested. The Participants' Accounts may be paid in full or may be retained by the Trustee and paid at Normal Retirement Date or the earlier termination of employment, depending upon the election of the Committee after consultation with the Participant at the time of such termination of employment. (b) In case of a partial termination, the Accounts of those Participants with respect to whom termination has occurred shall be fully vested. The fully vested Accounts of Participants with respect to which termination has occurred may be paid in full or may be retained by the Trustee and paid at Normal Retirement Date or upon earlier termination of employment depending upon the election of the Committee and subject to the requirements of law. (c) The Company reserves the right to suspend its contributions in any year. Any such suspension shall not terminate the Trust as to funds then held by the Trustee hereunder or operate to accelerate any distributions to or for the benefit of Participants or their Beneficiaries. No such suspension shall be deemed to be a "discontinuance" of further contributions. If, however, such a suspension does in fact ripen into a "discontinuance", then the proportionate interest of each Participant in the Trust Fund shall thereupon automatically be wholly vested in him notwithstanding any provision of the Plan to the contrary. Discontinuance on the part of the Company of further contributions to the Trust shall not, in the absence of formal action by the Company effecting termination, terminate the Trust as to the funds then held by the Trustee, or operate to accelerate any payments or distributions to Participants or to their Beneficiaries. Upon discontinuance, the then proportionate interest of each Participant in the Trust Fund shall thereupon automatically be wholly vested in him notwithstanding any provision of the Plan to the contrary. Distribution shall continue to be made in accordance with the applicable provisions of Section 10, and the Trustee shall continue to administer the Trust in accordance with the Trust Agreement. (d) Notwithstanding the foregoing, distribution of a Participant's Pre-Tax Account on account of Plan termination, sale of substantially all of the assets of a trade or business, or sale of a subsidiary, must meet the requirements of Sections 401(k)(2)(B) and 401(k)(10) of the Code. (e) No amendment of the Plan shall deprive any Participant or Beneficiary of any vested interest (unless required in order to comply with any federal law or regulation) nor cause any of the assets in the Trust to revert to or be applied for the benefit of the Company nor shall any amendment be made which will cause the Plan to lose its qualified status under the Internal Revenue Code. Any amendment may be effective retroactively. (f) Notwithstanding any other provision of the Plan to the contrary, in the event that Connecticut Natural Gas Corporation, CTG Resources, Inc., The Energy Network, Inc., The Hartford Steam Company, or any affiliate of any such corporations, shall acquire any other trade or business (or portion thereof) through asset or stock acquisition, merger, or similar transaction, and if in connection with or pursuant to the terms of any such transaction it is necessary or appropriate for this Plan to be amended for any reason (such as, for example, in order to provide prior service credit for vesting purposes), then any such amendment may be made by the President of Connecticut Natural Gas Corporation. The Board of Directors hereby delegates to the President the authority to make any such amendment or amendments to the Plan for such purpose, without further action by the Board. Any such amendment may take the form of an amendment to one or more provisions of the Plan; one or more schedules or appendices to be attached to the Plan and form a part of the Plan; a combination of the foregoing; or such other form as the President determines to be appropriate. The Board of Directors may terminate this delegation of authority at any time. 15.02 If CNG is judicially declared bankrupt or insolvent, or if it makes a general assignment for the benefit of creditors, or if its corporate existence shall cease or its business be substantially terminated, without provision being made by its successor, if any for the continuation of the Plan, the Plan will completely terminate. 15.03 Contributions by the Company are paid to the Trust on the condition that the same qualify for deduction under Section 404 of the Code. Any such contribution for which deduction is disallowed (to the extent disallowed), reduced by any loss attributable thereto (if any) while held in Trust, shall be returned to the Company within one year after the disallowance of the deduction, but not thereafter. Furthermore, if any contribution by the Company is made under a mistake of fact, such contribution in excess of the amount that would have been contributed had no mistake of fact occurred, reduced by any loss attributable thereto (if any) while held in Trust, shall be returned to the Company within one year after the payment of the contribution, but not thereafter. 15.04 Except as provided for in Section 15.03, under no circumstances shall any of the assets of the Trust revert to or be applied for the benefit of the Company; provided that reasonable expenses of administering the Plan and Trust may be charged to the Trust Fund. Section 16 GENERAL PROVISIONS 16.1 None of a Participant's Benefits in a Plan shall be subject to the claims of any creditor of such Participant or his Beneficiary, nor shall any Participant or his Beneficiary have the right to anticipate, alienate, or assign any Benefits under the Plan. Any attempted assignment or alienation, voluntary or involuntary, shall be absolutely void and of no effect. This Section 16.01 shall not apply to (i) the creation, assignment, or recognition of a right to any benefit payable with respect to a domestic relations order which is determined to be a qualified domestic relations order, as defined in Section 414(p) of the Code or (ii) on or after August 5, 1997, any judgment, order, decree or settlement agreement within the meaning of Section 401(a)(13)(C) of the Code. 16.02 In the event of any merger or consolidation of the Plan with, or a transfer of the assets and liabilities of the Plan to, any other plan, each Participant shall immediately following the effectiveness of such merger, consolidation or transfer, be entitled to receive Benefits (if the successor plan were then terminated) which are equal to or greater than the Benefits he would have been entitled to receive immediately prior to the effectiveness of such merger, consolidation or transfer (if the Plan had then been terminated). 16.03 This Plan is established by CNG and shall at all times be operated for the exclusive benefit of the Participants, terminated Participants and Beneficiaries of deceased Participants and to defray reasonable expenses of the Plan and Trust and, except as provided in Section 15, at no time shall any of the assets of the Fund revert to or be applied for the benefit of the Company. 16.04 Any person claiming a benefit or interest in the Plan agrees to perform any and all acts including the signing of required papers, and the taking of necessary physical examinations in order to carry out the Plan. Each Participant, including retired and terminated Participants, and Beneficiary entitled to receive benefits, must keep the Committee informed of his mailing address on a current basis. If any mailing properly addressed to a Participant or Beneficiary at the last address give to the Committee is returned by the postal authorities for want of satisfactory address, the Committee may withhold further mailings of informational materials or benefits until a proper address is provided. The terms of the Plan and the decisions of the Committee relative to the Plan made in a uniform non-discriminatory fashion shall be binding on all Participants and Beneficiaries and the heirs, executors and administrators of the person claiming a benefit or interest in the Plan. 16.05 This Plan shall not be construed as a modification of any employment relationship between any Participant and the Company nor shall it confer upon Participants any right to be continued in the employ of the Company. 16.06 Notwithstanding any provision of the Plan to the contrary, effective October 13, 1996, with regard to an Employee who after serving in the uniformed services is reemployed on or after December 12, 1994, within the time required by USERRA, contributions shall be made and benefits shall be provided under the Plan with respect to his qualified military service (as defined in Section 2.10(b)(iii)) in accordance with Section 414(u) of the Code. IN WITNESS WHEREOF, the Company executes this Plan Restatement this 25th day of April, 2000. WITNESS: CONNECTICUT NATURAL GAS CORPORATION S/ Jeffrey A. Hall                       By S/ Jean S. McCarthy                                                                              Vice President, Human Resources

ASSET PURCHASE AGREEMENT dated as of October 17, 2000 by and among AMERISTAR CASINO KANSAS CITY, INC., a Missouri corporation ("Purchaser"), AMERISTAR CASINOS, INC., a Nevada corporation ("ACI"), Kansas City Station Corporation, a Missouri corporation (the "Company"), and Station Casinos, Inc., a Nevada corporation ("Parent"), with respect to the assets of Kansas City Station Corporation, a Missouri corporation <page>TABLE OF CONTENTS This Table of Contents is not part of the Agreement to which it is attached but is inserted for convenience only. Page No. ASSET PURCHASE AGREEMENT * ARTICLE I SALE OF ASSETS AND CLOSING * 1.01    Assets * 1.02    Liabilities * 1.03    Purchase Price; Allocation * 1.04    Closing * 1.05    Determination of Surplus or Deficiency; Post-Closing Adjustment; Real Estate Purchase Adjustment * 1.06    Prorations * 1.07    Further Assurances; Post-Closing Cooperation * 1.08    Third-Party Consents; ACI's Gaming Compliance Program * 1.09    Insurance Proceeds * ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND PARENT * 2.01    Corporate Existence * 2.02    Authority * 2.03    No Conflicts * 2.04    Governmental Approvals and Filings * 2.05    Financial Statements and Condition * 2.06    Taxes * 2.07    Legal Proceedings * 2.08    Compliance With Laws and Orders * 2.09    Benefit Plans; ERISA; Labor Matters * 2.10    Real Property * 2.11    Tangible Personal Property * 2.12    Contracts * 2.13    Licenses * 2.14    Affiliate Transactions * 2.15    Environmental Matters * 2.16    Labor Matters * 2.17    Brokers * 2.18    Absence of Certain Changes * 2.19    Sufficiency of and Title to the Assets * 2.20    Insurance * ARTICLE III REPRESENTATIONS AND WARRANTIES OF PURCHASER and aci * 3.01    Existence * 3.02    Authority * 3.03    No Conflicts * 3.04    Governmental Approvals and Filings * <page>3.05    Legal Proceedings * 3.06    Brokers * 3.07    Financing * 3.08    Purchaser's Gaming Licenses * ARTICLE IV COVENANTS OF THE COMPANY AND PARENT * 4.01    Regulatory and Other Approvals * 4.02    HSR Filings * 4.03    Investigation by Purchaser * 4.04    Conduct of Business * 4.05    Certain Restrictions * 4.06    Transition Period * 4.07    No Solicitation * 4.08    Title Insurance * 4.09    ACI's Gaming Compliance Program * 4.10    Fulfillment of Conditions * 4.11    Noncompetition * 4.12    No Solicitation * ARTICLE V COVENANTS OF PURCHASER * 5.01    Regulatory and Other Approvals * 5.02    HSR Filings * 5.03    Investigation by the Company * 5.04    No Solicitation * 5.05    Collection of Gaming Chips and Tokens * 5.06    Baggage * 5.07    Safe Deposits * 5.08    Valet Parking * 5.09    Undertakings with Respect to Ground Lease * 5.10    Return of Books and Records * 5.11    Use of Transferred Intellectual Property * 5.12    Fulfillment of Conditions * ARTICLE VI CONDITIONS TO OBLIGATIONS OF PURCHASER * 6.01    Representations and Warranties * 6.02    Performance * 6.03    Officers' Certificates * 6.04    Orders and Laws * 6.05    Regulatory Consents and Approvals * 6.06    Consummation of Related Transaction * 6.07    Deliveries * 6.08    Title Insurance and Environmental Reports * 6.09    Consents. * 6.10    Absence of Material Adverse Effect * ARTICLE VII CONDITIONS TO OBLIGATIONS OF THE COMPANY * 7.01    Representations and Warranties * 7.02    Performance * 7.03    Officers' Certificates *<page>7.04    Orders and Laws * 7.05    Regulatory Consents and Approvals * 7.06    Consummation of Related Transaction * 7.07    Deliveries * 7.08    Letter Of Credit * 7.09    Required Consents * ARTICLE VIII TAX MATTERS AND POST-CLOSING TAXES * 8.01    Transfer Taxes and Transfer Fees * 8.02    Tax Indemnification * 8.03    Tax Cooperation * 8.04    Notification of Proceedings; Control * ARTICLE IX EMPLOYEE BENEFITS MATTERS * 9.01    Offer of Employment * 9.02    Welfare Plans -- Claims Incurred; Pre-Existing Conditions * 9.03    Vacation * 9.04    Service Credit * 9.05    Company's Benefit Plans * 9.06    COBRA Matters * ARTICLE X SURVIVAL OF REPRESENTATIONS * 10.01    Survival of Representations, Warranties, Covenants and Agreements * 10.02    No Other Representations * ARTICLE XI INDEMNIFICATION * 11.01    Other Indemnification * 11.02    Method of Asserting Claim * 11.03    Exclusivity * ARTICLE XII TERMINATION * 12.01    Termination * 12.02    Effect of Termination * ARTICLE XIII DEFINITIONS * 13.01    Defined Terms * 13.02    Construction of Certain Terms and Phrases * ARTICLE XIV MISCELLANEOUS * 14.01    Notices * 14.02    Entire Agreement * 14.03    Expenses * 14.04    Public Announcements * 14.05    Waiver * 14.06    Amendment * 14.07    Confidentiality * 14.08    No Third Party Beneficiary * 14.09    No Assignment; Binding Effect * 14.10    Headings * <page>14.11    Invalid Provisions * 14.12    Consent to Jurisdiction and Venue * 14.13    Governing Law * 14.14    Attorney's Fees * 14.15    Time of the Essence * 14.16    Counterparts * ARTICLE XV GUARANTEES * 15.01    Guarantee of the Company's Obligations * 15.02    Guarantee of Purchaser's Obligations * <page>SCHEDULES Section 1.01(a)(i) Owned Real Property Section 1.01(a)(ii) Real Property Leases Section 1.01(a)(v) Personal Property Leases Section 1.01(a)(vi) Business Contracts Section 1.01(a)(viii) Business Licenses Section 1.01(a)(ix) Vehicles and Vessels Section 1.01(a)(xiii) Transferred Intellectual Property Section 2.03 Conflicts Section 2.04 Governmental Approvals Section 2.05(a) Financial Statements Section 2.05(b) Changes in Condition Section 2.06(a) Tax Liens Section 2.06(b) Compliance with Tax Laws Section 2.07 Legal Proceedings Section 2.08 Compliance with Laws and Orders Section 2.09(a) Benefit Plans Section 2.09(e) Benefit Accrual Section 2.09(f) Collective Bargaining Agreements Section 2.09(g) Terminated Employees Section 2.10(a) Real Property Section 2.10(b) Liens Section 2.12(a) Contracts Section 2.12(b) Contract Violations Section 2.13 Licenses Section 2.15 Environmental Matters Section 2.18 Certain Changes Section 2.20 Insurance Section 3.04 Purchaser's Governmental Approvals Section 3.08 Purchaser's Gaming Licenses Section 6.09 Consents     EXHIBITS Exhibit A General Assignment and Bill of Sale Exhibit B Assumption Agreement Exhibit C Officer's Certificate of the Company Exhibit D Secretary's Certificate of the Company Exhibit E-1 Officer's Certificate of Purchaser Exhibit E-2 Officer's Certificate of ACI Exhibit F-1 Secretary's Certificate of Purchaser Exhibit F-2 Secretary's Certificate of Purchaser Exhibit G Intentionally Omitted Exhibit H Net Current Assets Calculation <page>ASSET PURCHASE AGREEMENT This ASSET PURCHASE AGREEMENT dated as of October 17, 2000 (the "Effective Date") is made and entered into by and among Ameristar Casino Kansas City, Inc., a Missouri corporation ("Purchaser"), Ameristar Casinos, Inc., a Nevada corporation ("ACI"), Kansas City Station Corporation, a Missouri corporation (the "Company"), and Station Casinos, Inc., a Nevada corporation ("Parent"). Capitalized terms not otherwise defined herein have the meanings set forth in Section 13.01 . WHEREAS, the Company owns and operates that certain riverboat gaming and entertainment facility known as "Station Casino Kansas City" located in Kansas City, Missouri (the "Business"); and WHEREAS, Parent and the Company have entered into that certain Asset Purchase Agreement dated as of July 19, 2000 with KC Opco, LLC, a Delaware limited liability company (the "July Agreement") pursuant to which the Company has agreed to sell the Business to KC Opco, LLC; and WHEREAS, the Company desires to enter into an agreement to sell, transfer and assign to Purchaser, and Purchaser desires to enter into an agreement to purchase and acquire from the Company, certain of the assets of the Company relating to the operation of the Business, and in connection therewith, Purchaser has agreed to assume certain of the liabilities of the Company relating to the Business, all on the terms set forth herein. NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SALE OF ASSETS AND CLOSING 1. Assets . Assets Transferred . On the terms and subject to the conditions set forth in this Agreement, the Company will sell, transfer, convey, assign and deliver to Purchaser, and Purchaser will purchase and pay for, at the Closing, all of the Company's right, title and interest in, and to all of the properties, assets and rights of every nature, kind and description, tangible and intangible (including goodwill), whether real, personal or mixed, whether accrued, contingent or otherwise, and whether now existing or hereafter acquired (other than the Excluded Assets) used primarily in connection with the Business, except as otherwise provided in Section 1.01(b) , as the same shall exist on the Closing Date including but not limited to such properties, assets and rights in the following categories (collectively with any proceeds and awards referred to in Section 1.09 , the " Assets "): <page>Real Property . The real property described in Section 1.01(a)(i) of the Disclosure Schedule , and all of the rights arising out of the ownership thereof or appurtenant thereto (the " Owned Real Property "), together with all buildings, structures, facilities, fixtures and other improvements thereto (the " Improvements ") and all transferable licenses, permits, approvals and qualifications relating to any Owned Real Property issued to the Company by any Governmental or Regulatory Authority; Real Property Leases and Agreements . Subject to Section 1.08, (A) the leases, subleases and licenses of real property and related guarantees described in Section 1.01(a)(ii)(A) of the Disclosure Schedule as to which the Company is the lessor, sublessor or licensor together with any agreements for use or occupancy of hotel rooms, banquet facilities or meeting rooms, (B) the leases and subleases of real property described in Section 1.01(a)(ii)(B) of the Disclosure Schedule as to which the Company is the lessee, sublessee or licensee (including the land and buildings, improvements and structures and all appurtenances belonging thereto) (such real property, the " Leased Real Property "; and, together with the Owned Real Property, the " Real Property "), (C) that certain Joint Venture Agreement between First Holdings Company and Parent dated September 25, 1993, as amended (the " Joint Venture Agreement "), (D) that certain Development Agreement dated as of April 24, 1995, as amended, by and between the Company and The Port Authority of Kansas City, Missouri (the " Development Agreement ") and (E) that certain Option Agreement dated September 25, 1993, as amended, between First Holdings Company and Parent (the " Option Agreement "); and all other rights, subleases, licenses, permits, deposits and profits appurtenant to or related to such leases, subleases and licenses described in this Section 1.01(a)(ii ) (the leases and agreements described in subclauses (A), (B), (C), (D) and (E), the " Real Property Leases ") and all of the Company's interest (including the land and buildings, improvements and structures located thereon and all appurtenances belonging thereto) in those certain leases, subleases and licenses as to which the Company is the lessee, sublessee or licensee as described in Section 1.01(a)(ii)(B) of the Disclosure Schedule ; Accounts Receivable . All accounts receivable of the Company existing on the Closing Date and calculated as set forth on the schedule attached hereto as Exhibit H (the " Accounts Receivable "); Tangible Personal Property . All furniture, fixtures, equipment, machinery, consumables, inventory, merchandise, liquor, food, supplies, spare and replacement parts and other tangible personal property (including, without limitation, all plans, designs and drawings for future expansions and all Gaming Devices which shall be transferred through a Licensed Supplier in accordance with the rules and regulations of the Missouri Gaming Commission (the " Commission ")) used primarily in the conduct of the Business (the " Tangible Personal Property "); Personal Property Leases . Subject to Section 1.08 , (A) the leases or subleases of Tangible Personal Property described in Section 1.01(a)(v)(A) of the Disclosure Schedule as to which the Company is the lessor or sublessor and (B) the leases of Tangible Personal Property described in Section 1.01(a)(v)(B) of the Disclosure <page>Schedule as to which the Company is the lessee or sublessee, together with any options to purchase the underlying property (the leases and subleases described in subclauses (A) and (B) , the " Personal Property Leases "); Business Contracts . Subject to Section 1.08 , all Contracts (other than the Real Property Leases and the Personal Property Leases) to which the Company is a party, the terms of which permit assignment of the Company's interest therein or with respect to which all necessary consents to assignment of the Company's interest therein have been obtained prior to the Closing, and which are utilized primarily in the conduct of the Business, including, without limitation, Contracts described in Section 1.01(a)(vi) of the Disclosure Schedule and Contracts relating to suppliers, sales representatives, distributors, purchase orders, marketing arrangements and manufacturing arrangements (the " Business Contracts "); Prepaid Expenses . All prepaid expenses of the Company existing on the Closing Date and calculated as set forth on the schedule attached hereto as Exhibit H (the " Prepaid Expenses "); Licenses . To the extent transfer is permitted under applicable Laws and pursuant to the terms of such Licenses and subject to Section 1.08 , Licenses (including applications therefor) issued primarily in connection with the conduct of the Business, including, without limitation, the Licenses listed in Section 1.01(a)(viii) of the Disclosure Schedule (the " Business Licenses "); Vehicles and Vessels . All motor vehicles, boats and barges and related docking facilities owned or leased by the Company and used primarily in the conduct of the Business, all of which are listed in Section 1.01(a)(ix) of the Disclosure Schedule (the " Vehicles and Vessels "); Security Deposits . All security deposits deposited by or on behalf of the Company as lessee or sublessee under the Real Property Leases and the Personal Property Leases existing on the Closing Date and calculated as set forth on the schedule attached hereto as Exhibit H (the " Lessee Security Deposits "); Other Rights . All third party guarantees, warranties, indemnities and similar rights in favor of the Company with respect to any Asset, other than claims and recoveries under litigation of the Company against third parties arising out of or relating to events or conditions existing or occurring prior to the Transfer Time; Hotel and Entertainment Reservations . All security deposits or payments made to the Company prior to the Transfer Time with regard to any hotel and entertainment reservations for events following the Transfer Time; Intellectual Property . All of the Company's licensed products or processes, patents, copyrights, trademarks, service marks, service names, designs, know-how, processes, trade secrets, inventions, and other proprietary data (including, without limitation, all customer lists) used exclusively in the Business or exclusively in <page>connection with the Assets (other than the trade names and logos described in Section 1.01(b)(ix)) (the "Transferred Intellectual Property"), which Transferred Intellectual Property is listed in Section 1.01(a)(xiii) of the Disclosure Schedule; Equity Interests. Subject to Section 1.08 , all of the Company's right, title and interest in and to the equity interests of the JV; and Books and Records . All Books and Records used primarily in the conduct of the Business or otherwise relating primarily to the Assets (including, without limitation, customer lists and customer data bases relating primarily to the Business (the " Business Customer Lists "), all Books and Records required by the Commission to be maintained at the Business, other than the Excluded Books and Records (the " Business Books and Records "). To the extent any of the Business Books and Records are items susceptible to duplication and are either (x) used in connection with any of the Company's or its Affiliates' businesses other than the Business or (y) are required by Law to be retained by the Company or its Affiliates, the Company may deliver photostatic copies or other reproductions from which, in the case of Business Books and Records referred to in clause (x), information solely concerning the Company's businesses other than the Business has been deleted. Subject to the terms and conditions hereof, at the Closing, the Assets shall be transferred or otherwise conveyed to Purchaser free and clear of all Liabilities, obligations, liens and encumbrances excepting only Assumed Liabilities and Permitted Liens which shall be payable by Purchaser only to the extent they are Assumed Liabilities. Excluded Assets . Notwithstanding anything in this Agreement to the contrary, the following assets and properties of the Company (the " Excluded Assets ") shall be excluded from and shall not constitute Assets: Cash . All cash (including checks received prior to the Transfer Time, whether or not deposited or cleared prior to the Transfer Time) including, without limitation, cage cash, slot fill, drop boxes, valet register, commercial paper, certificates of deposit and other bank deposits, treasury bills and other cash equivalents; Equity Interests . All of the Company's rights, title and interest in and to the equity interests of Station Casino Kansas City Restaurants, Inc.; Insurance . Subject to Section 1.09 , life insurance policies of officers and other employees of the Company and all other insurance policies relating to the operation of the Business; Employee Benefit Plans . All assets owned or held by or under any Benefit Plans including assets held in trust or insurance contracts for the benefit of Benefit Plan participants or beneficiaries; <page>Tax Refunds . All refunds or credits, if any, of Taxes due to or from the Company by reason of its ownership of the Assets or operation of the Business to the extent attributable to any time or period ending at or prior to the Transfer Time; Excluded Books and Records . The minute books, stock transfer books and corporate seal of the Company and any other Books and Records relating primarily to the Excluded Assets or the Retained Liabilities except for the Business Customer Lists and such Books and Records required by the Commission to be maintained at the Business (the " Excluded Books and Records "); Litigation Claims . All rights (including indemnification) and claims and recoveries under litigation of the Company against third parties (other than rights, claims and recoveries acquired by Purchaser pursuant to Section  1.01(a)(xi) ), arising out of or relating to events prior to the Transfer Time; Excluded Obligations . The rights of the Company in, to and under all Contracts of any nature, the obligations of the Company under which expressly are not assumed by Purchaser pursuant to Section 1.02(b) ; Trade Names and Logos . All of the Company's right, title and interest in, to and under the names "Station Casinos, Inc.", "Station Casino Kansas City", "The Feast", and "Boarding Pass Players Program", including any derivative names and related marks, designs or logos, except for the Transferred Intellectual Property; Gaming Chips and Tokens . All of the Company's gaming chips and tokens, including, without limitation, all (A) Gaming Device tokens not currently in circulation and (B) "reserve" chips, if any, not currently in circulation, except that at Purchaser's written election made at any time prior to the Closing Date (which election shall be subject to the prior approval of the Commission), such chips and tokens may be acquired by Purchaser at the Closing without further consideration; Intellectual Property . All trade names, marks, designs, logos, domain names and web sites other than the Transferred Intellectual Property; Rights under this Agreement . The Company's rights under this Agreement and the July Agreement; i. Signs. All of the Company's signs containing any trade name, mark, design or logo described in clause (ix) above, which Purchaser shall, at Purchaser's sole cost and expense and using reasonable care, not later than promptly following the expiration of any period that Purchaser is permitted to use such names, marks, designs or logos pursuant to Section 4.06 hereof, remove from the Real Property and Improvements thereto and place in a reasonably accessible location on the Real Property for prompt retrieval by the Company, together with all of the Company's right, title and interest therein, and as promptly as practicable, notify the Company and Parent that such signs have been removed and as to the location of such signs; provided, however, that other than as expressly provided herein, Purchaser shall have no liability to the Company <page>arising out of or resulting from Purchaser's performance of its removal, storage or other obligations with respect to such signs; and Excluded Contracts . The Administrative Services Agreement between the Company and Parent. 2. Liabilities . Assumed Liabilities . In connection with the sale, transfer, conveyance, assignment and delivery of the Assets pursuant to this Agreement, on the terms and subject to the conditions set forth in this Agreement, Purchaser shall assume as of the Transfer Time and shall pay, perform and discharge when due the following Liabilities of the Company, in each case to the extent arising out of or relating to the Business or the Assets (x) in the case of items listed in subsections (i), (iii) and (iv) below, as the same shall accrue after the Transfer Time and (y) in the case of items listed in subsections (ii) and (v) through (ix) below, as the same shall exist at the Transfer Time (collectively, the " Assumed Liabilities "), and no other Liabilities: Real Property Lease Obligations . Subject to the provisions of Section 1.08 , all obligations of the Company under the Real Property Leases; Accounts Payable . All obligations of the Company with respect to accounts payable outstanding on the Closing Date and calculated as set forth on the Schedule attached hereto as Exhibit H , but excluding any Liability owed by the Company to any Affiliate of the Company (" Accounts Payable "); Personal Property Lease Obligations . Subject to the provisions of Section 1.08 , all obligations of the Company under the Personal Property Leases; Obligations under Contracts and Licenses . Subject to the provisions of Section 1.08 , all obligations of the Company under the Business Contracts and Business Licenses that constitute Assets; Accrued Expenses . All obligations of the Company with respect to accrued expenses outstanding on the Closing Date and calculated as set forth on Exhibit H attached hereto (" Accrued Expenses "); Returned Goods . All obligations of the Company for replacement of, or refund for, damaged, defective or returned goods, to the extent such goods are subject to full return privileges from the supplier thereof; Security Deposits . All outstanding obligations of the Company on the Closing Date with respect to any security deposit held by the Company as lessor or sublessor under the Real Property Leases or Personal Property Leases calculated as set forth on Exhibit H attached hereto (the " Lessor Security Deposits "); <page>Progressive Meters . All outstanding obligations of the Company on the Closing Date with respect to any progressive meter on any Gaming Device calculated as set forth on Exhibit H attached hereto; Reservations . All obligations of the Company with respect to hotel room and entertainment reservations; and Post-Closing Liabilities . All Liabilities of the Business (other than Retained Liabilities) to the extent (A) resulting from events or conditions occurring following the Transfer Time or (B) arising out of the Assets and occurring after the Transfer Time. Retained Liabilities . All Liabilities of the Company other than Assumed Liabilities (the " Retained Liabilities ") shall be retained and paid, performed and discharged when due by the Company and Parent ( provided , that the Company shall have the ability to contest, in good faith, any such claim of liability asserted in respect thereof by any Person other than Purchaser and its Affiliates, so long as such contest does not result in a Lien upon any of the Assets): i. except to the extent any such liability is reflected on the Closing Date Balance Sheet as a current liability of the Business, any loss or liability of the Company of any nature or description, whether liquidated or contingent, to the extent (a) resulting from events or conditions which occurred or existed prior to the Transfer Time, or (b) arising out of or relating to the Excluded Assets (including those items identified as Retained Liabilities in Section 1.08); ii. any loss or liability relating to current or former employees of the Business (and their eligible dependents and beneficiaries), including with respect to employment or Benefit Plans, which accrued on or prior to the Transfer Time, except to the extent that such liability is reflected on the Closing Balance Sheet as a current liability of the Business; iii. all Liabilities with respect to gaming chips and tokens issued by the Company (but not progressive meters), except as provided otherwise herein; iv. all Liabilities related to Benefit Plans, except to the extent that such liability is reflected on the Closing Balance Sheet as a current liability of the Business; v. all Indebtedness (other than current accounts payable or accrued expenses of the Company incurred or accrued in the ordinary course of business, but only to the extent that the accrual for such payables and expenses has been properly reflected on the Closing Balance Sheet, and other than to the extent arising following the Transfer Time under Contracts that constitute Assets); vi. any Liability, whether currently in existence or arising hereafter, owed by the Company to any of its Affiliates; vii. <page>all Liabilities related to any fines or penalties imposed against the Company (or with respect to the Business or any Asset) by any Governmental or Regulatory Authority (including, without limitation, the Commission) prior to the Transfer Time; and viii. all other Liabilities of the Company other than the Assumed Liabilities. 3. Purchase Price; Allocation . Purchase Price . Subject to the adjustments set forth in Section 1.05 , the aggregate purchase price for the Assets shall be equal to Three Hundred Fifteen Million Dollars ($315,000,000) plus the amount of any Surplus or minus the amount of any Deficiency, in each case, as determined in accordance with Section 1.05 (the " Purchase Price "). Upon Closing, the Purchase Price shall be payable in immediately available United States funds at the Closing in the manner provided in Section 1.04 . Allocation of Purchase Price . Purchaser and the Company shall negotiate in good faith prior to the Closing Date and determine the allocation of the consideration paid by Purchaser for the Assets and the covenant not to compete contained in Section 4.11 hereof. Purchaser and the Company each agrees (i) that any such allocation shall be consistent with the requirements of Section 1060 of the Code and the regulations thereunder, (ii) to complete jointly and to file separately Form 8594 with its Federal income Tax Return consistent with such allocation for the tax year in which the Closing Date occurs and (iii) that no party will take a position on any income, transfer or gains Tax Return, before any Governmental or Regulatory Authority charged with the collection of any such Tax or in any judicial proceeding, that is in any manner inconsistent with the terms of any such allocation without the consent of the other party. 4. Closing . The Closing will take place at the offices of Milbank, Tweed, Hadley & McCloy LLP, 601 South Figueroa Street, 31st Floor, Los Angeles, California, or at such other place as Purchaser and the Company mutually agree, at 10:00  A.M. local time and shall be deemed to occur at 6:00 A.M., Central time, on the day immediately after the Closing Date (the "Transfer Time"). At the Closing, Purchaser will pay the Estimated Purchase Price by wire transfer of immediately available funds to such accounts as the Company may reasonably direct by written notice delivered to Purchaser at least two (2) Business Days before the Closing Date. Simultaneously, (a) the Company will assign and transfer to Purchaser all of its right, title and interest in and to the Assets (free and clear of all Liens, other than Permitted Liens) by delivery of (i) a General Assignment and Bill of Sale substantially in the form of Exhibit A hereto (the "General Assignment"), duly executed by the Company, (ii) general warranty deeds in proper statutory form for recording and otherwise in form and substance reasonably satisfactory to Purchaser conveying title to the Owned Real Property and (iii) such other good and sufficient instruments of conveyance, assignment and transfer, in form and substance reasonably acceptable to Purchaser's counsel, as shall be effective to vest in Purchaser good title to the Assets (the General Assignment and the other instruments referred to in clauses (ii) and (iii) being collectively referred to herein as the "Assignment Instruments"), and (b) Purchaser will assume from the Company the due payment, performance and discharge of the Assumed <page>Liabilities by delivery of (i) an Assumption Agreement substantially in the form of Exhibit B hereto (the "Assumption Agreement"), duly executed by Purchaser, and (ii) such other good and sufficient instruments of assumption, in form and substance reasonably acceptable to the Company's counsel, as shall be effective to cause Purchaser to assume the Assumed Liabilities as and to the extent provided in Section 1.02(a) (the Assumption Agreement and such other instruments referred to in clause (ii) being collectively referred to herein as the "Assumption Instruments"). At the Closing, there shall also be delivered to the Company and Purchaser the certificates and other contracts, documents and instruments required to be delivered under Articles VI and VII. 5. Determination of Surplus or Deficiency; Post-Closing Adjustment; Real Estate Purchase Adjustment . b. On or before the seventh (7th) Business Day preceding the Closing Date, the Company shall, and Parent shall cause the Company to, prepare and deliver to Purchaser an interim balance sheet (the "Estimated Closing Balance Sheet") of the Company as of the close of business on the final day of the calendar month immediately preceding the calendar month during which the Closing Date occurs (the "Test Month"), together with a statement of the Company's Net Current Assets as of such date calculated in a manner consistent with the calculation set forth on Exhibit H attached hereto; provided that if the Closing Date occurs within the first seven (7) Business Days of a calendar month, the Estimated Closing Balance Sheet shall be as of the close of business on the final day of the second calendar month immediately preceding the calendar month during which the Closing Date occurs (in such case, the "Test Month"). The Estimated Closing Balance Sheet shall be accompanied by a certificate of the Chief Financial Officer of the Company to the effect that the Estimated Closing Balance Sheet presents fairly, in accordance with GAAP and the accounting practices of the Company applied on a consistent basis, the financial condition of the Company as of the close of business on the last day of the Test Month. The amount of Net Current Assets set forth in the Estimated Closing Balance Sheet shall be final and binding for purposes of determining the amount of any Surplus or Deficiency used in calculating the Purchase Price (the "Estimated Purchase Price"), unless Purchaser delivers a good faith written objection to the calculation of Net Current Assets at least three (3) Business Days prior to the anticipated Closing Date (the "Objection Notice"). The Company shall make available to Purchaser and its representatives the books, records and workpapers used to prepare the Estimated Closing Balance Sheet. In the event of an Objection Notice, the Company and Purchaser shall negotiate in good faith during the period preceding the Closing Date to resolve the dispute. If the dispute is not resolved by the specified Closing Date, Purchaser shall pay an Estimated Purchase Price based upon the amount of any Deficiency or Surplus, as applicable, resulting from the calculation of Net Current Assets set forth in the Estimated Balance Sheet. c. As promptly as practicable after the Closing Date, but in no event more than sixty (60) days after the Closing Date (such date on which the Closing Balance Sheet is delivered, the "Closing Financial Statements Delivery Date"), Purchaser will prepare and deliver to the Company and Parent a balance sheet of the Company as of the close of business on the Closing Date (the "Closing Balance Sheet") and a calculation of Net Current Assets, in a manner <page>consistent with the calculation set forth on Exhibit H attached hereto, from such Closing Balance Sheet. The Closing Balance Sheet shall be accompanied by a certificate of the Chief Financial Officer of Purchaser to the effect that the Closing Balance Sheet presents fairly, in accordance with GAAP and the accounting practices of the Company applied on a consistent basis, the financial condition of the Company as of the close of business on the Closing Date and that the Net Current Assets calculation was made in accordance with the terms of this Agreement. d. The Company and a firm of independent public accountants designated by the Company (the "Company's Accountant") will be entitled to reasonable access during normal business hours to the relevant records, personnel and working papers of the Purchaser to aid in their review of the Closing Balance Sheet and the calculation of Net Current Assets therefrom. The Closing Balance Sheet and the calculation of Net Current Assets therefrom shall be deemed to be accepted by the Company and shall be conclusive for the purposes of the adjustment described in Section 1.05(d) and (e) hereof except to the extent, if any, that the Company or Company's Accountant shall have delivered, within thirty (30) days after the Closing Financial Statements Delivery Date, a written notice to Purchaser setting forth objections thereto, specifying in reasonable detail any such objection (it being understood that any amounts not disputed as provided herein shall be paid promptly). If a change proposed by the Company is disputed by Purchaser, then Purchaser and the Company shall negotiate in good faith to resolve such dispute. If, after a period of thirty (30) days following the date on which the Company gives Purchaser notice of any such proposed change, any such proposed change still remains disputed, then Purchaser and the Company hereby agree that the Las Vegas, Nevada office of PriceWaterhouseCoopers LLP (the "Accounting Firm") shall resolve any remaining disputes. The Accounting Firm shall act as an arbitrator to make a determination with respect to the issues that are disputed by the parties, based on presentations by the Company and Purchaser, and by independent review of the Accounting Firm if deemed necessary in the sole discretion of the Accounting Firm, which determination shall be limited to only those issues still in dispute. The decision of the Accounting Firm shall be final and binding and shall be in accordance with the provisions of this Section 1.05(b). The fees and expenses of the Accounting Firm, if any, shall be paid equally by Purchaser and the Company. The date on which the Net Current Assets is finally determined pursuant to this Section 1.05 is referred to hereinafter as the "Determination Date." e. If the amount of Net Current Assets used to determine the Estimated Purchase Price pursuant to Section 1.05(a) above is greater than the amount set forth in the Closing Balance Sheet, the Company shall pay to Purchaser, as an adjustment to the Estimated Purchase Price, an aggregate amount equal to such excess. Any payments required to be made by the Company pursuant to this Section 1.05(d) shall be made within ten (10) days of the Determination Date by wire transfer of immediately available funds to an account designated by Purchaser. f. If the amount of Net Current Assets used to determine the Estimated Purchase Price pursuant to Section 1.05(a) above is less than the amount set forth in the Closing Balance Sheet, Purchaser shall pay to the Company, as an adjustment to the Estimated Purchase Price, an amount equal to such difference. Any payments required to be made by Purchaser <page>pursuant to this Section 1.05(e) shall be made within ten (10) days of the Determination Date by wire transfer of immediately available funds to an account designated by the Company. g. In the event that Company or Parent exercises the right to purchase the JV interests subject to the Option Agreement prior to the Closing Date, the Purchase Price shall be increased in an amount equal to the exercise price paid by Parent or Company, as applicable, with respect to the exercise of the right to purchase the JV interests subject to the Option Agreement, provided that in no event shall the Purchase Price be increased in an amount in excess of the exercise price set forth in the Option Agreement in effect on the Effective Date. 6. Prorations . The following prorations relating to the Assets and the ownership and operation of the Business will be made as of the Transfer Time, with the Company liable to the extent such items relate to any time period prior to the Transfer Time and are Retained Liabilities and Purchaser liable to the extent such items relate to periods beginning with and subsequent to the Transfer Time or are Assumed Liabilities: b. Real estate taxes and assessments on or with respect to the Real Property, provided that proration with respect to Leased Real Property shall be based upon the amounts payable by the Company in respect to such taxes under the Real Property Leases. c. Rents, additional rents, taxes and other items payable by or to the Company under the Real Property Leases and Personal Property Leases. d. The amount of rents, taxes and charges for sewer, water, telephone, electricity and other utilities relating to the Real Property. e. All other items normally adjusted in connection with similar transactions; provided that receipts of the Company with respect to hotel room rentals on the Closing Date shall be retained by the Company. Except as otherwise agreed by the parties or with respect to amounts to adjustments to the Purchase Price made pursuant to Section 1.05, the net amount of all such prorations will be settled and paid on the Closing Date. If the Closing shall occur before a real estate tax rate is fixed, the apportionment of taxes shall be based upon the tax rate for the preceding year applied to the latest assessed valuation. 7. Further Assurances; Post-Closing Cooperation . b. Subject to the terms and conditions of this Agreement, at any time or from time to time after the Closing, at Purchaser's request and without further consideration, the Company shall execute and deliver to Purchaser such other instruments of sale, transfer, conveyance, assignment and confirmation, provide such materials and information and take such other actions as Purchaser may reasonably deem necessary or desirable in order more effectively to transfer, convey and assign to Purchaser, and to confirm Purchaser's title to, all of the Assets (including, without limitation, the delivery to Purchaser of fully executed Uniform Commercial Code amendment or termination statements relating to the Assets as Purchaser shall request), and, to the full extent permitted by Law, to put Purchaser in actual possession and operating <page>control of the Business and the Assets and to assist Purchaser in exercising all rights with respect thereto, and otherwise to cause the Company to fulfill its obligations under this Agreement. c. Following the Closing, the Company and Purchaser will afford the other party, its counsel and its accountants, during normal business hours, reasonable access to the books, records and other data relating to the Business in its possession with respect to periods prior to the Closing and the right to make copies and extracts therefrom, to the extent that such access may be reasonably required by the requesting party in connection with (i) the preparation of Tax Returns, (ii) the determination or enforcement of rights and obligations under this Agreement, (iii) compliance with the requirements of any Governmental or Regulatory Authority including without limitation the Commission, (iv) the determination or enforcement of the rights and obligations of any party to this Agreement and (v) in connection with any actual or threatened Action or Proceeding. Further, the Company and Purchaser agree for a period extending six (6) years after the Closing Date not to destroy or otherwise dispose of any such books, records and other data unless such party shall first offer in writing to surrender such books, records and other data to the other party and such other party shall not agree in writing to take possession thereof during the ten (10) day period after such offer is made. d. If, in order properly to prepare its Tax Returns, other documents or reports required to be filed with Governmental or Regulatory Authorities or its financial statements or to fulfill its obligations hereunder, it is necessary that the Company or Purchaser be furnished with additional information, documents or records relating to the Business not referred to in paragraph (b) above, and such information, documents or records are in the possession or control of the other party, such other party shall use its commercially reasonable efforts to furnish or make available such information, documents or records (or copies thereof) at the recipient's request, cost and expense. e. Notwithstanding anything to the contrary contained in this Section, if the Company and Purchaser are in an adversarial relationship in litigation or arbitration, the furnishing of information, documents or records in accordance with paragraphs (b) and (c) of this Section shall be subject to applicable rules relating to discovery. 8. Third-Party Consents; ACI's Gaming Compliance Program . b. To the extent that any Real Property Lease, Personal Property Lease, Business Contract or Business License is not assignable without the consent of another party, this Agreement shall not constitute an assignment or an attempted assignment thereof if such assignment or attempted assignment would constitute a breach thereof or a default thereunder. The Company and Purchaser shall use commercially reasonable efforts to obtain the consent of such other party to the assignment of any such Real Property Lease, Personal Property Lease, Business Contract or Business License to Purchaser in all cases in which such consent is required for such assignment, provided, however, that in the event any such consent, other than any required consent of the Commission or any consent that is listed in Section 6.09 of the Disclosure Schedule (each a "Required Consent"), is not obtained on or prior to the Closing Date, such event shall not cause the Closing to be delayed or constitute a default by the Company of any obligation hereunder or result in a reduction of the Purchase Price. If any such consent, <page>other than a Required Consent, shall not be obtained, the Company shall cooperate with Purchaser in any reasonable arrangement designed to provide for Purchaser the benefits intended to be assigned to Purchaser under the relevant Real Property Lease, Personal Property Lease, Business Contract or Business License, including enforcement at the cost and for the account of Purchaser of any and all rights of the Company against the other party thereto arising out of the breach or cancellation thereof by such other party or otherwise, provided that if Purchaser does not receive the benefits intended to be assigned to Purchaser pursuant to a Real Property Lease, Personal Property Lease, Business Contract or Business License because a consent is not obtained and an arrangement transferring such benefit is not entered into, such Real Property Lease, Personal Property Lease, Business Contract or Business License, as applicable, shall constitute an Excluded Asset and the obligations pursuant thereto shall constitute a Retained Liability. c. In the event that any background investigation with respect to any party (and its respective owners and management) to any Real Property Lease, Personal Property Lease or Business Contract to which Purchaser will become a party by virtue of the consummation of the transactions contemplated hereby results in a finding by ACI that such party is an "Unsuitable Person" (as defined in ACI's Gaming Compliance Program in the form provided to Parent), then such Real Property Lease, Personal Property Lease or Business Contract shall not be assumed by Purchaser and shall constitute an Excluded Asset and a Retained Liability. ACI shall notify Parent and the Company no later than forty-five (45) days following the Effective Date if such investigation reveals that any such party is an "Unsuitable Person," which notice shall specify the identity of the person that has been determined to be unsuitable and shall also indicate if any person that is subject to a background investigation required pursuant to ACI's Gaming Compliance Program has not responded to inquiries made pursuant to such background investigation. 9. Insurance Proceeds . If any of the Assets is destroyed or damaged or taken in condemnation following the Effective Date, the insurance proceeds or condemnation award with respect thereto shall be an Asset. At the Closing, the Company shall pay or credit to Purchaser any such insurance proceeds or condemnation awards received by it on or prior to the Closing (along with the amount of any deductible or retention withheld therefrom) and shall assign to or assert for the benefit of Purchaser all of its rights against any insurance companies, Governmental or Regulatory Authorities and others with respect to such damage, destruction or condemnation. As and to the extent that there is available insurance under policies maintained by the Company and its Affiliates, predecessors and successors in respect of any Assumed Liability, except for any such insurance proceeds with respect to which the insured is directly or indirectly self-insured or has agreed to indemnify the insurer, the Company shall cause such insurance to be applied toward the payment of such Assumed Liability. <page> REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND PARENT The Company and Parent hereby jointly and severally represent and warrant to Purchaser as follows as of the Effective Date and as of the Closing Date, except, to the extent any such representation or warranty is made as of a specified date earlier than the Closing Date, such earlier date: 1. Corporate Existence . b. The Company is a corporation duly incorporated, validly existing and in good standing under the Laws of the State of Missouri, and has full corporate power and authority to conduct its business as and to the extent now conducted and to own, use and lease its Assets and enter into and perform this Agreement and consummate the transactions contemplated hereby. Subsidiaries . The Company does not have any equity investment in any entity, nor does it own any other securities with respect to any entity, other than Station/First Joint Venture and Station Casino Kansas City Restaurants, Inc. Station Casino Kansas City Restaurants, Inc. does not own any assets or conduct any operations related to the Business or otherwise. 2. Authority . The execution and delivery by the Company of this Agreement, and the performance by the Company and Parent of their obligations hereunder, have been duly and validly authorized by the Board of Directors and the stockholder of the Company and the Board of Directors of Parent, no other action on the part of the Company or Parent or their stockholders being necessary. This Agreement has been duly and validly executed and delivered by the Company and Parent and constitutes a legal, valid and binding obligation of the Company and Parent enforceable against the Company and Parent in accordance with its terms, except to the extent such enforceability (a) may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to creditors' rights generally, and (b) is subject to general principles of equity. 3. No Conflicts . Except as set forth in Section 2.03 of the Disclosure Schedule, the execution, delivery and performance by the Company of this Agreement do not and the consummation of the transactions contemplated hereby will not: b. conflict with or result in a violation or breach of any of the terms, conditions or provisions of the articles of incorporation or bylaws (or other comparable charter documents) of the Company; c. subject to obtaining the consents, approvals and actions, making the filings and giving the notices disclosed in Section 2.04 of the Disclosure Schedule, conflict with or result in a violation or breach of any term or provision of any Law or Order applicable to the <page>Company or any of the Assets (other than such conflicts, violations or breaches (i) which could not in the aggregate reasonably be expected to materially and adversely affect the validity or enforceability of this Agreement or to have a Material Adverse Effect or (ii) as would occur solely as a result of the identity or the legal or regulatory status of Purchaser or any of its Affiliates); or d. except as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect or to materially and adversely affect the ability (i) of the Company to consummate the transactions contemplated hereby or to perform its obligations hereunder or (ii) Purchaser to operate the Business after the Transfer Time in a manner substantially consistent with the Company's past practice, (A) conflict with or result in a violation or breach of, (B) constitute (with or without notice or lapse of time or both) a default under, (C) require the Company to obtain any consent, approval or action of, make any filing with or give any notice to any Person as a result or under the terms of, (D) result in or give to any Person any right of termination, cancellation, acceleration or modification in or with respect to, or (E) result in the creation or imposition of any Lien upon the Company or any of the Assets under, any Contract or License to which the Company is a party or by which any of its Assets is bound. 4. Governmental Approvals and Filings . Except as disclosed in Section 2.04 of the Disclosure Schedule, no consent, approval, action, order or authorization of, or registration, declaration or filing with or notice to any Governmental or Regulatory Authority on the part of the Company is required in connection with the execution, delivery and performance of this Agreement or the consummation of the transactions contemplated hereby, except (a) where the failure to obtain any such consent, approval or action, to make any such filing or to give any such notice could not reasonably be expected to materially and adversely affect the ability of the Company to consummate the transactions contemplated by this Agreement or to perform its obligations hereunder, or to have a Material Adverse Effect, and (b) those as would be required solely as a result of the identity or the legal or regulatory status of Purchaser or any of its Affiliates. 5. Financial Statements and Condition . b. Prior to the execution of this Agreement, the Company has delivered to Purchaser true and complete copies of (i) the unaudited combined balance sheets and the related combined statements of operations, stockholder's equity and cash flows of the Company and St. Charles Riverfront Station, Inc. for the fiscal year ended December 31, 1999, and (ii) the unaudited combined balance sheets of the Company and St. Charles Riverfront Station, Inc. as of March 31, 2000 and June 30, 2000 and the related unaudited statement of operations for the portion of the fiscal year then ended. Except as set forth in the notes thereto and as disclosed in Section 2.05(a) of the Disclosure Schedule, all such financial statements were prepared in accordance with GAAP and fairly present in all material respects the combined financial condition and results of operations of the Company and St. Charles Riverfront Station, Inc., in each case, as of the respective dates thereof and for the respective periods covered thereby. c. <page>Except for the execution and delivery of this Agreement and the transactions to take place pursuant hereto on or prior to the Closing Date and except as disclosed in Section 2.05(b) of the Disclosure Schedule, during the period beginning on the Financial Statement Date and ending on the Effective Date there has not been any change with respect to the Business or the Assets that could reasonably be expected to have a Material Adverse Effect. 6. Taxes . Tax Liens . Except as set forth in Section 2.06(a) of the Disclosure Schedule , there are no Tax Liens upon the assets of the Company except liens for Taxes not yet due. Compliance with Tax Laws . Except as set forth in Section 2.06(b) of the Disclosure Schedule , the Company has complied (and, with respect to all amounts due with respect to periods through and including the Closing Date, will comply) with all applicable laws, rules, and regulations relating to the filing of Tax Returns and the payment and withholding of Taxes (including, without limitation, withholding and reporting requirements under Code Secs. 1441 through 1464, 3401 through 3406, 6041 and 6049 and similar provisions under any other laws) and have, within the time and in the manner prescribed by law, withheld from employee wages and paid over to the proper governmental authorities all required amounts. 7. Legal Proceedings . Except as disclosed in Section 2.07 of the Disclosure Schedule, there are no Orders outstanding and no Actions or Proceedings pending or, to the Knowledge of the Company, threatened against, relating to or affecting the Company or any of its Assets which could reasonably be expected individually or in the aggregate to have a Material Adverse Effect, or which seek to enjoin, rescind or otherwise prevent the consummation of the transactions contemplated hereby. 8. Compliance With Laws and Orders . To the Knowledge of the Company, except as disclosed in Section 2.08 of the Disclosure Schedule or in the filings of Parent with the Securities and Exchange Commission, the Company is not in violation of or in default under any Law or Order applicable to the Company or any of its Assets the effect of which, individually or in the aggregate with other such violations and defaults, could reasonably be expected to have a Material Adverse Effect. 9. Benefit Plans; ERISA; Labor Matters . Section 2.09(a) of the Disclosure Schedule contains a true and complete list of each Benefit Plan and "employee benefit plan" (within the meaning of section 3(3) of ERISA, including, without limitation, multiemployer plans within the meaning of ERISA section 3(37)), stock purchase, stock option, severance, employment, change-in-control, fringe benefit, collective bargaining, bonus, incentive, deferred compensation and all other employee benefit plans, agreements, programs, policies or other arrangements, whether or not subject to ERISA (including any funding mechanism therefor now in effect or required in the future as a result of the transaction contemplated by this Agreement or otherwise), whether formal or informal, oral or written, legally binding or not, under which any employee or former employee of the Company has any present or future right to benefits or under which the Company has any present <page>or future liability. All such plans, agreements, programs, policies and arrangements shall be collectively referred to as the "Company Plans". b. With respect to each Company Plan, the Company has delivered to Purchaser a current, accurate and complete copy (or, to the extent no such copy exists, an accurate description) thereof. c. No Lien has arisen on the Assets by reason of Section 302 of ERISA, Section 412 of the Code or Title IV of ERISA. d. Except as set forth in Section 2.09(e) of the Disclosure Schedule, no individual shall accrue or receive additional benefits, service or accelerated rights to payments of benefits under any Benefit Plan, as defined in Section 280G of the Code, or become entitled to severance, termination allowance or similar payments as a direct result of the transactions contemplated by this Agreement. e. There are no controversies pending or, to the Knowledge of the Company, threatened between the Company and any of its employees which controversies would have a Material Adverse Effect. The Company is not a party to any collective bargaining agreement or other labor union Contract applicable to persons employed by the Company except as disclosed in Section 2.09(f) of the Disclosure Schedule. To the Knowledge of the Company there are no strikes, slowdowns, work stoppages, lockouts or threats thereof by or with respect to any of the employees of the Company. Section 2.09(g) of the Disclosure Schedule lists the number of employees terminated by the Company at each site of employment of the Business in the 90-day period ending on the date hereof, and the date of such termination, with respect to each such termination which would be required to be taken into account in determining whether a "plant closing" or "mass layoff" subject to the Worker Adjustment and Retraining Notification Act (the " WARN ") could occur based on subsequent terminations; provided that this sentence shall not apply with respect to any site of employment at which sufficient employees have not been employed at any time in such 90-day period for terminations of employment at such site to be subject to WARN. 10. Real Property . Section 2.10(a) of the Disclosure Schedule contains a list of (i) each parcel of real property currently owned by the Company and (ii) each parcel of real property leased by the Company. b. The Company has good and marketable title to each parcel of real property described in clause (i) of paragraph (a) above free and clear of Liens, except for Permitted Liens or as disclosed in Section 2.10(b) of the Disclosure Schedule, and has a valid and subsisting leasehold estate in the real properties referred to in clause (ii) of paragraph (a) above free and clear of Liens, except for Permitted Liens or as disclosed in Section 2.10(b) of the Disclosure Schedule. To the Knowledge of the Company, all of the Real Property Leases are valid, binding, and enforceable in accordance with their terms, and are in full force and effect as of the date hereof. To the Knowledge of the Company, except as disclosed in Section 2.10(b) of the <page>Disclosure Schedule there are no existing material defaults by the Company beyond any applicable grace periods under such leases and the Company has not received any notice of default under any of such leases. c. Without limiting the generality of the foregoing, as to leasehold estates under the Real Property Leases, the Company warrants that it has quiet and peaceful possession of each of the properties leased by it. d. To the Knowledge of the Company, the Real Property is not subject to any deferred or rollback taxes on account of any change in zoning or land use classification, and to the Knowledge of the Company there are no pending assessments affecting the Real Property. e. Except as could not be reasonably expected to have a Material Adverse Effect, all water, sewer, gas, electric, telephone and drainage facilities and all other utilities required by law or for the present normal use and operation of the Business are all connected and operating pursuant to valid permits, are adequate to service the Business, and such facilities are connected by means of one or more public or private easements extending from a property line to one or more public streets, public rights-of-way or utility facilities. f. There are no pending or, to the Knowledge of the Company, threatened condemnation, eminent domain or similar proceedings affecting the Real Property or any portion thereof. g. The Company is not a "foreign person" within the meaning of Section 1445 et seq. of the Internal Revenue Code of 1986, as amended. h. The mechanical equipment located in any improvements located on the Real Property, including but not limited to air conditioning and heating systems and the electrical and plumbing systems, are in sufficient condition to permit the operation of the Business as it is currently conducted. 11. Tangible Personal Property . The Company is in possession of and has good title to, or has valid leasehold interests in or valid rights under Contract to use, all tangible personal property used in and, individually or in the aggregate with other such property, material to the Business or Condition of the Company, except for such tangible personal property sold, consumed or otherwise disposed of in the ordinary course of business since the Financial Statement Date. All tangible Assets, taken as a whole, are in sufficient condition to permit the operation of the Business as it is currently conducted. 12. Contracts . Section 2.12(a) of the Disclosure Schedule (with paragraph references corresponding to those set forth below) contains a true and complete list of each of the following Contracts that constitute Assets as of the Effective Date: i. <page>all Contracts (excluding Benefit Plans) providing for a commitment of employment or consultation services for a specified term and payments at any one time or in any one year in excess of One Hundred Thousand Dollars ($100,000); ii. all Contracts with any Person containing any provision or covenant prohibiting or materially limiting the ability of the Company to engage in any business activity or compete with any Person; iii. all Contracts relating to Indebtedness of the Company included as an Assumed Liability; iv. all Contracts (other than this Agreement) providing for (A) the future disposition or acquisition of any assets or properties individually or in the aggregate material to the Business, other than dispositions or acquisitions in the ordinary course of business, and (B) any merger or other business combination; v. all Contracts between the Company, on the one hand, and any Affiliate of the Company, on the other hand and which is included as an Assumed Liability; vi. all Contracts (other than this Agreement) that limit or contain restrictions on the ability of the Company to incur Indebtedness or incur or suffer to exist any Lien, to purchase or sell any Assets, to change the lines of business in which it participates or engages or to engage in any merger or other business combination and which is included as an Assumed Liability; vii. all other Contracts that (A) involve the payment, pursuant to the terms of any such Contract, by or to the Company of more than One Hundred Thousand Dollars ($100,000) annually or (B) cannot be terminated within ninety (90) days after giving notice of termination without resulting in any material cost or penalty to the Company; and viii. all Real Property Leases. b. As of the Effective Date, each Contract required to be disclosed in Section 2.12(a) of the Disclosure Schedule, true and complete copies of which have been delivered to Purchaser, is in full force and effect and constitutes a legal, valid and binding agreement, enforceable in accordance with its terms, of the Company and, to the Knowledge of the Company, of each other party thereto; and except as disclosed in Section 2.12(b) of the Disclosure Schedule neither the Company nor, to the Knowledge of the Company, any other party to such Contract is in violation or breach of or default under any such Contract (or with notice or lapse of time or both, would be in violation or breach of or default under any such Contract) as of the Effective Date, the effect of which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. c. As of the Effective Date, the July Agreement has been terminated by the parties thereto and is of no further force or effect. 13. <page>Licenses . As of the Effective Date, the Company has all Licenses required for the conduct of the Business as presently conducted (other than Licenses, the absence of which could not reasonably be expected to have a Material Adverse Effect). Except as set forth on Section 2.13 of the Disclosure Schedule, each such License is valid, binding and in full force and effect as of the Effective Date. Except as set forth on Section 2.13 of the Disclosure Schedule, to the Knowledge of the Company, as of the Effective Date the Company is not in default (or with the giving of notice or lapse of time or both, would be in default) under any such License in any respect that could reasonably be expected to have a Material Adverse Effect. The Licenses listed in Section 2.13 of the Disclosure Schedule are not transferable. 14. Affiliate Transactions . There is no Liability between the Company, on the one hand, and any officer, director or Affiliate of the Company, on the other, that will constitute an Assumed Liability. 15. Environmental Matters . Except as disclosed in Section 2.15 of the Disclosure Schedule or as could not be reasonably expected to have a Material Adverse Effect, to the Knowledge of the Company: b. the Company holds and is in compliance with all Licenses which are required under applicable Environmental Laws for the Company to own and operate the Business (the "Environmental Permits") and will use commercially reasonable efforts to provide copies of such Environmental Permits to Purchaser and to facilitate the transfer of those Environmental Permits which are transferable to Purchaser; c. the Company and all real property owned, operated or leased by the Company are in compliance with applicable Environmental Laws; d. the Company has not been notified by any Governmental or Regulatory Authority or third party of any pending or threatened claim arising under Environmental Laws (an "Environmental Claim") against the Business or the Company in connection with the Business; e. the Company has not been notified by any Governmental or Regulatory Authority or third party of any pending claim that either the Business or the Company in connection with the Business may be a potential responsible party for environmental contamination or any Release of Hazardous Material, nor has the Company been notified that any site or facility now or previously owned or leased by the Company is listed or proposed for listing on the NPL or any similar state or local list of sites requiring investigation or clean-up; f. the Company in connection with the Business has not entered into or agreed to any consent decree or order with respect to or affecting the Assets relating to compliance with any Environmental Law or to investigation or cleanup of Hazardous Material under any Environmental Law; g. there are no aboveground or underground storage tanks located on, in or under any properties currently or formerly owned, operated or leased by the Company in <page>connection with the Business or any predecessor of the Business or the Company in connection with the Business; h. no Releases of Hazardous Material have occurred at, from, in, on, to or under any property currently or formerly owned, operated or leased by the Company in connection with the Business or any predecessor of the Business or the Company, and no Hazardous Material is present in, on or about or is migrating to or from any such property that could give rise to an Environmental Claim by a Governmental or Regulatory Authority or third party against the Business or the Company; i. neither the Company in connection with the Business, nor any predecessors thereof, has transported or arranged for the treatment, storage, handling, disposal or transportation of any Hazardous Substance to any location that could result in an Environmental Claim against or liability to the Business or the Company; j. there is no amount of asbestos, ureaformaldehyde material, polychlorinated biphenyl containing equipment or lead paint containing materials in, at or on any property owned, leased or operated by the Company in connection with the Business; and k. there have been no environmental investigations, studies, audits or tests with respect to any property currently or formerly owned, leased or operated by the Company in connection with the Business thereof which have not been delivered to Purchaser prior to execution of this Agreement. 16. Labor Matters . To the Knowledge of the Company, the Company is in compliance in all material respects with all Laws respecting employment and employment practices, terms and conditions of employment and wages and hours. 17. Brokers . Except for Wasserstein Perella & Co., Inc., whose fees, commissions and expenses are the sole responsibility of the Company, all negotiations relative to this Agreement and the transactions contemplated hereby have been carried out by the Company directly with Purchaser without the intervention of any other Person on behalf of the Company in such manner as to give rise to any valid claim by any Person against Purchaser for a finder's fee, brokerage commission or similar payment. 18. Absence of Certain Changes . Except as set forth in Section 2.18 of the Disclosure Schedule, since the Financial Statement Date, the Business has been conducted in the ordinary course, and there has not been: b. any event, occurrence, state of circumstances or facts or change in the Company, the Assets or the Business that has had or that may be reasonably expected to have, either alone or together, a Material Adverse Effect; c. any change by the Company in its accounting principles, methods or practices other than changes required pursuant to GAAP or in the manner it keeps its books and records or any change by the Company of its current practices with regards to sales, receivables, payables or accrued expenses; d. <page>the entering into of any Contract (other than the July Agreement) or other arrangement between the Company and any officer, director, stockholder or Affiliate of the Company; or e. any (i) single commitment for capital expenditures that has not been performed prior to the Effective Date in excess of $1,000,000 for additions to property, plant, equipment or intangible capital assets, (ii) commitments for capital expenditures that has not been performed prior to the Effective Date in an aggregate amount in excess of $5,000,000 for additions to property, plant, equipment or intangible capital assets or capital expenditures, (iii) sale, assignment, transfer, lease or other disposition of or agreement to sell, assign, transfer, lease or otherwise dispose of any asset or property outside the ordinary course of business having a value of $2,000,000 in the aggregate. 19. Sufficiency of and Title to the Assets . Upon consummation of the transactions contemplated by this Agreement, the Company will have sold, assigned, transferred and conveyed to Purchaser, free and clear of all Liens, other than Permitted Liens, all of the Assets, which constitute all of the properties and assets now held or employed by the Company primarily in connection with the Business (other than the Excluded Assets). 20. Insurance . As of the Effective Date, the assets, properties and operations of the Business are insured under various policies of insurance, all of which are described in Section 2.20 of the Disclosure Schedule, which discloses for each policy the type of coverage and the amounts of coverage. As of the Effective Date, all such policies are in full force and effect, no notice of cancellation has been received, and there is no existing material default, or event which the giving of notice or lapse of time or both, would constitute a material default, by any insured thereunder. REPRESENTATIONS AND WARRANTIES OF PURCHASER and aci Purchaser and ACI, jointly and severally represent and warrant to the Company as follows as of the Effective Time and as of the Closing Date, except, to the extent any such representation or warranty is made as of a specified date earlier than the Closing Date, such earlier date: 1. Existence . Purchaser is a corporation duly organized, validly existing and in good standing under the Laws of the State of Missouri. ACI is a corporation duly organized, validly existing and in good standing under the Laws of the State of Nevada. Each of Purchaser and ACI has full corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. 2. Authority . The execution and delivery by Purchaser and ACI of this Agreement, and the performance by Purchaser and ACI of their respective obligations hereunder, have been duly and validly authorized by the respective boards of directors of Purchaser and ACI, no other corporate action on the part of Purchaser or ACI or their respective shareholders being necessary. This Agreement has been duly and validly executed and delivered by each of <page>Purchaser and ACI and constitutes a legal, valid and binding obligation of each of Purchaser and ACI enforceable against each of them in accordance with its terms, except to the extent such enforceability (a) may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to creditors' rights generally and (b) is subject to general principles of equity. 3. No Conflicts . The execution and delivery by each of Purchaser and ACI of this Agreement do not and the consummation of the transactions contemplated hereby will not: b. conflict with or result in a violation or breach of any of the terms, conditions or provisions of the articles of incorporation (or other comparable corporate charter document) of Purchaser or ACI, as applicable; c. subject to obtaining the consents, approvals and actions, making the filings and giving the notices disclosed in Section 3.04 of the Disclosure Schedule, conflict with or result in a violation or breach of any term or provision of any Law or Order applicable to Purchaser or ACI or any of the Assets (other than such conflicts, violations or breaches which could not in the aggregate reasonably be expected to adversely affect the validity or enforceability of this Agreement); or d. except as could not, individually or in the aggregate, reasonably be expected to adversely affect the ability of Purchaser or ACI to consummate the transactions contemplated hereby or to perform its obligations hereunder, (i) conflict with or result in a violation or breach of, (ii) constitute (with or without notice or lapse of time or both) a default under, (iii) require Purchaser or ACI to obtain any consent, approval or action of, make any filing with or give any notice to any Person as a result or under the terms of, or (iv) result in the creation or imposition of any Lien upon Purchaser or ACI or any of their respective assets or properties under, any Contract or License to which Purchaser or ACI is a party or by which any of their respective assets and properties is bound. 4. Governmental Approvals and Filings . Except as disclosed in Section 3.04 of the Disclosure Schedule, no consent, approval, action, order or authorization of, or registration, declaration or filing with or notice to any Governmental or Regulatory Authority on the part of Purchaser or ACI is required in connection with the execution, delivery and performance of this Agreement or the consummation of the transactions contemplated hereby, except where the failure to obtain any such consent, approval or action, to make any such filing or to give any such notice could not reasonably be expected to adversely affect the ability of Purchaser or ACI to consummate the transactions contemplated by this Agreement or to perform its obligations hereunder. 5. Legal Proceedings . There are no Orders outstanding and no Actions or Proceedings pending or, to the Knowledge of Purchaser or ACI, as applicable, threatened against, relating to or affecting Purchaser or ACI, as the case may be, which could reasonably be expected to result in the issuance of an Order restraining, enjoining or otherwise prohibiting or making illegal the consummation of any of the transactions contemplated by this Agreement. 6. <page>Brokers . Except for Deutsche Bank Securities Inc., whose fees, commissions and expenses are the sole responsibility of Purchaser and/or ACI, all negotiations relative to this Agreement and the transactions contemplated hereby have been carried out by Purchaser and ACI without the intervention of any Person on behalf of Purchaser or ACI in such manner as to give rise to any valid claim by any Person against the Company for a finder's fee, brokerage commission or similar payment. 7. Financing . Purchaser has sufficient cash and/or available credit facilities (and has provided the Company with evidence thereof) to pay the Purchase Price and to make all other necessary payments of fees and expenses in connection with the transactions contemplated by this Agreement. 8. Purchaser's Gaming Licenses . Neither Purchaser nor any of its directors or executive officers has ever been denied a gaming license by any Governmental or Regulatory Authority. ACI and the directors and executive officers of Purchaser are currently licensed or hold findings of suitability to conduct gaming activities in the States of Nevada, Mississippi and Iowa. A list of such directors, officers and each such state in which such Person is licensed or holds a finding of suitability is set forth in Section 3.08 of the Disclosure Schedule. COVENANTS OF THE COMPANY AND PARENT The Company and Parent covenant and agree with Purchaser that, at all times from and after the Effective Date until the Closing, and in the case of Sections 4.06, 4.11 and 4.12 for the period set forth therein, Parent and the Company will, and Parent will cause the Company to, comply with all covenants and provisions of this Article IV, except to the extent Purchaser may otherwise consent in writing. Purchaser acknowledges and agrees that the actions taken, or failed to be taken, by Parent and the Company prior to or following the Effective Date with respect to the investigation by the Commission or any other Governmental or Regulatory Authority into the activities of Michael Lazaroff and the involvement of Parent and the Company therewith, and any related matters, shall not constitute a breach of the obligations of Parent and the Company pursuant to this Article IV; provided, however, that Purchaser shall have no liability with respect to any obligations resulting from such investigation and all liabilities arising out of, or with respect to, such investigation shall be considered a "Retained Liability" for the purposes of this Agreement. 1. Regulatory and Other Approvals . The Company will, as promptly as reasonably practicable (a) take all commercially reasonable steps necessary or desirable to obtain all consents, approvals, actions, orders or authorizations of, or make all registrations, declarations or filings with and give all notices to Governmental or Regulatory Authorities or any other Person required of the Company to consummate the transactions contemplated hereby (including, without limitation, the Required Consents), (b) provide such other information and communications to such Governmental or Regulatory Authorities or other Persons as such Governmental or Regulatory Authorities or other Persons may reasonably request in connection therewith and (c) provide reasonable cooperation to Purchaser in connection with the <page>performance of its obligations under Sections 5.01 and 5.02 below. The Company will provide, or cause to be provided, notification to Purchaser when any such consent, approval, action, order, authorization, registration, declaration, filing or notice referred to in clause (a) above is obtained, taken, made or given, as applicable, and will advise Purchaser of any communications (and, unless precluded by Law, provide copies of any such communications that are in writing) with any Governmental or Regulatory Authority or other Person regarding any of the transactions contemplated by this Agreement. 2. HSR Filings . In addition to and not in limitation of the Company's covenants contained in Section 4.01 above, the Company will (a) take promptly all actions necessary to make the filings required of the Company or its Affiliates under the HSR Act, (b) comply at the earliest practicable date with any request for additional information received by the Company or its Affiliates from the Federal Trade Commission or the Antitrust Division of the Department of Justice pursuant to the HSR Act and (c) cooperate with Purchaser in connection with Purchaser's filing under the HSR Act and in connection with resolving any investigation or other inquiry concerning the transactions contemplated by this Agreement commenced by either the Federal Trade Commission or the Antitrust Division of the Department of Justice or state attorneys general. 3. Investigation by Purchaser . The Company will (a) provide Purchaser and its officers, employees, counsel, accountants, financial advisors, consultants and other representatives (together, "Representatives") with full access, upon reasonable prior notice and during normal business hours, to all officers, employees, agents and accountants of the Company and its Assets and Books and Records, but only to the extent that such access does not unreasonably interfere with the business operations of the Company and (b) furnish Purchaser and such other Persons with all such information and data (including, without limitation, copies of Contracts, Benefit Plans and other Books and Records) concerning the business and operations of the Company as Purchaser or any of such other Persons reasonably may request in connection with such investigation, except to the extent that furnishing any such information or data would violate any Law, Order, Contract or License applicable to the Company or by which any of its Assets is bound. 4. Conduct of Business . Subject to Section 4.05 below, the Company will conduct business only in the ordinary course consistent with past practice and shall: b. take all actions to be in compliance with, and to maintain the effectiveness of, all Licenses, it being acknowledged and agreed that actions taken, or failed to be taken, by Parent and the Company prior to or following the Effective Date with respect to the investigation by the Commission or any other Governmental or Regulatory Authority into the activities of Michael Lazaroff and the involvement of Parent and the Company therewith shall not constitute a breach of this clause (a); c. preserve the goodwill of those of its suppliers, customers and distributors having material business relationships with the Business, unless such failure to preserve such goodwill would not be commercially unreasonable; d. <page>maintain policies of insurances with substantially the same insurance coverage as exists as of the Effective Date against loss or damage to the Assets; e. use commercially reasonable efforts to maintain the Assets, in the aggregate, in a condition comparable to their current condition, reasonable wear, tear and depreciation excepted, and except for Assets disposed of, sold or consumed in the ordinary course of business in accordance with Section 4.05(a) below; f. continue and maintain its dredging operations in material compliance with the requirements of applicable Laws; and g. unless precluded by law, notify Purchaser in writing if to the Knowledge of the Company there is any event, condition, circumstance or group of actions, events, conditions or circumstances that could be reasonably expected to have a Material Adverse Effect, provided that nothing contained herein shall be deemed to require the Company to disclose any information that is privileged. 5. Certain Restrictions . The Company shall not: b. other than in the ordinary course of business or pursuant to the exercise of the rights to purchase the JV interests subject to the Option Agreement, acquire, lease, dispose of or otherwise transfer, any Assets; c. engage with any Person in any merger or other business combination; or d. amend or modify in any material respect or terminate any material Contract that could be reasonably expected to have a Material Adverse Effect, it being agreed that amendments to the Option Agreement that do not increase the exercise price to Purchaser of the option that is the subject of the Option Agreement and amendments to the Joint Venture Agreement and/or the Ground Lease to permit the assignment thereof to Purchaser and the novation of the Company and Parent or the acceleration of the exercise of the option under the Option Agreement shall not be deemed to have a Material Adverse Effect; e. make any material changes in the Company's staffing levels that could be reasonably expected to have a Material Adverse Effect; f. without Purchaser's prior written approval, which approval shall not be unreasonably withheld, materially increase the salary, bonus or other compensation of any of the Company's current employees that are department heads of the Business, other than pursuant to bonus plans that have been approved prior to the Effective Date, increases pursuant to employment agreements entered into prior to the Effective Date and increases consistent with past practices in an amount not to exceed five percent (5%) of the applicable employee's most recent annual salary and bonus g. enter into any Contract to do or engage in any of items listed in clauses (a) through (g) above; or h. <page>except as expressly permitted elsewhere in this Agreement, enter into or commit or propose to enter into any Contract obligating the Company to make payments thereunder in excess of $100,000 in any twelve-month period that can not be cancelled upon thirty days notice; and i. amend its articles of incorporation or bylaws in any manner that would have an adverse effect on the transactions contemplated hereby. 6. Transition Period . b. Subject to the prior approval of the Commission, the Company and Parent will, beginning at the Transfer Time and for a period of twelve (12) months after the Transfer Time, permit Purchaser to use and employ, solely in connection with the operation of the Business and pursuant to a non-exclusive, non-transferable, royalty-free license and right to use, the "Station Casino" name and logo (the "Mark") in connection with the operation of the Business following the Closing; provided that Purchaser shall conduct the Business under the Mark in a manner that is of a quality which at all times comports with the quality of the goods and services previously offered by the Company and its Affiliates under the Mark at the acquired property. The Company or its designee shall have the right, upon reasonable notice to Purchaser and during reasonable business hours, to inspect the premises of the Business to ensure that the quality of the Business is being maintained. In the event Purchaser fails to carry out or comply with such quality standards, the Company may immediately terminate this non-exclusive, non-transferable, royalty-free license upon written notice to Purchaser. c. Each of the Company and Parent will, beginning at the Effective Date and for a period of twelve (12) months after the Transfer Time, upon reasonable request from Purchaser and at the sole cost and expense of Purchaser, promptly provide Purchaser any and all information regarding the Assets and the Business, including but not limited to financial, accounting, tax and related data, reasonably necessary for the preparation by Purchaser of applications, reports and filings with any Governmental or Regulatory Authority. d. Each of the Company and Parent will, following the Effective Date and at the sole cost and expense of Purchaser, provide reasonable assistance to Purchaser with respect to the transfer of the Assets, including, without limitation, the transition and integration of payroll and benefit processing, accounting systems and other similar administrative systems and software systems constituting Assets. In addition, the Company and Parent will reasonably cooperate with Purchaser with respect to any permitted transfer of any rating experience with respect to unemployment and workers' compensation, and such other processes and procedures with respect to the operation of the Business as Purchaser may reasonably request. 7. No Solicitation . From and after the Effective Date, neither the Company nor Parent shall, directly or indirectly, through any officer, director, employee, financial advisor, representative or agent of such party (i) solicit, initiate, or encourage (including by way of furnishing information) or take any other action to facilitate knowingly any inquiries or proposals that constitute, or could reasonably be expected to lead to, a proposal or offer for a merger, consolidation, business combination, sale of substantial assets, sale of shares of capital <page>stock (including, without limitation, by way of a tender or exchange offer) or similar transaction involving the Company or the Business, other than the transactions contemplated by this Agreement (an "Acquisition Proposal"), (ii) engage in negotiations or discussions with any person (or group of persons) other than Purchaser or its affiliates (a "Third Party") concerning, or provide any non-public information to any person or entity relating to, any Acquisition Proposal, (iii) continue any prior discussions or negotiations with any Third Party concerning any Acquisition Proposal or (iv) accept, or enter into any agreement concerning, any Acquisition Proposal with any Third Party or consummate any Acquisition Proposal other than as contemplated by this Agreement. 8. Title Insurance . b. On the Closing Date, the Company shall, at the Company's expense (except as provided hereinafter), cause to be issued and delivered to Purchaser a policy of title insurance (the "Title Policy") with respect to the Real Property and conforming to the following specifications: i. The form of the policy will be ALTA Owner's Policy Form B 1970 (amended 10/17/70), with appropriate modifications for leasehold estates, or the current approved form for the jurisdiction in which the Real Property is located, with an endorsement deleting any exclusion or exception for creditors' rights; ii. The Title Policy will be issued by Assured Quality Title Company (the "Title Company") and shall be underwritten by First American Title Insurance Company; iii. Reinsurance (with direct access) of all amounts in excess of $100,000,000, if any, shall be underwritten by Chicago Title Insurance Company; iv. The insured will be Purchaser and the JV; v. The Title Policy shall be in an amount equal to that portion of the Purchase Price allocated to the Real Property; vi. The Title Policy shall contain an affirmative statement of the insurer to the effect that the knowledge of the Company and First Holdings Company prior to the Closing shall not be imputed to Purchaser; vii. The Title Policy will be dated concurrent with or subsequent to the Closing; viii. There will be no exceptions to coverage other than the Permitted Liens. Without limiting the generality of the foregoing provisions hereof, the Title Policy shall not contain any exceptions with respect to: A. Rights or claims of parties in possession other than tenants, as tenants only, under the leases and subleases described in Sections 1.01(a)(ii)(A) and 1.01(a)(ii)(B) of the Disclosure Schedule; B. <page>Encroachments, overlaps, boundary line disputes or any other matters which would be disclosed by an accurate survey and inspection; C. Easements or claims of easements not shown by the public records; D. Any lien, or right to a lien, for services, labor or materials heretofore or hereafter furnished; and E. Any other exceptions which may be designated or included as standard exceptions in the area where the Real Property is located. ix. The Title Policy, at Purchaser's request and expense, shall contain a zoning endorsement in the form of ALTA Form 3.1 showing the zoning classification of the Real Property and confirming that the current use of the Real Property is in conformance with the applicable zoning laws and use restrictions; and x. The Title Policy, at Purchaser's request, will contain an assignment endorsement whereby the insurer agrees to consent to the assignment of the policy to, and to issue without charge an endorsement to the policy to show as an insured under the policy, any of the following: (i) any successor to Purchaser, by dissolution, liquidation, merger, consolidation, reorganization or otherwise; (ii) any stockholder of Purchaser to whom the Real Property, or any part thereof, is distributed; and (iii) any Affiliate of Purchaser, including any entity controlled by, in control of or under common control with Purchaser and to whom an interest in the Real Property, or any part thereof, is transferred by Purchaser. In the event that the Real Property, or any part thereof, consists of more than one parcel, the Title Policy shall, at Purchaser's request, contain an affirmative statement of insurance to the effect that all parcels of land constituting the Real Property, or such part thereof, are contiguous. The policy also shall contain such other affirmative statements of insurance and endorsements (for example, but not by way of limitation, an "access endorsement") as Purchaser may reasonably require. xi. The fee or premium for any endorsements to the Title Policy whether identified in this Section 4.08 or otherwise requested by Purchaser, shall be for the account of and paid by Purchaser. c. The Company shall within ten (10) days after the date hereof deliver to Purchaser (i) a current commitment from the Title Company setting forth the basis upon which the Title Company is willing to insure title to the Real Property (the "Title Commitment"), and all documents referenced in Schedule B thereto, and (ii) a copy of each survey (the "Survey") of each parcel of the Real Property in the Company's possession, which Purchaser acknowledges and agrees shall be delivered without any representation or warranty of any kind as to the accuracy or completeness thereof by the Company or Parent. The cost of any survey work performed or ordered by the Company prior to the date hereof shall be paid for by the Company. If Purchaser requires any revisions or updates to the Survey delivered by the Company or requires a new survey, all such work shall be at the cost and expense of Purchaser. If the Title Commitment or the Survey discloses any liens, easements, restrictions, reservations or other defects or any other matters objectionable to Purchaser ("Title Objections"), other than Permitted <page>Liens, Purchaser shall advise the Company of the same in writing within ten (10) days after last receipt by Purchaser of the Title Commitment (with all documents referred to in Schedule B thereto) and the Survey (as revised or updated as may be required by Purchaser within 30 days after receipt of the Title Commitment and Survey). Matters not objected to by Purchaser within said period shall be deemed to be additional Permitted Liens. As to any Title Objections, the Company may, but shall not be obligated to, remedy such matters as are susceptible of being remedied and shall, within ten (10) days after Purchaser gives the Company notice of its Title Objections, deliver written notice to Purchaser of those Title Objections which it shall remedy and those which it shall not remedy. Unless Purchaser elects to terminate this Agreement in accordance with clause 4.08(b)(y) below, the Company shall, as a condition to Purchaser's obligation to close hereunder, deliver to Purchaser a Title Commitment and Survey revised to reflect that any Title Objections which the Company has committed to remedy have been remedied to Purchaser's reasonable satisfaction. If the Company elects not to remedy any Title Objection, Purchaser shall have the option, which it shall exercise in writing within ten (10) days of its receipt of the written notice from the Company, of (x) consummating the transaction contemplated hereby and accepting such title as the Company holds, without change in or to the terms hereof, unless such matters are encumbrances or liens for an ascertainable amount, in which case the Company shall pay the amount thereof to Purchaser in cash at the Closing, or (y) terminating this Agreement and receiving a refund of all monies deposited hereunder. If Purchaser fails to deliver the written notice required in the immediately preceding sentence within the period prescribed thereby, such failure shall be deemed an irrevocable election by Purchaser to proceed to close the purchase and sale contemplated by this Agreement in accordance with clause 4.08(b)(x) above. 9. ACI's Gaming Compliance Program . The Company, Parent and their respective executive officers, directors and principal stockholders shall fully cooperate with any background investigation with respect to each of them required to be conducted by ACI pursuant to its Gaming Compliance Program to the extent required by the Nevada Gaming Control Board. Fulfillment of Conditions . The Company (a) will execute and deliver at the Closing each certificate, document and instrument that the Company is hereby required to execute and deliver as a condition to Closing, (b) will take all commercially reasonable steps necessary or desirable and proceed diligently and in good faith (i) to satisfy each condition to the obligations of Purchaser contained in this Agreement and (ii) to consummate all of the transactions contemplated by this Agreement, and (c) will not take or fail to take any action that could reasonably be expected to result in the nonfulfillment of any obligation of the Company or Purchaser contained in this Agreement. 10. Noncompetition . Term . The Company and Parent hereby covenant with Purchaser that from the Closing Date until the date that is three (3) years following the Closing Date, none of the Company, Parent or their respective subsidiaries shall (except as otherwise specifically permitted herein), directly or indirectly, for their own account, or as a partner, member, advisor or agent of any partnership or joint venture, or as a trustee, officer, director, shareholder, advisor or agent of any corporation, trust, or other business organization or entity, own, manage, join, <page>participate in, encourage, support, finance, be engaged in, have an interest in, give financial assistance or advice to, permit Parent's name to be used in connection with or be concerned in any way in the ownership, management, operation or control of any casino gaming operation within one hundred (100) miles of the facilities of the Business as of the Effective Date other than a Currently Existing Gaming Operation (as such operations may be expanded from time to time) provided that (i) such operation shall not conduct casino gaming under the "Station Casinos" name, or any derivative thereof, (ii) such entity is acquired by or becomes affiliated with Parent or its subsidiaries as a result of a transaction between an entity that has assets other than such Currently Existing Gaming Operation (the "Competing Group") and Parent or such subsidiary and (iii) either (A) EBITDA of such operation for the immediately preceding four fiscal quarters shall not be greater than 30% of the consolidated EBITDA of the Competing Group for the immediately preceding four fiscal quarters or (B) Parent or the Competing Group pays Purchaser an amount equal to $10 million no later than ten (10) Business Days following consummation of the transaction between Parent and the Competing Group. For purposes of this Agreement, "Currently Existing Gaming Operation" shall mean a gaming operation that is owned or operated by third parties prior to the acquisition of ownership or commencement of operations thereof by the Company, Parent or their Affiliates. Each of the Company and Parent also hereby covenants that it shall not, for a period of eighteen (18) months after the Closing Date, solicit or encourage any employee, agent, consultant or independent contractor of Purchaser to terminate or curtail his or her relationship with Purchaser. Remedies . The parties agree that the remedy of the Purchaser at law for any actual or threatened breach of this Section 4.11 by the Company or Parent would be inadequate and that, in the event of such actual or threatened breach, in addition to any other remedy available to it, Purchaser shall be entitled to specific performance hereof, injunctive relief, or both, by temporary or permanent injunction or other appropriate judicial remedy, writ or order. The remedies provided for in this Section 4.11 are non-exclusive and are in addition to each other and to any other remedy available elsewhere in this Agreement or available generally at law or in equity. Divisibility . If any portion of this Section 4.11 is held to be unreasonable, arbitrary or against public policy, provisions of this Section 4.11 shall be considered divisible both as to time and as to geographical areas; and each month of each year of the specified period shall be deemed to be a separate period of time. In the event any court determines the specified time period or geographical area to be unreasonable, arbitrary or against public policy, the lesser time period or geographical area which is determined to be reasonable, non-arbitrary and not against public policy may be enforced. Notwithstanding the foregoing, the Company and Parent agree to honor the terms of this Section 4.11 for the time periods and areas specified herein and not to contest the enforceability of such periods or areas. Permitted Ownership . Notwithstanding any language to the contrary contained in this Section 4.11 , it shall be permissible for the Company and Parent to own stock or securities of any company which may be deemed competitive with Purchaser providing such shares or securities held by the Company or Parent are issued by a company listed on a national securities exchange or the NASDAQ Automated Quotation System and represent less than a five percent (5%) interest in such company. 11. <page>No Solicitation . For a period of twelve (12) months following the Closing Date, Parent, the Company and their respective Affiliates shall refrain from, either alone or in conjunction with any other Person, directly or indirectly, soliciting for hire any employee of Purchaser or any Affiliate of Purchaser, except as contemplated pursuant to the terms of that certain Asset Purchase Agreement dated as of October 17, 2000, by and among Lake Mead Station, Inc., Parent, Ameristar Casino Las Vegas, Inc. and ACI; provided, however, that the Company shall not be prohibited from soliciting for employment any Person whose employment with Purchaser or any of its Affiliates terminated prior to such solicitation. COVENANTS OF PURCHASER Purchaser covenants and agrees with the Company that, at all times from and after the date hereof until the Closing and, in the case of Sections 5.04, 5.05, 5.06, 5.07, 5.08, 5.10 and 5.11 below, thereafter, Purchaser will comply with all covenants and provisions of this Article V, except to the extent the Company may otherwise consent in writing. 1. Regulatory and Other Approvals . Purchaser will as promptly as practicable (a) take all steps necessary or desirable to obtain all consents, approvals, actions, orders or authorizations of, or make all registrations, declarations or filings with and give all notices to Governmental or Regulatory Authorities or any other Person required of Purchaser to consummate the transactions contemplated hereby and will diligently and in good faith strive to obtain the same including, without limitation, (i) making all necessary filings under the HSR Act with the Federal Trade Commission and the Department of Justice no later than seven (7) days following the date hereof (ii)  making all necessary filings with the Commission no later than fifteen (15) days following the date hereof, and (iii) no later than ten (10) days following the Effective Date, making all necessary filings and requesting consents from and, to the extent required to obtain consents, hearings with The Port Authority of Kansas City, Missouri and the Birmingham Drainage District, (b) provide such other information and communications to such Governmental or Regulatory Authorities or other Persons as such Governmental or Regulatory Authorities or other Persons may request in connection therewith and (c) provide cooperation to the Company in connection with the performance of their obligations under Sections 4.01 and 4.02 above. The parties acknowledge and agree that so long as the Purchaser complies with clauses (a) and (b) of the foregoing sentence, any failure or refusal by the Commission to grant to Purchaser a Class A gaming license to operate the Business shall not be deemed to be a breach of the obligations of Purchaser or Parent hereunder; provided that nothing contained herein shall limit the obligations of Purchaser to comply with any other covenant or agreement contained in this Agreement or shall relieve Purchaser from liability for any breach of a representation or warranty contained in this Agreement. Purchaser will provide prompt written notification to the Company when any such consent, approval, action, order, authorization, registration, declaration, filing or notice referred to in clause (a) above is obtained, taken, made or given, as applicable, and will advise the Company of any communications (and, unless precluded by Law, provide copies of any such communications that are in writing) with any Governmental or Regulatory Authority or other Person regarding any of the transactions contemplated by this Agreement. 2. <page>HSR Filings . In addition to and without limiting Purchaser's covenants contained in Section 5.01 above, Purchaser will (a) take promptly all actions necessary to make the filings required of Purchaser or its Affiliates under the HSR Act and in any event no later than seven (7) days following the date hereof, (b) comply at the earliest practicable date with any request for additional information received by Purchaser or its Affiliates from the Federal Trade Commission or the Antitrust Division of the Department of Justice pursuant to the HSR Act and (c) cooperate with the Company in connection with the Company's filing under the HSR Act and in connection with resolving any investigation or other inquiry concerning the transactions contemplated by this Agreement commenced by either the Federal Trade Commission or the Antitrust Division of the Department of Justice or state attorneys general. Purchaser shall pay the Filing Fee, if any, required under the HSR Act. 3. Investigation by the Company . Purchaser will provide the Company and their respective Representatives with such documentation, data and other information as the Company may reasonably request in order to verify Purchaser's representations and warranties set forth in Section 3.07 above, but only to the extent that furnishing any such documentation, data or information would not violate any Law, Order, Contract or License applicable to Purchaser. 4. No Solicitation . Purchaser will, for a period of eighteen (18) months following the Closing Date, except as expressly permitted or required by Article IX of this Agreement, refrain from, either alone or in conjunction with any other Person, directly or indirectly, through its present of future Affiliates, soliciting for hire any employee of the Company or any Affiliate of the Company; provided, however, that Purchaser shall not be prohibited from soliciting for employment any Person whose employment with the Company or any of its Affiliates terminated prior to such solicitation. 5. Collection of Gaming Chips and Tokens . Purchaser shall redeem, in its capacity as the Company's agent if Purchaser has not elected to acquire such chips and tokens pursuant to Section 1.01(b)(x) hereof, any gaming chips or tokens (from any series in use as of or prior to the Transfer Time) of the Company relating to the use and operation of the Business, which are presented by patrons of the Business or Purchaser for payment within the applicable Missouri statutory time periods for such redemptions. The Company's gaming chips and tokens redeemed by Purchaser shall be reimbursed, at Purchaser's election, as often as weekly for the first 30 Business Days following the Closing Date, and thereafter as often as monthly, by the Company, upon delivery by Purchaser to the Company of such gaming chips and tokens being redeemed. The Company agrees to make arrangements for the additional redemption of its gaming chips and tokens as may be required by Missouri law. 6. Baggage . At the Transfer Time, an authorized representative of the Company shall perform the following functions for all baggage, trunks and other property that was checked and placed in the care of the Company: (i) seal all pieces of baggage with tape: (ii) prepare an inventory ("Inventoried Baggage") of such items indicating the check number applicable thereto; and (iii) deliver the Inventoried Baggage to an authorized representative of Purchaser and secure a receipt for the Inventoried Baggage. Thereafter, Purchaser shall be responsible for such Inventoried Baggage, provided that the Company shall be liable to the <page>owners of such Inventoried Baggage with respect to any missing or damaged contents of such Inventoried Baggage and such liability shall be a Retained Liability for the purposes of this Agreement to the extent that Purchaser is able to prove that such contents were missing or damaged prior to the Transfer Time. 7. Safe Deposits . Safe deposit boxes in use by customers at the Transfer Time will be sealed in a reasonable manner mutually agreeable to Purchaser and the Company. At the Transfer Time, Purchaser and the Company shall designate in writing their initial safe deposit representatives. Representatives of Purchaser are to be present when a seal is broken. The Company will have no further responsibility for seals broken without the presence of the Company's representative. Purchaser will have no responsibility for loss or theft from a safe deposit box whose seal was broken in the presence of the Company representative. The Company will make a representative available within one (1) hour after Purchaser notifies a person or persons whom the Company will from time to time designate. All safe deposit keys, combinations and records shall be delivered at the Transfer Time to Purchaser. 8. Valet Parking . At the Transfer Time, an authorized representative of the Company shall perform the following functions for all motor vehicles that were checked and placed in the care of the Company: (i) mark all motor vehicles with a sticker or tape; (ii) prepare a report with respect to any damages to such vehicles; (iii) prepare an inventory of such vehicles ("Inventoried Vehicles") indicating the check number applicable thereto; and (iv) transfer control of the Inventoried Vehicles to an authorized representative of Purchaser and secure a receipt for the Inventoried Vehicles. Thereafter, Purchaser shall be responsible for the Inventoried Vehicles, provided that the Company shall be liable to the owners of such Inventoried Vehicles with respect to any damages occurring as a result of actions taken by the Company and its employees prior to the Transfer Time (including, without limitation, damages (as a result of actions taken by the Company and its employees) set forth in the damage report) or items missing from or damaged in such Inventoried Vehicles and such liability shall be a Retained Liability for the purposes of this Agreement, to the extent that Purchaser is able to prove that such items were missing or damaged prior to the Transfer Time. 9. Undertakings with Respect to Ground Lease . In the event that all necessary consents to the assignment of the Ground Lease, the Option Agreement and the Joint Venture Agreement have not been received prior to the date that all other conditions to the obligations of Purchaser (other than deliveries to be made at the Closing) hereunder have been satisfied, Purchaser shall undertake to exercise the option to purchase the joint venture interest in the Station/First Joint Venture held by First Holdings Company at the earliest possible time pursuant to the terms of the Option Agreement, as the same may be amended following the date hereof to accelerate the exercise period of the option set forth in the Option Agreement. 10. Return of Books and Records . Following the Closing Date, upon the request of the Company, Purchaser shall return to the Company all Books and Records relating to the Company that are not used primarily in the conduct of the Business, including, without limitation, the Books and Records relating to the businesses of Parent or its Affiliates (other than the Company). 11. <page>Use of Transferred Intellectual Property . Purchaser agrees that neither it nor any of its Affiliates shall use any portion of the Transferred Intellectual Property that prior to the Closing Date constituted proprietary property of the Company in its operations in Clark County, Nevada. 12. Fulfillment of Conditions . Purchaser (a) will execute and deliver at the Closing each certificate, document and instruments that Purchaser is hereby required to execute and deliver as a condition to the Closing, (b) will as promptly as practicable affirmatively take all steps necessary or desirable and proceed diligently and in good faith (i) to satisfy each other condition to the obligations of the Company contained in this Agreement and (ii) to consummate all of the transactions contemplated in this Agreement, and (c) will not take or fail to take any action that could reasonably be expected to result in the nonfulfillment of any obligation of the Company or Purchaser contained in this Agreement. CONDITIONS TO OBLIGATIONS OF PURCHASER The obligations of Purchaser hereunder to purchase the Assets are subject to the fulfillment, at or before the Closing, of each of the following conditions (all or any of which may be waived in whole or in part by Purchaser in its sole discretion): 1. Representations and Warranties . The representations and warranties made by the Company and Parent in this Agreement shall be true and correct, in all respects, on and as of the Closing Date as though made on and as of the Closing Date or, in the case of representations and warranties made as of a specified date earlier than the Closing Date, on and as of such earlier date, except in each case as could not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; provided, however, that for the purposes of determining the accuracy of such representations and warranties, all "Material Adverse Effect" qualifications and other materiality qualifications, and any similar qualifications, contained in such representations and warranties shall be disregarded. 2. Performance . The Company and Parent shall have performed and complied with the agreements, covenants and obligations required by this Agreement to be so performed or complied with by the Company, as the case may be, at or before the Closing, except in each case as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 3. Officers' Certificates . The Company and Parent shall have delivered to Purchaser a certificate, dated the Closing Date and executed in the name and on behalf of the Company by an executive officer of the Company and on behalf of the Parent by an executive officer of the Parent, substantially in the form and to the effect of Exhibit C hereto, and certificates, dated the Closing Date and executed by the Secretary of the Company and the Secretary of Parent, substantially in the form and to the effect of Exhibit D hereto. 4. <page>Orders and Laws . There shall not be in effect at the time of Closing any Order or Law restraining, enjoining or otherwise prohibiting or making illegal the consummation of any of the transactions contemplated by this Agreement. 5. Regulatory Consents and Approvals . All consents, approvals, actions, orders or authorizations of, all registrations, declarations or filings with and all notices to any Governmental or Regulatory Authority necessary to permit Purchaser and the Company to perform their respective obligations under this Agreement and to consummate the transactions contemplated hereby shall have been duly obtained, made or given and shall be in full force and effect, and all terminations or expirations of waiting periods imposed by any Governmental or Regulatory Authority necessary for the consummation of the transactions contemplated by this Agreement, including under the HSR Act, shall have occurred, except for such consents, approvals, actions, orders or authorizations the failure of which to obtain could not be reasonably expected to have a Material Adverse Effect. 6. Consummation of Related Transaction . The transactions contemplated by the St. Charles Riverfront Station, Inc. Agreement shall be consummated substantially concurrently with the consummation of the transactions contemplated hereby. 7. Deliveries . The Company shall have delivered to Purchaser the General Assignment and other Assignment Instruments. 8. Title Insurance and Environmental Reports . Purchaser shall have received (a) the Title Policy (as defined and described in Section 4.08 hereof) and (b) recently completed Phase I environmental assessment reports with respect to the Real Property. 9. Consents. With respect to each Contract set forth in Section 6.09 of the Disclosure Schedule, the Company shall have obtained and delivered to Purchaser a consent from the relevant third parties to the extent required for the assignment of such Contract to Purchaser or, in the case of the Ground Lease, the Option Agreement or Joint Venture, if the consents required pursuant to the terms thereof shall not have been obtained the Company and Purchaser shall have entered into a sublease on terms satisfactory to Purchaser with respect to the real property leased pursuant to the Ground Lease, which sublease shall contain representations and warranties regarding the ability of the Company and Parent to sublease the real property subject to such Sublease. 10. Absence of Material Adverse Effect . Since the date hereof, there shall not have occurred any Material Adverse Effect or any events or series of events that constitute a Material Adverse Effect. <page> CONDITIONS TO OBLIGATIONS OF THE COMPANY The obligations of the Company hereunder to sell the Assets are subject to the fulfillment, at or before the Closing, of each of the following conditions (all or any of which may be waived in whole or in part by the Company in its sole discretion): 1. Representations and Warranties . The representations and warranties made by Purchaser in this Agreement shall be true and correct in all material respects on and as of the Closing Date as though made on and as of the Closing Date or, in the case of representations and warranties made as of a specified date earlier than the Closing Date, on and as of such earlier date, except in each case as could not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; provided, however, that for the purposes of determining the accuracy of such representations and warranties, all "Material Adverse Effect" qualifications and other materiality qualifications, and any similar qualifications, contained in such representations and warranties shall be disregarded. 2. Performance . Purchaser shall have performed and complied with, in all material respects, the agreements, covenants and obligations required by this Agreement to be so performed or complied with by Purchaser at or before the Closing. 3. Officers' Certificates . Purchaser and ACI shall have delivered to the Company certificates, dated the Closing Date and executed in the name and on behalf of Purchaser and ACI by the executive officer of Purchaser and ACI, respectively, substantially in the form and to the effect of Exhibit E-1 and Exhibit E-2 hereto, and certificates, dated the Closing Date and executed by the Secretary of Purchaser and ACI, respectively, substantially in the form and to the effect of Exhibit F-1 and Exhibit F-2 hereto. 4. Orders and Laws . There shall not be in effect at the time of Closing any Order or Law restraining, enjoining or otherwise prohibiting or making illegal the consummation of any of the transactions contemplated by this Agreement. 5. Regulatory Consents and Approvals . All consents, approvals and actions of, filings with and notices to any Governmental or Regulatory Authority necessary to permit the Company and Purchaser to materially perform their obligations under this Agreement and to consummate the transactions contemplated hereby, shall have been duly obtained, made or given, shall be in full force and effect and shall be in form and substance satisfactory to the Company and not subject to any material condition or contingency and all terminations or expirations of waiting periods imposed by any Governmental or Regulatory Authority necessary for the consummation of the transactions contemplated by this Agreement, including under the HSR Act, shall have occurred. 6. <page>Consummation of Related Transaction . The transactions contemplated by the St. Charles Riverfront Station, Inc. Agreement shall be consummated substantially concurrently with the consummation of the transactions contemplated hereby. 7. Deliveries . Purchaser shall have delivered the Assumption Agreement and other Assumption Instruments. 8. Letter Of Credit . At the Closing, Purchaser shall deliver to the Company an irrevocable standby letter of credit substantially in the form of, and in the same amount and with the same terms as, the Company's existing letter of credit, which amount may change from time to time, and in form and substance satisfactory to the Company, which may be drawn upon only by the Company in accordance with the terms of such letter of credit in the event that the Company becomes liable for payments or other obligations, at any time on or after the Closing Date, under the terms of that certain Guaranty Agreement executed by the Company guaranteeing payment obligations pursuant to the Bond Trust Indenture, dated July 5, 1999, by and between The 210 Highway Transportation Development District and American National Bank and Trust Company of Chicago, as Trustee, and the standby letter of credit relating thereto; (ii) an irrevocable standby letter of credit in form and substance satisfactory to the Company and Parent and in an amount equal to the payment obligations of the Company and Parent remaining as of the Closing Date pursuant to Sections VI and VII of the Development Agreement, as amended. 9. Required Consents . The third party consents listed in Section 6.09 of the Disclosure Schedule shall have been obtained and shall not have been revoked. TAX MATTERS AND POST-CLOSING TAXES 1. Transfer Taxes and Transfer Fees . The Company shall pay all sales, use, transfer, real property transfer, recording, stock transfer and other similar taxes and fees (other than Taxes of Purchaser and its Affiliates based upon or measured by net income or gains) ("Transfer Taxe s") arising out of or in connection with the transactions effected pursuant to this Agreement, and shall indemnify, defend, and hold harmless Purchaser and its Affiliates with respect to such Transfer Taxes. The Company and Purchaser shall equally share the costs of Gaming Device transfer fees. The Company shall file all necessary documentation and Tax Returns with respect to such Transfer Taxes. 2. Tax Indemnification . b. Subject to Section 1.06, after the Closing Date, the Company and Parent will indemnify and hold harmless Purchaser from and against any and all claims, actions, causes of action, liabilities, losses, damages, and reasonable out-of-pocket expenses and costs resulting from, arising out of or relating to any Taxes of, or with respect to, the Company (including, without limitation, any Tax liability that arises solely by reason of Company being severally liable for any Tax of any federal or state or local consolidated or combined group of which it is a <page>member pursuant to Treasury Regulation Sec. 1.1502-6 or any analogous state or local Tax provision) or with respect to the income, assets or operation of the Business or the Assets for all taxable periods ending on or before the Closing Date and that portion of any taxable period including and ending on the Closing Date that ends on or after the Closing Date (determined as if the relevant period ended on the Closing Date) in excess of the amount of such Taxes shown as Accrued Expenses on the Closing Balance Sheet. c. Purchaser will be responsible for and indemnify and hold the Company harmless against any all liabilities with respect to Taxes relating to the Assets for all taxable periods beginning on the Closing Date and ending after the Closing Date other than to the extent such Taxes relate to or result from a breach of a representation set forth in Section 2.06, and other than Taxes for which the Company is responsible pursuant to Sections 1.06, 8.01 and 8.02(a) above. d. For purposes of clarification, the obligations of the Company, Parent and Purchaser pursuant to this Section 8.02 shall not be subject to the limits contained in Section 11.01(c)(i) hereof. 3. Tax Cooperation . b. After the Closing Date, the Company and Parent will cooperate with Purchaser, and Purchaser will cooperate with the Company and Parent, in the preparation of all Tax Returns and will provide (or cause to be provided) any records and other information the other so requests, and will provide access to, and the cooperation of its auditors. The Company and Parent will cooperate with Purchaser and Purchaser will cooperate with the Company and Parent in connection with any Tax investigation, audit or other proceeding. c. At Parent's request, Purchaser shall cooperate with the Company and Parent in structuring the transactions contemplated by this Agreement so as to enable the Company to qualify such transactions as part of a "like-kind exchange" within the meaning of Code Section 1031 and the Treasury Regulations promulgated thereunder including assigning this Agreement to an intermediary selected by Parent. 4. Notification of Proceedings; Control . The Company shall have the right to control any audit or examination relating to Taxes by any taxing authority, initiate any claim for refund, file any amended return, contest, resolve and defend against any assessment, notice of deficiency or other adjustment or proposed adjustment relating or with respect to any Taxes of any company for which the Company is responsible pursuant to Section 8.02 and shall be entitled to all refunds with respect to such taxes. <page> EMPLOYEE BENEFITS MATTERS 1. Offer of Employment . b. The parties hereto intend that there shall be continuity of employment with respect to all of the employees of the Business. Subject to Purchaser's (or its Affiliates') ordinary ninety-day orientation period, Purchaser shall offer employment at will, commencing on the Closing Date, to all employees, including those on vacation, leave of absence or disability, who were employed by the Business immediately prior to Closing, on substantially the same terms in the aggregate (including salary, fringe benefits, job responsibility and location but excluding employee stock ownership and incentive plans) as those provided to similar employees of Purchaser (or its Affiliates) immediately prior to Closing to the extent permitted under applicable law. Those persons who accept Purchaser's offer of employment and commence working with Purchaser on the Closing Date shall hereafter be referred to as "Transferred Employees." The parties hereto agree that nothing in this Agreement shall limit Purchaser's ability after the Closing Date to modify or terminate (i) the employment of any Transferred Employee or (ii) any benefit policy, plan or program offered to or covering any Transferred Employee. c. Prior to, or in connection with, the Closing, Purchaser shall take no action to cause the Company or the Business to terminate the employment of any employee of the Business, and neither the Company nor the Business shall be under any obligation to terminate any employee of the Business prior to or on the Closing Date. Purchaser shall be liable for any amounts to which any employee of the Business may become entitled pursuant to any employment or severance contract as a result of, or in connection with, the sale of the Business hereunder. Purchaser agrees that it will not take any action which would give rise to liability under WARN or any similar state, local or federal Law or regulation. 2. Welfare Plans -- Claims Incurred; Pre-Existing Conditions . b. Notwithstanding any provision of this Agreement to the contrary, the Company shall retain responsibility for and continue to pay all medical, life insurance, disability and other welfare plan expenses and benefits for each Transferred Employee with respect to claims incurred by such Transferred Employees or their covered dependents prior to the Closing Date. Notwithstanding any provision of this Agreement to the contrary, expenses and benefits with respect to claims incurred by Transferred Employees or their covered dependents on or after the Closing Date shall be the responsibility of Purchaser. For purposes of this paragraph, a claim is deemed incurred when the services that are the subject of the claim are performed; in the case of life insurance, when the death occurs, in the case of long-term disability benefits, when the disability occurs and, in the case of a hospital stay, when the employee first enters the hospital. c. With respect to any welfare benefit plans (as defined in Section 3(1) of ERISA) maintained by Purchaser for the benefit of Transferred Employees on and after the <page>Closing Date, Purchaser shall (i) use commercially reasonable efforts to cause there to be waived any pre-existing condition limitations (other than those limitations existing under the Company's welfare benefit plans) and (ii) give effect, in determining any deductible and maximum out-of-pocket limitations, to claims incurred and amounts paid by, and amounts reimbursed to, such employees with respect to similar plans maintained by the Company (and its Affiliates) for their benefit immediately prior to the Closing Date. 3. Vacation . With respect to any accrued but unused vacation time to which any Transferred Employee is entitled pursuant to the vacation policy applicable to such employee immediately prior to the Closing Date (the "Vacation Policy"), Purchaser shall allow such Transferred Employee to use such accrued vacation, subject to the terms and conditions of Purchaser's vacation policy; provided, however, that if Purchaser deems it necessary to disallow such Transferred Employee from taking such accrued vacation, Purchaser shall be liable for and pay in cash to each such Transferred Employee an amount equal to such vacation time in accordance with terms of the Vacation Policy; provided, further, that Purchaser shall be liable for and pay in cash an amount equal to any remaining accrued vacation time to any Transferred Employee whose employment terminates for any reason prior to the close of business on the last calendar day of the year during which the Closing Date occurs. 4. Service Credit . Purchaser will provide, for the purposes of eligibility and vesting (but not for benefit accrual) each Transferred Employee with credit for all service with the Company and its Affiliates to the extent possible under each employee benefit plan, program, or arrangement of Purchaser or its Affiliates in which such employee is eligible to participate; provided, however, that in no event shall any employee be entitled to any credit to the extent that it would result in a duplication of benefits with respect to the same period of service. 5. Company's Benefit Plans . Except as provided in this Agreement, the parties hereto agree that Purchaser shall not assume any Benefit Plan and the Company shall retain and be responsible for any cost, expense, liability, damage or obligation relating to any Benefit Plan, whether arising before, on or after the Closing Date. 6. COBRA Matters . The Company agrees to provide and be fully responsible for the continuation coverage required by Section 4980B of the Code and Sections 601 through 608 of ERISA ("COBRA") for all employees and former employees of the Company and their covered beneficiaries who incurred or will incur a qualifying event prior to the Closing Date, or will incur a qualifying event as a result of the consummation of the transactions contemplated herein, and who are entitled to COBRA coverage as a result thereof. SURVIVAL OF REPRESENTATIONS 1. Survival of Representations, Warranties, Covenants and Agreements . Except for (i) this Article X, Sections 2.06, 5.05, 5.06, 5.07, 5.08, 5.10 and 5.11 above, Articles VIII and IX above, Sections 14.03, 14.04 and 14.07 below and the Company's agreements and covenants with respect to Retained Liabilities, which shall survive and remain enforceable <page>indefinitely, (ii) Sections 4.06, 4.11 and 5.04 which shall survive for the period set forth therein, and (iii) Sections 2.10 and 2.15 which shall survive and remain enforceable for a period of five (5) years following the Closing Date, the representations, warranties, agreements and covenants contained in this Agreement shall survive the Closing for a period of eighteen (18) months following the Closing Date, after which time there shall be no liability in respect thereof on the part of either party or its officers, directors, employees, agents and Affiliates. 2. No Other Representations . Notwithstanding anything to the contrary contained in this Agreement, but subject to Section 10.01 above, it is the explicit intent of each party hereto that the Company and Purchaser are making no representation or warranty whatsoever, express or implied, except those representations and warranties contained in Article II above and in any certificate delivered pursuant to Section 6.03 above. It is understood that, except to the extent otherwise expressly provided herein, Purchaser takes the Assets "as is" and "where is." In particular, the Company and Parent make no representation or warranty to Purchaser with respect to the information set forth in the Wasserstein Perella & Co., Inc. offering memorandum relating to the Company, or (y) any financial projection or forecast relating to the Company. With respect to any projection or forecast delivered by or on behalf of the Company to Purchaser, Purchaser acknowledges that (i) there are uncertainties inherent in attempting to make such projections and forecasts, (ii) it is familiar with such uncertainties, (iii) it is taking full responsibility for making its own evaluation of the adequacy and accuracy of all such projections and forecasts furnished to it and (iv) it shall have no claim against the Company or Parent with respect thereto. INDEMNIFICATION 1. Other Indemnification . b. Subject to paragraph (c) of this Section and the other Sections of this Article XI, the Company and Parent shall jointly and severally indemnify the Purchaser Indemnified Parties in respect of, and hold it harmless from and against, any and all Losses suffered, incurred or sustained by any of them or to which any of them becomes subject, resulting from, arising out of or relating to (i) any breach of representation or warranty or nonfulfillment of or failure to perform any covenant or agreement on the part of the Company or Parent contained in this Agreement, (ii) a Retained Liability, (iii) the First Holdings Litigation, (iv) if the parties hereto enter into a sublease with respect to the property subject to the Ground Lease, any termination of such sublease or the Ground Lease for any reason other than a termination or breach of the sublease by Purchaser or a breach by the landlord under the Ground Lease, or (v) if the Company exercises its option to purchase the JV interest from First Holdings Company, any failure of the Company to deliver good and marketable title, subject to Permitted Liens, to the real property that is subject to the Ground Lease; c. Subject to the other Sections of this Article XI, Purchaser shall indemnify the Company Indemnified Parties in respect of, and hold each of them harmless from and <page>against, any and all Losses suffered, incurred or sustained by any of them or to which any of them becomes subject, resulting from, arising out of or relating to (i) any breach of representation or warranty or nonfulfillment of or failure to perform any covenant or agreement on the part of Purchaser contained in this Agreement or (ii) an Assumed Liability; d. Notwithstanding anything to the contrary contained in this Agreement, no amounts of indemnity shall be payable as a result of any claim in respect of a Loss arising under paragraph (a)(i) or (b)(i), as applicable, of Section 11.01 (other than a claim based on fraud or willful misconduct or for or with respect breaches of Section 2.06 hereof or claims under Article VIII hereof): (i) unless, until and then only to the extent that the Purchaser Indemnified Parties or the Company Indemnified Parties, as applicable, have suffered, incurred, sustained or become subject to Losses referred to in such paragraph in excess of one hundred thousand dollars ($100,000) in the aggregate; (ii) unless and to the extent that the Purchaser Indemnified Parties and the Purchaser Indemnified Parties as defined in the St. Charles Riverfront Station, Inc. Agreement or the Company Indemnified Parties and the Company Indemnified Parties as defined in the St. Charles Riverfront Station, Inc. Agreement, as applicable, have not received payments in respect of claims made under Section 11.01(a)(i) of this Agreement and the St. Charles Riverfront Station, Inc. Agreement or Section 11.01(b)(i) of this Agreement and the St. Charles Riverfront Station, Inc. Agreement, respectively, in excess of Twenty Million Dollars ($20,000,000) in the aggregate; (iii) unless the Indemnified Party has given the Indemnifying Party a Claim Notice or Indemnity Notice, as applicable, with respect to such claim, setting forth in reasonable detail the specific facts and circumstances pertaining thereto, (A) as soon as practical following the time at which the Indemnified Party discovered or reasonably should have discovered such claim (except to the extent the Indemnifying Party is not prejudiced by any delay in the delivery of such notice) and (B) in any event prior to the applicable Cut-off Date; or (iv) to the extent that the Indemnified Party had a reasonable opportunity, but failed, in good faith to mitigate such Loss, including, without limitation, to the failure to use commercially reasonable efforts to recover under a policy of insurance or under a contractual right of set off or indemnity. 2. Method of Asserting Claim . All claims for indemnification by any Indemnified Party under Section 11.01 will be asserted and resolved as follows: b. In the event any claim or demand in respect of which an Indemnified Party might seek indemnity under Section 11.01 is asserted against or sought to be collected from such Indemnified Party by a Person other than the Company, Parent, ACI, Purchaser or any Affiliate of the Company or of Purchaser (a "Third Party Claim"), the Indemnified Party shall deliver a Claim Notice with reasonable promptness to the Indemnifying Party. The Indemnifying Party will notify the Indemnified Party as soon as practicable within the Dispute Period whether the Indemnifying Party disputes its liability to the Indemnified Party under Section 11.01 and <page>whether the Indemnifying Party desires, at its sole cost and expense, to defend the Indemnified Party against such Third Party Claim, provided that failure to give such notice shall not relieve the Indemnifying Party of its obligations hereunder except to the extent it shall have been prejudiced by such failure. i. If the Indemnifying Party notifies the Indemnified Party within the Dispute Period that the Indemnifying Party desires to defend the Indemnified Party with respect to the Third Party Claim pursuant to this Section 11.02(a), then the Indemnifying Party will have the right to defend, at the sole cost and expense of the Indemnifying Party, such Third Party Claim by all appropriate proceedings, which proceedings will be vigorously and diligently prosecuted by the Indemnifying Party to a final conclusion or will be settled at the discretion of the Indemnifying Party. The Indemnifying Party will have full control of such defense and proceedings, including that if requested by the Indemnifying Party, the Indemnified Party will, at the sole cost and expense of the Indemnifying Party, reasonably cooperate with the Indemnifying Party and its counsel in contesting any Third Party Claim that the Indemnifying Party elects to contest, or, if appropriate and related to the Third Party Claim in question, in making any counterclaim against the Person asserting the Third Party Claim, or any cross-complaint against any Person (other than the Indemnified Party or any of its Affiliates); provided that the Indemnified Party may participate in such settlement or defense through counsel chosen by such Indemnified Party and paid at its own expense; and provided further that, if in the opinion of counsel for such Indemnified Party, there is a reasonable likelihood of a conflict of interest between the Indemnifying Party and the Indemnified Party, the Indemnifying Party shall be responsible for reasonable fees and expenses of one counsel to such Indemnifying Party in connection with such defense. Notwithstanding the foregoing, the Indemnified Party may retain or take over the control of the defense or settlement of any Third Party Claim the defense of which the Indemnifying Party has elected to control if the Indemnified Party irrevocably waives its right to indemnity under Section 11.01 with respect to such Third Party Claim. ii. If the Indemnifying Party fails to notify the Indemnified Party within the Dispute Period that the Indemnifying Party desires to defend the Third Party Claim pursuant to Section 11.02(a), then the Indemnified Party will have the right to defend, at the sole cost and expense of the Indemnifying Party, the Third Party Claim by all appropriate proceedings, which proceedings will be vigorously and diligently prosecuted by the Indemnified Party to a final conclusion or will be settled at the discretion of the Indemnified Party (with the consent of the Indemnifying Party, which consent will not be unreasonably withheld). The Indemnified Party will have full control of such defense and proceedings, including (except as provided in the immediately preceding sentence) any settlement thereof; provided, however, that if requested by the Indemnified Party, the Indemnifying Party will, at the sole cost and expense of the Indemnifying Party, cooperate with the Indemnified Party and its counsel in contesting any Third Party Claim which the Indemnified Party is contesting, or, if appropriate and related to the Third Party Claim in question, in making any counterclaim against the Person asserting the Third Party Claim, or any cross-complaint against any Person (other than the Indemnifying Party or any of its Affiliates). Notwithstanding the foregoing provisions of this <page>clause (ii), if the Indemnifying Party has notified the Indemnified Party within the Dispute Period that the Indemnifying Party disputes its liability hereunder to the Indemnified Party with respect to such Third Party Claim and if such dispute is resolved in favor of the Indemnifying Party in the manner provided in clause (iii) below, the Indemnifying Party will not be required to bear the costs and expenses of the Indemnified Party's defense pursuant to this clause (ii) or of the Indemnifying Party's participation therein at the Indemnified Party's request, and the Indemnified Party will reimburse the Indemnifying Party in full for all reasonable costs and expenses incurred by the Indemnifying Party in connection with such litigation. The Indemnifying Party may retain separate counsel to represent it in, but not control, any defense or settlement controlled by the Indemnified Party pursuant to this clause (ii), and the Indemnifying Party will bear its own costs and expenses with respect to such participation. iii. If the Indemnifying Party notifies the Indemnified Party that it does not dispute its liability to the Indemnified Party with respect to the Third Party Claim under Section 11.02 or fails to notify the Indemnified Party within the Dispute Period whether the Indemnifying Party disputes its liability to the Indemnified Party with respect to such Third Party Claim, the Loss arising from such Third Party Claim will be conclusively deemed a liability of the Indemnifying Party under Section 11.01 and the Indemnifying Party shall pay the amount of such Loss to the Indemnified Party on demand following the final determination thereof. If the Indemnifying Party has timely disputed its liability with respect to such claim, the Indemnifying Party and the Indemnified Party will proceed in good faith to negotiate a resolution of such dispute, and if not resolved through negotiations within the Resolution Period, such dispute shall be resolved by arbitration in accordance with paragraph (c) of this Section 11.02. c. In the event any Indemnified Party should have a claim under Section 11.02 against any Indemnifying Party that does not involve a Third Party Claim, the Indemnified Party shall deliver an Indemnity Notice with reasonable promptness to the Indemnifying Party. If the Indemnifying Party notifies the Indemnified Party that it does not dispute the claim described in such Indemnity Notice or fails to notify the Indemnified Party within the Dispute Period whether the Indemnifying Party disputes the claim described in such Indemnity Notice, the Loss arising from the claim specified in such Indemnity Notice will be conclusively deemed a liability of the Indemnifying Party under Section 11.01 and the Indemnifying Party shall pay the amount of such Loss to the Indemnified Party on demand following the final determination thereof. If the Indemnifying Party has timely disputed its liability with respect to such claim, the Indemnifying Party and the Indemnified Party will proceed in good faith to negotiate a resolution of such dispute, and if not resolved through negotiations within the Resolution Period, such dispute shall be resolved by arbitration in accordance with paragraph (c) of this Section 11.02. d. Any dispute submitted to arbitration pursuant to this Section 11.02 shall be finally and conclusively determined by the decision of a panel of three arbitrators (hereinafter sometimes called the "Board of Arbitration") selected as herein provided. Each of the Indemnified Party and the Indemnifying Party shall select one (1) member and the third member shall be selected by mutual agreement of the other members, or if the other members fail to reach <page>agreement on a third member within twenty (20) days after their selection, such third member shall thereafter be selected by the American Arbitration Association (the "AAA") upon application made to it jointly by the Indemnified Party and the Indemnifying Party for a third member possessing expertise or experience appropriate to the dispute. Within 120 days of the selection of the Board of Arbitration, the Indemnified Party and the Indemnifying Party shall meet in Las Vegas, Nevada with such Board of Arbitration at a place and time designated by such Board of Arbitration after consultation with such parties and present their respective positions on the dispute. The arbitration proceeding shall be held in accordance with the rules for commercial arbitration of the AAA in effect on the date of the initial request for appointment of the Board of Arbitration, that gave rise to the dispute to be arbitrated (as such rules are modified by the terms of this Agreement or may be further modified by mutual agreement of the parties). Each party shall have no longer than five (5) days to present its position, the entire proceedings before the Board of Arbitration shall be no more than ten consecutive days, and the decision of the Board of Arbitration shall be made in writing no more than thirty (30) days following the end of the proceeding. Such an award shall be a final and binding determination of the dispute and shall be fully enforceable as an arbitration decision in any court having jurisdiction and venue over such parties. The prevailing party (as determined by the Board of Arbitration) shall in addition be awarded by the Board of Arbitration such party's own attorneys' fees and expenses in connection with such proceeding. The non-prevailing party (as determined by the Arbitrator) shall pay the Board of Arbitration's fees and expenses. e. In the event of any claim for indemnity under Section 11.02(a), Purchaser agrees to give the Company and its Representatives reasonable access to the Books and Records and employees of the Company in connection with the matters for which indemnification is sought to the extent the Company reasonably deems necessary in connection with its rights and obligations under this Article XI. 3. Exclusivity . After the Closing, to the extent permitted by Law, the indemnities set forth in Article VIII and this Article XI shall be the exclusive remedies of Purchaser, Parent and the Company and their respective officers, directors, employees, agents and Affiliates for any misrepresentation, breach of warranty or nonfulfillment or failure to be performed of any covenant or agreement contained in this Agreement, and the parties shall not be entitled to a rescission of this Agreement or to any further indemnification rights or claims of any nature whatsoever in respect thereof, all of which the parties hereto hereby waive; provided, however, that no party hereto shall be deemed to have waived any rights, claims, causes of action or remedies if and to the extent such rights, claims, causes of action or remedies may not be waived under applicable law or actual fraud or intentional misrepresentation is proven on the part of a party by another party hereto. TERMINATION 1. Termination . This Agreement may be terminated, and the transactions contemplated hereby may be abandoned: b. <page>at any time before the Closing, by mutual written agreement of the Company and Purchaser; c. at any time before the Closing without liability to the terminating party, by the Company or Purchaser, in the event that any Order or Law becomes effective restraining, enjoining or otherwise prohibiting or making illegal the consummation of any of the transactions contemplated by this Agreement upon notification of the non-terminating party by the terminating party and the terminating party is not then in material breach of this Agreement; d. at any time before the Closing, by Company or Purchaser in the event of a material breach of this Agreement by the non-terminating party if such non-terminating party fails to cure such non-compliance or breach within ten (10) Business Days following notification thereof by the terminating party; e. at any time after the date that is ninety (90) days following the Effective Date (the "Initial Term"), without liability to the terminating party, upon notification of the non-terminating party by the terminating party if the Closing shall not have occurred on or before such date and such failure to consummate is not caused by a breach of this Agreement by the terminating party; provided that the Company may in its sole and absolute discretion extend such period for up to three additional thirty (30) day extension periods upon five (5) Business days' written notice to Purchaser prior to the then applicable termination date; and provided, further, that if the sole condition that remains unsatisfied as of the expiration of the then applicable term (other than deliveries of closing certificates and other Closing documents) is the receipt of a Class A license from the Commission and Purchaser demonstrates to the reasonable satisfaction of the Company that (x) it has sufficient cash on hand and/or available credit facilities to pay the Purchase Price and make all other necessary payments of fees and expenses in connection with the transactions contemplated by this Agreement and (y) it is using commercially reasonable efforts to obtain such license and there are no facts known to Purchaser or the Company that could be reasonably expected to result in the failure to obtain such license, Purchaser may extend such period for up to three additional thirty (30) day extension periods by providing written notice to the Company on or before the date that is no more than ten (10) Business Days and no less than five (5) Business Days prior to the then applicable termination date. 2. Effect of Termination . If this Agreement is validly terminated pursuant to the provisions of Section 12.01 above, this Agreement will forthwith become null and void, and, except as set forth in the next sentence, there will be no liability or obligation on the part of Parent, the Company, Purchaser or ACI (or any of their respective officers, directors, employees, agents or other representatives or Affiliates), except that the provisions of Sections 14.02, 14.03, 14.04 and 14.07 below will continue to apply following any such termination. Notwithstanding any other provision in the Agreement to the contrary, upon any termination of this Agreement by any party pursuant to Section 12.01(c), the non-terminating party shall remain liable to the terminating party for any and all willful breaches of this Agreement and the terminating party may seek such remedies, including damages and attorneys' fees, as are provided in this Agreement or as are otherwise available at Law or in equity. <page> DEFINITIONS 1. Defined Terms . As used in this Agreement, the following defined terms have the meanings indicated below: "Accounts Payable" has the meaning ascribed to it in Section 1.02(a). "Accounts Receivable" has the meaning ascribed to it in Section 1.01(a). "Accrued Expenses" has the meaning ascribed to it in Section 1.02(a). "ACI" has the meaning ascribed to it in the forepart of this Agreement. "Acquisition Proposal" has the meaning ascribed to it in Section 4.07. "Actions or Proceedings" means any action, suit, proceeding, arbitration or Governmental or Regulatory Authority investigation. "Affiliate" means any 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 definition, control of a Person means the power, direct or indirect, to direct or cause the direction of the management and policies of such Person whether by Contract or otherwise and, in any event and without limitation of the previous sentence, any Person owning ten percent (10%) or more of the voting securities of another Person shall be deemed to control that Person. "Agreement" means this Asset Purchase Agreement and the Exhibits, the Disclosure Schedule and the Schedules hereto and the certificates delivered in accordance with Sections 6.03 and 7.03, as the same shall be amended from time to time. "Assets" has the meaning ascribed to it in Section 1.01(a). "Assignment Instruments" has the meaning ascribed to it in Section 1.04. "Assumed Liabilities" has the meaning ascribed to it in Section 1.02(a). "Assumption Agreement" has the meaning ascribed to it in Section 1.04. "Assumption Instruments" has the meaning ascribed to it in Section 1.04. "Benefit Plan" means any Plan established by the Company, or any predecessor or Affiliate of any of the foregoing, existing at the Closing Date or at any time since December 31, 1997, to which the Company contributes or has contributed, or under which any employee, <page>former employee or director of the Company or any dependent or beneficiary thereof is covered, is eligible for coverage or has benefit rights. "Board of Arbitration" has the meaning ascribed to it in Section 11.02(c). "Books and Records" means all files, documents, instruments, papers, books and records relating primarily to the Business or Condition of the Company, including, without limitation, financial statements, Tax Returns and related work papers and letters from accountants, budgets, pricing guidelines, ledgers, journals, deeds, title policies, minute books, stock certificates and books, stock transfer ledgers, Contracts, Licenses, customer lists, computer files and programs, retrieval programs, operating data and plans, environmental studies, audits, plans, surveys, designs, models and specifications. "Business" has the meaning ascribed to it in the forepart of this Agreement. "Business Books and Records" has the meaning ascribed to it in Section 1.01(a). "Business Contracts" has the meaning ascribed to it in Section 1.01(a). "Business Customer Lists" has the meaning ascribed to it in Section 1.01(a). "Business Day" means a day other than Saturday, Sunday or any day on which banks located in the States of location of the Company's principal executive offices are authorized or obligated to close. "Business Licenses" has the meaning ascribed to it in Section 1.01(a). "Business or Condition of the Company" means the business, financial condition or results of operations of the Company. "CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, and the rules and regulations promulgated thereunder. "Claim Notice" means written notification pursuant to Section 11.02(a) of a Third Party Claim as to which indemnity under Section 11.01 is sought by an Indemnified Party, enclosing a copy of all papers served, if any, and specifying the nature of and basis for such Third Party Claim and for the Indemnified Party's claim against the Indemnifying Party under Section 11.01, together with the amount or, if not then reasonably determinable, the estimated amount, determined in good faith, of the Loss arising from such Third Party Claim. "Closing" means the closing of the transactions contemplated by Section 1.04. "Closing Balance Sheet" has the meaning ascribed to it in Section 1.05(a). "Closing Date" means (a) the second Business Day after the day on which the last of the conditions described in Articles VI and VII hereof above has been obtained, made or given <page>or has expired, as applicable, or (b) such other date as Purchaser and the Company mutually agree upon in writing. "Closing Financial Statements Delivery Date" has the meaning ascribed to it in Section 1.05(a). "Code" means the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder. "Commission" has the meaning ascribed to it in Section 1.01(a)(iv). "Common Stock" means the common stock, no par value, of the Company. "Company" has the meaning ascribed to it in the forepart of this Agreement. "Company Indemnified Parties" means Parent, the Company and their respective officers, directors, employees, agents and Affiliates. "Company Plans" has the meaning ascribed to it in Section 2.09(a). "Company's Accountant" has the meaning ascribed to it in Section 1.05(c). "Contract" means any agreement, lease, license, evidence of Indebtedness, mortgage, indenture, security agreement or other contract. "Cut-off Date" means, with respect to any representation, warranty, covenant or agreement contained in this Agreement, the date on which such representation, warranty, covenant or agreement ceases to survive as provided in Section 11.01 , as applicable. "Deficiency" means the amount, if any, by which the Net Current Assets as determined in accordance with Section 1.05 is a negative number. "Determination Date" has the meaning ascribed to it in Section 1.05(c). "Development Agreement" has the meaning ascribed to in Section 1.01(a)(ii). "Disclosure Schedule" means the record delivered to Purchaser by the Company herewith and dated as of the date hereof, containing all lists, descriptions, exceptions and other information and materials as are required to be included therein by the Company pursuant to this Agreement, as said record may be amended, supplemented or modified by the Company at any time prior to the Closing without any liability to the Company other than that Purchaser shall have the right for five (5) Business Days after such amendment, supplement or modification of the Disclosure Schedule to terminate the Agreement based upon such amendment, supplement or modification of the Disclosure Schedule if such amendment, supplement or modification of the Disclosure Schedule reveals a matter which would have a Material Adverse Effect. Reference herein to the Disclosure Schedule shall mean and refer not only to the record itself, but to all items, documents, agreements and instruments referenced therein and to the content of each such <page>item, document, agreement and instrument. Likewise, reference herein to a certain Section of the Disclosure Schedule shall refer not only to that portion of the Disclosure Schedule, but to the items, documents, agreements and instruments referenced in that Section and the contents of each such item, document, agreement and instrument. Further, matters disclosed for the purpose of one Section of the Disclosure Schedule shall constitute disclosure of such matters for the purposes of all other Sections of the Disclosure Schedule. The duplication or cross-referencing of any disclosures made in the Disclosure Schedule shall not, in any instance or in the aggregate, effect a waiver of the foregoing sentence. "Dispute Period" means the period ending sixty (60) days following receipt by an Indemnifying Party of either a Claim Notice or an Indemnity Notice. "EBITDA" means, with respect to any Person for any period, the earnings before interest, taxes, depreciation and amortization of such Person for such period. "Effective Date" has the meaning ascribed to it in the forepart of this Agreement. "Environmental Claim" has the meaning ascribed to it in Section 2.15(c). "Environmental Law" means any federal, state, or local law, statute, code, ordinance, order, rule, regulation, judgment, decree, injunction, writ, edict, award, authorization, or other legally binding and enforceable requirement by any Governmental or Regulatory Authority relating to any environmental, health or safety matters. "Environmental Permits" has the meaning ascribed to it in Section 2.15(a). "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated thereunder. "Excluded Assets" has the meaning ascribed to it in Section 1.01(b). "Excluded Books and Records" has the meaning ascribed to it in Section 1.01(b). "Financial Statement Date" means December 31, 1999. "Financial Statements" means the combined financial statements of the Company delivered to Purchaser pursuant to Section 2.05. "First Holdings Litigation" means that legal action by First Holdings Company and Kansas City Station Joint Venture against the Company and Parent filed on September 8, 2000 in the Circuit Court of Jackson County, Missouri. "GAAP" means generally accepted accounting principles, consistently applied throughout the specified period and in the immediately prior comparable period. <page>"Gaming Devices" means any gambling games or implements of gaming (as such terms are used in the applicable gaming statutes and regulations of the State of Missouri) that is an asset or property of the Company and is not an Excluded Asset. "General Assignment" has the meaning ascribed to it in Section 1.04. "Governmental or Regulatory Authority" means any court, tribunal, arbitrator, authority, administrative or other agency, commission, gaming authority, official or other authority or instrumentality of the United States or any state, county, city or other political subdivision. "Ground Lease" means that certain Lease Agreement dated as of April 1, 1994, as amended, by and between Station/First Joint Venture and the Company. "Hazardous Material" means any chemical, or other material, or substance regulated under any Environmental Law including, without limitation, any which are defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "infectious waste," "extremely hazardous wastes," "restricted hazardous wastes," "toxic substances," or "toxic pollutants" or words of similar import under any Environmental Law. "HSR Act" means Section 7A of the Clayton Act (Title II of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended) and the rules and regulations promulgated thereunder. "Improvements" has the meaning ascribed to it in Section 1.01(a). "Indebtedness" of any Person means all obligations of such Person (i) for borrowed money, (ii) evidenced by notes, bonds, debentures or similar instruments, (iii) for the deferred purchase price of goods or services (other than trade payables or accruals incurred in the ordinary course of business), (iv) under capital leases and (v) in the nature of guarantees of the obligations described in clauses (i) through (iv) above of any other Person. "Indemnified Party" means any Person claiming indemnification under any provision of Article XI. "Indemnifying Party" means any Person against whom a claim for indemnification is being asserted under any provision of Article XI. "Indemnity Notice" means written notification pursuant to Section 11.02(b) of a claim for indemnity under Article XI by an Indemnified Party, specifying the nature of and basis for such claim, together with the amount or, if not then reasonably determinable, the estimated amount, determined in good faith, of the Loss arising from such claim. "Inventoried Baggage" has the meaning ascribed to it in Section 5.06. "Inventoried Vehicles" has the meaning ascribed to it in Section 5.08. <page>"JV" means the Station/First Joint Venture, a Missouri partnership. "Joint Venture Agreement" has the meaning ascribed to it in Section 1.01(a)(ii). "July Agreement" has the meaning ascribed to it in the forepart of this Agreement. "Knowledge of the Company" means the actual knowledge of the directors and executive officers of Parent or the Company, Parent's President of Midwest Operations, Parent's General Counsel for Midwest Operations or the General Manager of the Business. "Knowledge of Purchaser" means the actual knowledge of the members, directors and officers of Purchaser and its Affiliates. "Laws" means all laws, statutes, rules, regulations, ordinances and other pronouncements having the effect of law of the United States or any state, county, city or other political subdivision or of any Governmental or Regulatory Authority. "Leased Real Property" has the meaning ascribed to it in Section 1.01(a). "Lessee Security Deposits" has the meaning ascribed to it in Section 1.01(a). "Lessor Security Deposits" has the meaning ascribed to it in Section 1.02(a). "Liabilities" means all Indebtedness, obligations and other liabilities of a Person (whether absolute, accrued, contingent, fixed or otherwise, or whether due or to become due). "Licensed Supplier" means a licensed supplier of Gaming Devices in the State of Missouri. "Licenses" means all licenses, permits, certificates of authority, authorizations, approvals, registrations, franchises and similar consents granted or issued by any Governmental or Regulatory Authority. "Liens" means any mortgage, pledge, assessment, security interest, lease, lien, adverse claim, levy, charge or other encumbrance of any kind, or any conditional sale Contract, title retention Contract or other Contract to give any of the foregoing. "Loss" or "Losses" means any and all damages, fines, penalties, deficiencies, losses and expenses (including without limitation interest, court costs, reasonable fees of attorneys, accountants and other experts or other reasonable expenses of litigation or other proceedings or of any claim, default or assessment). "Mark" has the meaning ascribed to it in Section 4.06(a). "Material Adverse Effect" means any event or circumstance that has or will have, or could reasonably be expected to have, a material adverse effect on the Business or Condition of the Company after the Closing Date, it being understood that in no event shall any of the <page>following shall be deemed by itself or by themselves, either individually or in the aggregate, to constitute a Material Adverse Effect: (a) a failure by the Company to meet internal earnings, revenue or other projections or earnings, revenue or other predictions of any analyst, (b) any event, circumstance or market condition occurring as a general economic or financial conditions or other developments which are not unique to the Company but also is applicable to the gaming industry generally, or the Missouri gaming industry in particular, or (c) the appointment of a receiver to operate the Business, the operation of the Business by such a receiver and the results of operations of the Business during such period of operation, the imposition of monetary penalties which shall constitute Retained Liabilities, or any Permitted Interruption; it being further understood that any cessation of operation of the Business other than a Permitted Interruption shall conclusively be deemed to be a Material Adverse Effect. "Net Current Assets" means for any date of determination the net current assets of such Person at such date of determination calculated as set forth on Exhibit H attached hereto. "NPL" means the National Priorities List under CERCLA. "Option Agreement" has the meaning ascribed to it in Section 1.01(a)(ii). "Order" means any writ, judgment, decree, injunction or similar order of any Governmental or Regulatory Authority (in each such case whether preliminary or final). "Owned Real Property" has the meaning ascribed to it in Section 1.01(a). "Parent" has the meaning ascribed to it in the forepart of this Agreement. "Permitted Interruption" shall mean a cessation of the operation of the Business for a period not to exceed fifteen days, provided that during such period of interruption the Company shall continue to pay its employees pursuant to its compensation policies in effect immediately prior to the cessation of operations and for each day of such interruption shall compensate employees that receive compensation in the form of tips an additional amount equal to the average daily tip compensation received by such employees. "Permitted Lien" means (i) any Lien for Taxes not yet due or delinquent or being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with GAAP, (ii) any statutory Lien arising in the ordinary course of business by operation of Law with respect to a Liability that is not yet due or delinquent and (iii) any minor imperfection of title, easements of public record or similar Liens which individually or in the aggregate with other such Liens would not have a Material Adverse Effect. "Person" means any natural person, corporation, limited liability company, general partnership, limited partnership, proprietorship, other business organization, trust, union, association or Governmental or Regulatory Authority. "Personal Property Leases" has the meaning ascribed to it in Section 1.01(a). <page>"Plan" means any bonus, incentive compensation, deferred compensation, pension, profit sharing, retirement, stock purchase, stock option, stock ownership, stock appreciation rights, phantom stock, leave of absence, layoff, vacation, day or dependent care, legal services, cafeteria, life, health, accident, disability, workers' compensation or other insurance, severance, separation or other employee benefit plan, practice, policy or arrangement of any kind, whether written or oral, including, without limitation, any "employee benefit plan" within the meaning of Section 3(3) of ERISA. "Prepaid Expenses" has the meaning ascribed to it in Section 1.01(a). "Purchase Price" has the meaning ascribed to it in Section 1.03(a). "Purchaser" has the meaning ascribed to it in the forepart of this Agreement. "Purchaser Indemnified Parties" means Purchaser and its officers, directors, employees, agents and Affiliates. "Real Property" has the meaning ascribed to it in Section 1.01(a). "Real Property Leases" has the meaning ascribed to it in Section 1.01(a). "Release" means any release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching or migration into the indoor or outdoor environment. "Representatives" has the meaning ascribed to it in Section 4.03. "Required Consents" has the meaning ascribed to it in Section 1.08. "Resolution Period" means the period ending ninety (90) days following receipt by an Indemnified Party of a written notice from an Indemnifying Party stating that it disputes all or any portion of a claim set forth in a Claim Notice or an Indemnity Notice. "Retained Liabilities" has the meaning ascribed to it in Section 1.02(b). "St. Charles Riverfront Station, Inc. Agreement" means that certain agreement dated as of October 17, 2000 by and among Ameristar Casino St. Charles, Inc., Ameristar Casinos, Inc., a Nevada corporation, St. Charles Riverfront Station, Inc., a Missouri corporation and Station Casinos, Inc. a Nevada corporation. "Surplus" means the amount, if any, by which Net Current Assets as determined in accordance with Section 1.05 is a positive number. "Tangible Personal Property" has the meaning ascribed to it in Section 1.01(a). "Tax Return" means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof. <page>"Taxes" means (i) any federal, state, local or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental (including taxes under Code Sec. 59A), customs duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition thereto, whether disputed or not and any expenses incurred in connection with the determination, settlement or litigation of any Tax liability and (ii) any liability for payment of amounts described in clause (i) above as a result of any express or implied agreement to pay or indemnify another Person with respect to such amounts or any liability for such amounts, any joint and/or several liability for such amounts, and any such amounts for which a Person is liable by operation of Law (including but not limited to successor liability). "Third Party Claim" has the meaning ascribed to it in Section 11.02(a). "Transfer Taxes" has the meaning ascribed to it in Section 8.01. "Transfer Time" has the meaning ascribed to it in Section 1.04. "Transferred Employees" has the meaning ascribed to it in Section 9.01(a). "Transferred Intellectual Property" has the meaning ascribed to it in Section 1.01(a). "Vacation Policy" has the meaning ascribed to it in Section 9.03. "Vehicles and Vessels" has the meaning ascribed to it in Section 1.01(a). "WARN" means the Worker Adjustment Retraining and Notification Act of 1988. 2. Construction of Certain Terms and Phrases . Unless the context of this Agreement otherwise requires, (i) words of any gender include each other gender; (ii) words using the singular or plural number also include the plural or singular number, respectively; (iii) the terms "hereof," "herein," "hereby" and derivative or similar words refer to this entire Agreement; (iv) the terms "Article" or "Section" refer to the specified Article or Section of this Agreement; and (v) the phrase "ordinary course of business" refers to the business of the Company. Whenever this Agreement refers to a number of days, such number shall refer to calendar days unless Business Days are specified. All accounting terms used herein and not expressly defined herein shall have the meanings given to them under GAAP. Any representation or warranty contained herein as to the enforceability of a Contract shall be subject to the effect of any bankruptcy, insolvency, reorganization, moratorium or other similar law affecting the enforcement of creditors' rights generally and to general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at Law). <page> MISCELLANEOUS 1. Notices . All notices, requests and other communications hereunder must be in writing and will be deemed to have been duly given only if delivered personally, by facsimile transmission, by registered or certified mail (postage prepaid, return receipt requested) or by overnight express courier to the parties at the following addresses or facsimile numbers: If to Purchaser, to: Ameristar Casino Kansas City, Inc. 3773 Howard Hughes Parkway Suite 490 South Las Vegas, Nevada 89109 Attention: Craig H. Neilsen, President & CEO Facsimile No. (702) 369-8860 with copies to: Gordon R. Kanofsky, Esq. Senior Vice President of Legal Affairs Ameristar Casinos, Inc. 16633 Ventura Boulevard, Suite 1050 Encino, CA 91436-1864 Facsimile No. (818) 995-7099 and Gibson, Dunn & Crutcher LLP 333 South Grand Avenue Los Angeles, CA 90071 Attention: Jonathan K. Layne, Esq. Facsimile No. (213) 229-6141   <page>If to the Company, to: Kansas City Station Corporation c/o Station Casinos, Inc. 2411 West Sahara Ave. Las Vegas, Nevada 89102 Facsimile No.: (702) 253-2926 Attn: Scott M Nielson, Esq. with copies to: Milbank, Tweed, Hadley & McCloy LLP 601 South Figueroa, Suite 300 Los Angeles, California 90017 Facsimile No.: (213) 892-5063 Attn: Kenneth J. Baronsky, Esq. All such notices, requests and other communications will (a) if delivered personally to the address as provided in this Section 14.01, be deemed given upon delivery, (b) if delivered by facsimile transmission to the facsimile number as provided in this Section 14.01, be deemed given upon receipt, and (c) if delivered by mail in the manner described above to the address as provided in this Section 14.01, be deemed given upon receipt (in each case regardless of whether such notice, request or other communication is received by any other Person to whom a copy of such notice, request or other communication is to be delivered pursuant to this Section 14.01). Any party from time to time may change its address, facsimile number or other information for the purpose of notices to that party by giving notice specifying such change to the other party hereto. 2. Entire Agreement . This Agreement supersedes all prior discussions and agreements between the parties with respect to the subject matter hereof and contains the sole and entire agreement between the parties hereto with respect to the subject matter hereof. 3. Expenses . Whether or not the transactions contemplated hereby are consummated, Purchaser and the Company each shall pay the costs and expenses incurred by such party in connection with the negotiation, execution and closing of this Agreement and the transactions contemplated hereby. 4. Public Announcements . At all times at or before the Closing, the Company and Parent, on the one hand, and Purchaser and ACI, on the other, will not issue or make any reports, statements or releases to the public or generally to the employees, customers, suppliers or other Persons to whom the Company sells goods or provides services or with whom the Company otherwise has significant business relationships with respect to this Agreement or the transactions contemplated hereby without the consent of the other, which consent shall not be unreasonably withheld. If either party is unable to obtain the approval of its public report, statement or release from the other party and such report, statement or release is, in the opinion of legal counsel to such party, required by Law in order to discharge such party's disclosure obligations, then such party may make or issue the legally required report, statement or release <page>and promptly furnish the other party with a copy thereof. Purchaser and ACI will obtain the Company's prior approval of any press release to be issued immediately following execution of this Agreement or the Closing announcing execution of this Agreement or the consummation of the transactions contemplated by this Agreement, which approval shall not be unreasonably withheld. The Company and Parent will obtain Purchaser's prior approval of any press release to be issued immediately following execution of this Agreement or the Closing announcing this Agreement or the consummation of the transactions contemplated by this Agreement. 5. Waiver . Any term or condition of this Agreement may be waived at any time by the party that is entitled to the benefit thereof, but no such waiver shall be effective unless set forth in a written instrument duly executed by or on behalf of the party waiving such term or condition. No waiver by any party of any term or condition of this Agreement, in any one or more instances, shall be deemed to be or construed as a waiver of the same or any other term or condition of this Agreement on any future occasion. All remedies, either under this Agreement or by Law or otherwise afforded, will be cumulative and not alternative. 6. Amendment . Except for amendments, supplements and modifications to the Disclosure Schedule by the Company prior to the Closing (which shall be made in accordance with the terms and provisions set forth in the definition of the term "Disclosure Schedule"), this Agreement may be amended, supplemented or modified only by a written instrument duly executed by or on behalf of Purchaser, on the one hand, and the Company, on the other hand. 7. Confidentiality . Each party hereto will hold, and will use its best efforts to cause its Affiliates , and in the case of Purchaser, any Person who has provided, or who is considering providing, financing to Purchaser to finance all or any portion of the Purchase Price, and their respective Representatives to hold, in strict confidence from any Person (other than any such Affiliate, Person who has provided, or who is considering providing, financing or Representative), unless (i) compelled to disclose by judicial or administrative process (including, without limitation, in connection with obtaining the necessary approvals of this Agreement and the transactions contemplated hereby of Governmental or Regulatory Authorities) or by other requirements of Law or (ii) disclosed in an Action or Proceeding brought by a party hereto in pursuit of its rights or in the exercise of its remedies hereunder, all documents and information concerning the other party or any of its Affiliates furnished to it by the other party or such other party's Representatives in connection with this Agreement or the transactions contemplated hereby, except to the extent that such documents or information can be shown to have been (a) previously known by the party receiving such documents or information, (b) in the public domain (either prior to or after the furnishing of such documents or information hereunder) through no fault of such receiving party or (c) later acquired by the receiving party from another source if the receiving party is not aware that such source is under an obligation to another party hereto to keep such documents and information confidential; provided that following the Closing the foregoing restrictions will not apply to Purchaser's use of documents and information concerning the Business, the Assets or the Assumed Liabilities furnished by Seller hereunder. In the event the transactions contemplated hereby are not consummated, upon the request of the other party, each party hereto will, and will cause its Affiliates, any Person who has provided, or who is considering providing, financing to such party and their respective Representatives to, <page>promptly (and in no event later than five (5) Business Days after such request) redeliver or cause to be redelivered all copies of documents and information furnished by the other party in connection with this Agreement or the transactions contemplated hereby and destroy or cause to be destroyed all notes, memoranda, summaries, analyses, compilations and other writings related thereto or based thereon prepared by the party furnished such documents and information or its Representatives. 8. No Third Party Beneficiary . The terms and provisions of this Agreement are intended solely for the benefit of each party hereto and their respective successors or permitted assigns, and it is not the intention of the parties to confer third-party beneficiary rights upon any other Person other than any Person entitled to indemnity pursuant to Article XI hereof. 9. No Assignment; Binding Effect . Neither this Agreement nor any right, interest or obligation hereunder may be assigned by any party hereto without the prior written consent of the other party hereto and any attempt to do so will be void, except (a) for assignments and transfers by operation of Law and (b) that Purchaser may assign any or all of its rights, interests and obligations hereunder (including, without limitation, its rights under Article XI) to (i) a wholly-owned subsidiary, provided that any such subsidiary agrees in writing to be bound by all of the terms, conditions and provisions contained herein and Purchaser remains liable for its obligations under this Agreement, (ii) any post-Closing purchaser of the Business or a substantial part of the Assets or (iii) any financial institution or other entity providing purchase money or other financing to Purchaser from time to time as collateral security for such financing. Subject to the preceding sentence, this Agreement is binding upon, inures to the benefit of and is enforceable by the parties hereto and their respective successors and assigns. 10. Headings . The headings used in this Agreement have been inserted for convenience of reference only and do not define or limit the provisions hereof. 11. Invalid Provisions . If any provision of this Agreement is held to be illegal, invalid or unenforceable under any present or future Law, and if the rights or obligations of any party hereto under this Agreement will not be materially and adversely affected thereby, (a) such provision will be fully severable, (b) this Agreement will be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof, and (c) the remaining provisions of this Agreement will remain in full force and effect and will not be affected by the illegal, invalid or unenforceable provision or by its severance herefrom. 12. Consent to Jurisdiction and Venue . Each party hereby irrevocably submits to the exclusive jurisdiction of the United States District Court for the District of Nevada or any court of the State of Nevada located in Clark County in any action, suit or proceeding arising out of or relating to this Agreement or any of the transactions contemplated hereby, and agrees that any such action, suit or proceeding shall be brought only in such court; provided, however, that such consent to jurisdiction is solely for the purpose referred to in this Section 14.12 and shall not be deemed to be a general submission to the jurisdiction of said courts or in the State of Nevada other than for such purpose. Each party hereby irrevocably waives, to the fullest extent permitted by Law, any objection that it may now or hereafter have to the laying of <page>the venue of any such action, suit or proceeding brought in such a court. Each party further irrevocably waives and agrees not to plead or claim that any such action, suit or proceeding brought in such a court has been brought in an inconvenient forum. 13. Governing Law . This Agreement shall be governed by and construed in accordance with the Laws of the State of Nevada applicable to a Contract executed and performed in such State, without giving effect to the conflicts of laws principles thereof. 14. Attorney's Fees . In the event of a dispute between the parties hereto relating to this Agreement, the prevailing party to such dispute will be entitled to recover its reasonable attorneys fees and other costs and expenses relating to such dispute from the non-prevailing party. 15. Time of the Essence . Time is of the essence in performing covenants and agreements hereunder. 16. Counterparts . This Agreement may be executed in any number of counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument. GUARANTEES 1. Guarantee of the Company's Obligations . Parent hereby, to the fullest extent permitted by applicable law, irrevocably and unconditionally guarantees (the "Parent Guarantee") to Purchaser and its successors and assigns the prompt performance and payment in full when due of all obligations of the Company to Purchaser under this Agreement and hereby agrees to take all reasonably necessary action as the sole shareholder of the Company to cause the Company to perform its obligations hereunder. 2. Guarantee of Purchaser's Obligations . ACI hereby, to the fullest extent permitted by applicable law, irrevocably and unconditionally guarantees (the "ACI Guarantee") to the Company and its successors and assigns the prompt performance and payment in full when due of all obligations of Purchaser to the Company under this Agreement and hereby agrees to take all reasonably necessary action as the sole shareholder of Purchaser to cause Purchaser to perform its obligations under this Agreement. <page>THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the duly authorized officer or trustee, as applicable, of each party hereto as of the date first above written. "PURCHASER" AMERISTAR CASINO KANSAS CITY, INC., a Missouri corporation By: /s/ Thomas M. Steinbauer Name: Thomas M. Steinbauer Title: Vice President "THE COMPANY" KANSAS CITY STATION CORPORATION, a Missouri corporation By: /s/Glenn C. Christenson Name: Title: "PARENT" STATION CASINOS, INC., a Nevada corporation By: /s/ Glenn C. Christenson Name: Title: <page> "ACI" AMERISTAR CASINOS, INC. a Nevada corporation By: /s/ Thomas M. Steinbauer Name: Thomas M. Steinbauer Title: Senior Vice President and Chief Financial Officer

EXHIBIT 10.45 BYLAWS OF DIGITALPORTAL INC. A DELAWARE CORPORATION 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     PREAMBLE 1             ARTICLE I OFFICES 1        Section 1.1 Registered Office and Agent 1        Section 1.2 Other Offices 1             ARTICLE II STOCKHOLDERS 1        Section 2.1 Place of Meetings 1        Section 2.2 Annual Meeting 1        Section 2.3 Special Meetings 1        Section 2.4 Notice of Meetings 1        Section 2.5 Voting List 2        Section 2.6 Quorum 2        Section 2.7 Adjournments 2        Section 2.8 Voting and Proxies 2        Section 2.9 Action at Meeting 2        Section 2.10 Nomination of Directors 2        Section 2.11 Notice of Business at Annual Meetings 3        Section 2.12 Inspectors 3        Section 2.13 Action without Meeting 4        Section 2.14 Organization 4             ARTICLE III DIRECTORS 4        Section 3.1 General Powers 4        Section 3.2 Number; Election and Qualification 5        Section 3.3 Terms of Office 5        Section 3.4 Vacancies 5        Section 3.5 Resignation 5        Section 3.6 Annual Meetings 5        Section 3.7 Regular Meetings 5        Section 3.8 Special Meetings 5        Section 3.9 Notice of Special Meetings 5        Section 3.10 Meetings by Telephone Conference Calls 5        Section 3.11 Quorum 5        Section 3.12 Required Consent 5        Section 3.13 Special Consent Required 5        Section 3.14 Action by Consent 6        Section 3.17 Compensation of Directors 6             ARTICLE IV OFFICERS 6        Section 4.1 Enumeration 6        Section 4.2 Election 6        Section 4.3 Qualification 6        Section 4.4 Tenure 6        Section 4.5 Resignation and Removal 6        Section 4.6 Vacancies 7        Section 4.7 Chairman of the Board and Vice Chairman of the Board 7        Section 4.8 President and Chief Executive Officer 7        Section 4.9 Vice Presidents 7        Section 4.10 Secretary and Assistant Secretaries 7        Section 4.11 Treasurer and Assistant Treasurer 8        Section 4.12 Salaries 8 --------------------------------------------------------------------------------              Section 5.4 Lost, Stolen or Destroyed Certificates 8        Section 5.5 Record Date 8        Section 5.6 Dividends 9     ARTICLE VI GENERAL PROVISIONS 9        Section 6.1 Fiscal Year 9        Section 6.2 Corporate Seal 9        Section 6.3 Waiver of Notice 9        Section 6.4 Voting for Securities 9        Section 6.5 Evidence of Authority 9        Section 6.6 Certificate of Incorporation 9        Section 6.7 Transactions with Interested Parties 9        Section 6.8 Dissolution 10        Section 6.9 Severability 10        Section 6.10 Pronouns 10                 i -------------------------------------------------------------------------------- BYLAWS OF DIGITALPORTAL INC. PREAMBLE         These Bylaws are subject to, and governed by, the General Corporation Law of the State of Delaware and the Certificate of Incorporation of DigitalPortal Inc., a Delaware corporation (the “Corporation”). In the event of a direct conflict between the provisions of these Bylaws and the mandatory provisions of the Delaware General Corporation Law or the provisions of the Certificate of Incorporation of the Corporation, such provisions of the Delaware General Corporation Law or the Certificate of Incorporation of the Corporation, as the case may be, will be controlling. ARTICLE I OFFICES         Section 1.1  Registered Office and Agent. The registered office and registered agent of the Corporation shall be as designated from time to time by the appropriate filing by the Corporation in the office of the Secretary of State of the State of Delaware. The initial registered office of the Corporation shall be established at 1209 Orange Street, City of Wilmington, County of New Castle, Delaware 19801. The initial registered agent of the Corporation at such registered office shall be The Corporation Trust Company.         Section 1.2  Other Offices. The Corporation may also have offices at such other places, both within and without the State of Delaware, as the Board of Directors from time to time determines or as the business of the Corporation from time to time requires. ARTICLE II STOCKHOLDERS         Section 2.1  Place of Meetings. All meetings of stockholders shall be held at such place within or without the State of Delaware as may be designated from time to time by the Board of Directors, the Chairman of the Board or the President or, if not so designated, at the registered office of the Corporation.         Section 2.2  Annual Meeting. The annual meeting of stockholders for the election of directors and Chairman of the Board and for the transaction of such other business as may properly be brought before the meeting shall be held on a date to be fixed by the Board of Directors, the Chairman of the Board or the President (which date shall not be a legal holiday in the place where the meeting is to be held) at the time and place to be fixed by the Board of Directors, the Chairman of the Board or the President and stated in the notice of the meeting. If no annual meeting is held in accordance with the foregoing provisions, the Board of Directors shall cause the meeting to be held as soon thereafter as convenient. If no annual meeting is held in accordance with the foregoing provisions, a special meeting may be held in lieu of the annual meeting, and any action taken at the annual meeting, and in such case all references in these Bylaws to the annual meeting of the stockholders shall be deemed to refer to such special meeting.               Section 2.3  Special Meetings. Special meetings of stockholders may be called at any time only by the Chairman of the Board of Directors, the President or fifty percent (50%) of the Board of Directors. Business transacted at any special meeting of stockholders shall be limited to matters relating to the purpose or purposes stated in the notice of meeting.               Section 2.4  Notice of Meetings. Except as otherwise provided by law, written notice of each meeting of stockholders, whether annual or special, shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting. The notices of all meetings shall state the place, date and hour of the meeting. The notice of a special meeting shall state, in addition, the purpose or purposes for which the meeting is called. If mailed, notice is given when deposited in the United States mail, postage prepaid, directed to the stockholder at the stockholder’s address as it appears on the records of the Corporation. 15 --------------------------------------------------------------------------------                              Section 2.5  Voting List. The officer who has charge of the stock ledger of the Corporation shall prepare, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, at a place within the city where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time of the meeting, and may be inspected by any stockholder who is present.               Section 2.6  Quorum. Except as otherwise provided by law, the Certificate of Incorporation or these Bylaws, the holders of a majority of the shares of the capital stock of the Corporation issued and outstanding and entitled to vote at the meeting, present in person or represented by proxy, shall constitute a quorum for the transaction of business.               Section 2.7  Adjournments. Any meeting of stockholders may be adjourned to any other time and to any other place at which a meeting of stockholders may be held under these Bylaws by the stockholders present or represented at the meeting and entitled to vote, although less than a quorum, or, if no stockholder is present, by any officer entitled to preside at or to act as Secretary of such meeting. It shall not be necessary to notify any stockholder of any adjournment of less than thirty (30) days if the time and place of the adjourned meeting are announced at the meeting at which adjournment is taken, unless after the adjournment a new record date is fixed for the adjourned meeting. At the adjourned meeting, the Corporation may transact any business which might have been transacted at the original meeting.               Section 2.8  Voting and Proxies. Each stockholder shall have one vote for each share of stock entitled to vote held of record by such stockholder and a proportionate vote for each fractional share so held, unless otherwise provided by law, the Certificate of Incorporation or these Bylaws. Each stockholder of record entitled to vote at a meeting of stockholders, or to express consent or dissent to corporate action in writing without a meeting, may vote or express such consent or dissent in person or may authorize another person or persons to vote or act for him by proxy executed in writing (or in such other manner permitted by the General Corporation Law of the State of Delaware) by the stockholder or his authorized agent and delivered or transmitted to the Secretary of the Corporation. No such proxy shall be voted or acted upon after three (3) years from the date of its execution, u nless the proxy expressly provides for a longer period.               Section 2.9  Action at Meeting. When a quorum is present at any meeting, the holders of a majority of the stock present or represented and voting on a matter (or if there are two or more classes of stock entitled to vote as separate classes, then in the case of each such class, the holders of a majority of the stock of that class present or represented and voting on a matter) shall decide any matter to be voted upon by the stockholders at such meeting, except when a different vote is required by express provision of law, the Certificate of Incorporation or these Bylaws. Any election by stockholders shall be determined by a plurality of the votes cast by the stockholders entitled to vote at the election.               Section 2.10  Nomination of Directors. Only persons who are nominated in accordance with the following procedures shall be eligible for election as directors. Nomination for election to the Board of Directors of the Corporation at a meeting of stockholders may be made by the Board of Directors or by any stockholder of the Corporation entitled to vote for the election of directors at such meeting who complies with the notice procedures set forth in this Section 2.10. Such nominations, other than those made by or on behalf of the Board of Directors, shall be made by timely notice in writing to the Secretary of the Corporation. To be timely, a stockholder’s notice must be delivered to, or mailed and received by, the Secretary at the principal executive offices of the Corporation not less than thirty (30) days nor more than ninety (90) days prior to the first anniversary of the pr eceding year’s annual meeting; provided, however, that (i) in the event that the date of the annual meeting is advanced by more than twenty (20) days, or delayed by more than seventy (70) days, from such anniversary date, notice by the stockholder to be timely must be so delivered or received not earlier than the ninetieth day prior to such annual meeting and not later than the close of business on the later of the thirtieth day prior to such annual meeting or the fifteenth day following the day on which notice of the date of such annual meeting was mailed or public disclosure of the date of such annual meeting was made, whichever first occurs, and (ii) with respect to the annual meeting of stockholders of the Corporation to be held in the year 2001, to be timely, a stockholder’s notice must be so received not earlier than the ninetieth day prior to such annual meeting and not later than the close of business on the later of (A) the thirtieth day prior to such annual meeting and (B)  the fifteenth day following the day on which notice of the date of such 4 -------------------------------------------------------------------------------- annual meeting was mailed or public disclosure of the date of such annual meeting was made, whichever first occurs. As to the stockholder giving the notice (i) the name and address, as they appear on the Corporation’s books, of such stockholder and (ii) the class and number of shares of the Corporation which are beneficially owned by such stockholder. The Corporation may require any proposed nominee to furnish such information as may reasonably be required by the Corporation to determine the eligibility of such proposed nominee to serve as a director of the Corporation.               The chairman of the meeting may, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the foregoing procedure, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded.               Section 2.11  Notice of Business at Annual Meetings. At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (b) otherwise brought before the meeting by or at the direction of the Board of Directors, or (c) otherwise properly brought before an annual meeting by a stockholder. For business to be properly brought before an annual meeting by a stockholder, if such business relates to the election of directors of the Corporation, the procedures in Section 2.10 must be complied with. If such business relates to any other matter, the stockholder must have given timely notice thereof in writing to the Secretary . To be timely, a stockholder’s notice must be delivered to, or mailed and received by, the Secretary at the principal executive offices of the Corporation not less than seventy (70) days nor more than ninety (90) days prior to the first anniversary of the preceding year’s annual meeting; provided, however, that (i) in the event that the date of the annual meeting is advanced by more than twenty (20) days, or delayed by more than seventy (70) days, from such anniversary date, notice by the stockholder to be timely must be so delivered or received not earlier than the ninetieth day prior to such annual meeting and not later than the close of business on the later of the seventieth day prior to such annual meeting or the tenth day following the day on which notice of the date of such annual meeting was mailed or public disclosure of the date of such annual meeting was made, whichever first occurs, and (ii) with respect to the annual meeting of stockholders of the Corporation to be held in t he year 2001, to be timely, a stockholder’s notice must be so received not earlier than the ninetieth day prior to such annual meeting and not later than the close of business on the later of (A) the sixtieth day prior to such annual meeting and (B) the tenth day following the day on which notice of the date of such annual meeting was mailed or public disclosure of the date of such annual meeting was made, whichever first occurs. A stockholder’s notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before the annual meeting (a) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (b)  the name and address, as they appear on the Corporation’s books, of the stockholder proposing such business, (c) the class and number of shares of the Corporation which are beneficially owned by the stockholder, and (d) any material interest of the s tockholder in such business. Notwithstanding anything in these Bylaws to the contrary, no business shall be conducted at any annual meeting except in accordance with the procedures set forth in this Section 2.11 and except that any stockholder proposal which complies with rule 14a-8 of the proxy rules (or any successor provision) promulgated under the Securities Exchange Act of 1934, as amended, and is to be included in the Corporation’s proxy statement for an annual meeting of stockholders shall be deemed to comply with the requirements of this Section 2.11.               The chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of this Section 2.11, and if he should so determine, the chairman shall so declare to the meeting that any such business not properly brought before the meeting shall not be transacted.               Section 2.12  Inspectors. The Board of Directors may, in advance of any meeting of stockholders, appoint one or more inspectors to act at such meeting or any adjournment thereof. If any of the inspectors so appointed shall fail to appear or act, the chairman of the meeting may appoint one or more inspectors. Each inspector, before entering upon the discharge of his duties, shall take and sign an oath to execute faithfully the duties of inspector at such meeting with strict impartiality and according to the best of his ability. The inspectors shall determine the number of shares represented at the meeting, the existence of a quorum, and the validity and effect of proxies and shall receive votes, ballots, or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots, or consents, determine the results, and do such acts as are proper to conduct the election or vote with fairness to all stockholders. On request of the chairman of the meeting, the inspectors shall make a report in writing of any challenge, request or matter determined by them 5 -------------------------------------------------------------------------------- and shall execute a certificate of any fact found by them. No director or candidate for the office of director shall act as an inspector of an election of directors. Inspectors need not be stockholders.         Section 2.13  Action without Meeting. Unless otherwise provided in the Certificate of Incorporation, any action required or permitted to be taken by stockholders for or in connection with any corporate action may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the Corporation by delivery to its registered office in Delaware or to its principal place of business by hand or certified or registered mail, return receipt requested, or to an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Each su ch written consent shall bear the date of signature of each stockholder who signs the consent. No written consent shall be effective to take the corporate action referred to therein unless written consents signed by a number of stockholders sufficient to take such action are delivered to the Corporation in the manner specified in this paragraph within sixty (60) days of the earliest dated consent so delivered.         If action is taken by consent of stockholders and in accordance with the foregoing, there shall be filed with the records of the meetings of stockholders the writing or writings comprising such consent.         If action is taken by less than unanimous consent of stockholders, prompt notice of the taking of such action without a meeting shall be given to those who have not consented in writing and a certificate signed and attested to by the Secretary of the Corporation that such notice was given shall be filed with the records of the meetings of stockholders.         In the event that the action which is consented to is such as would have required the filing of a certificate under any provision of the General Corporation Law of the State of Delaware, if such action had been voted upon by the stockholders at a meeting thereof, the certificate filed under such provision shall state, in lieu of any statement required by such provision concerning a vote of stockholders, that written consent has been given under Section 228 of said General Corporation Law and that written notice has been given as provided in such Section 228.         Notwithstanding the foregoing, if at any time the Corporation shall have a class of stock registered pursuant to the provisions of the Securities Exchange Act of 1934, as amended, for so long as such class is registered, any action by the stockholders of such class must be taken at an annual or special meeting of stockholders and may not be taken by written consent.         Section 2.14  Organization. The Chairman of the Board, or in his absence the Vice Chairman of the Board designated by the Chairman of the Board, if any, or the President, in the order named, shall call meetings of the stockholders to order, and shall act as chairman of such meeting; provided, however, that the Board of Directors may appoint any stockholder to act as chairman of any meeting in the absence of the Chairman of the Board. The Secretary of the Corporation shall act as secretary at all meetings of the stockholders; but in the absence of the Secretary at any meeting of the stockholders, the presiding officer may appoint any person to act as secretary of the meeting. ARTICLE III DIRECTORS         Section 3.1  General Powers. The business and affairs of the Corporation shall be managed by or under the direction of a Board of Directors, who may exercise all of the powers of the Corporation except as otherwise provided by law, the Certificate of Incorporation or these Bylaws. In the event of a vacancy in the Board of Directors, the remaining directors, except as otherwise provided by law, may exercise the powers of the full Board until the vacancy is filled.         Section 3.2  Number; Election and Qualification. Unless and until changed by amendment to this bylaw, the number of directors which shall constitute the whole Board of Directors shall be four. The directors shall be elected at the annual or special meeting of stockholders or by written consent. Directors need not be stockholders of the Corporation. 6 --------------------------------------------------------------------------------         Section 3.3  Terms of Office. Each director shall serve until the next annual meeting after he or she is elected ; provided, that the term of each director shall be subject to the election and qualification of his successor and to his earlier death, resignation or removal.         Section 3.4  Vacancies. Any vacancy in the Board of Directors, however occurring, including a vacancy resulting from an enlargement of the size of the Board, shall be filled by appointment by a majority of the directors then in office, although less than a quorum, or by a sole remaining director, and such appointee shall hold office for the unexpired term in respect of which such vacancy occurred or until the next election of directors by stockholders, subject to the election and qualification of a successor and to the earlier death, resignation or removal of the appointee. Notwithstanding the foregoing, for so long as that certain Stockholders Agreement, dated as of August 7, 2000, by and between the Corporation and its stockholders (the “Stockholders Agreement”), shall be in effect, (i) if the office of a director designated under such Stockholders Agreement becomes vacant by reason of death, disabili ty, resignation or removal, the remaining directors shall appoint a successor to such office as the party entitled under the Stockholders’ Agreement to designate such director or such party’s assignee shall direct; and (ii) if the office of a director designated under such Stockholders Agreement becomes vacant by reason of enlargement of the board, the remaining directors shall appoint a director to such office so as to conform with Section 4(a) of the Stockholders’ Agreement.         Section 3.5  Resignation. Any director may resign by delivering his written resignation to the Corporation at its principal office or to the President or Secretary. Such resignation shall be effective upon receipt unless it is specified to be effective at some other time or upon the happening of some other event.         Section 3.6  Annual Meetings. Annual meetings of the Board of Directors shall be held without notice immediately following and at the same place as the annual meeting of stockholders.         Section 3.7  Regular Meetings. Regular meetings of the Board of Directors shall be held at least on a quarterly basis, with fourteen (14) days written notice, at such time and place, either within or without the State of Delaware, as shall be determined from time to time by the Board of Directors; provided that any director who is absent when such a determination is made shall be given notice of the determination; and provided that at least one regular meeting a year shall be held in Grenoble, France and at least one meeting a year shall be held in Sunnyvale, CA.         Section 3.8  Special Meetings. Special meetings of the Board of Directors may be held at any time and place, within or without the State of Delaware, designated in a call by the Chairman of the Board, President, two or more directors, or by one director in the event that there is only a single director in office.         Section 3.9  Notice of Special Meetings. Notice of any special meeting of directors shall be given to each director by the Secretary or by the officer or one of the directors calling the meeting. Notice shall be duly given to each director (i) by giving notice to such director in person or by telephone at least 72 hours in advance of the meeting, (ii) by sending a telegram, telecopy, telex or electronic mail message, or delivering written notice by hand, to his last known business or home address at least 72 hours in advance of the meeting, or (iii) by mailing written notice to his last known business or home address at least 14 days in advance of the meeting. A notice or waiver of notice of a meeting of the Board of Directors need not specify the purposes of the meeting.         Section 3.10  Meetings by Telephone Conference Calls. Directors or any members of any committee designated by the directors may participate in a meeting of the Board of Directors or such committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation by such means shall constitute presence in person at such meeting.         Section 3.11  Quorum. A majority of the total number of the whole Board of Directors shall constitute a quorum at all meetings of the Board of Directors. In the absence of a quorum at any such meeting, a majority of the directors present may adjourn the meeting from time to time without further notice other than announcement at the meeting, until a quorum shall be present.         Section 3.12  Required Consent. At any meeting of the Board of Directors at which a quorum is present, the vote of a majority of those present shall be sufficient to take any action, unless a different vote is specified by law, the Certificate of Incorporation or these Bylaws         Section 3.13  *    *    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. 7 --------------------------------------------------------------------------------         Section 3.14  Action by Consent. Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee of the Board of Directors may be taken without a meeting, if all members of the Board or committee, as the case may be, consent to the action in writing, and the written consents are filed with the minutes of proceedings of the Board or committee.         Section 3.15  Presumption of Assent. A director of the Corporation who is present at the meeting of the Board of Directors at which action on any corporate matter is taken shall be presumed to have assented to the action unless his dissent shall be entered in the minutes of the meeting or unless he shall file his written dissent to such action with the person acting as secretary of the meeting before the adjournment thereof or shall forward any dissent by certified or officer is present at or participates in the meeting of the Board of Directors or a committee of the Board of Directors which authorizes the contract or transaction or solely because his or their votes are counted for such purpose if:         Section 3.16  Committees. The Board of Directors may designate one or more committees, each committee to consist of one or more of persons, who need not be directors of the Corporation. The Board may designate one or more persons as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members of the committee present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another person to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors and subject to the provisions of the General Corporation Law of the State of Delaware, shall have and may exercise all the powers and authority of the Board of Direc tors in the management of the business and affairs of the Corporation and may authorize the seal of the Corporation to be affixed to all papers which may require it; provided that committees containing members who are not directors shall serve on such committees in an advisory capacity only. Each such committee shall keep minutes and make such reports as the Board of Directors may from time to time request. Except as the Board of Directors may otherwise determine, any committee may make rules for the conduct of its business, but unless otherwise provided by the directors or in such rules, its business shall be conducted as nearly as possible in the same manner as is provided in these Bylaws for the Board of Directors.         Section 3.17  Compensation of Directors. Directors may be paid such compensation for their services and such reimbursement for expenses of attendance at meetings as the Board of Directors may from time to time determine. No such payment shall preclude any director from serving the Corporation or any of its parent or subsidiary corporations in any other capacity and receiving compensation for such service. ARTICLE IV OFFICERS         Section 4.1  Enumeration. The officers of the Corporation shall consist of a Chairman, a President and Chief Executive Officer, a Secretary, a Treasurer and such other officers with such other titles as the Board of Directors shall determine, including a Vice Chairman of the Board and one more Vice Presidents, Assistant Treasurers and Assistant Secretaries. The Board of Directors may appoint such other officers as it may deem appropriate         Section 4.2  Election. During the Restricted Period (as defined in the Stockholders’ Agreement), the Chairman shall be appointed annually in accordance with Section 5 of the Stockholders’ Agreement. The President and Chief Executive Officer, the Treasurer and the Secretary shall be appointed annually by the Board of Directors at its first meeting following the annual meeting of stockholders; provided that the President and Chief Executive Officer shall be appointed only with the approval of both Approval Agents. Other officers may be appointed by the Board of Directors at such meeting or at any other meeting.         Section 4.3  Qualification. No officer need be a stockholder. Any two or more offices may be held by the same person; provided that the President and Chief Executive Officer shall not serve as Chairman.         Section 4.4  Tenure. Except as otherwise provided by law, by the Certificate of Incorporation or by these Bylaws, each officer shall hold office until his successor is elected and qualified, unless a different term is specified in the vote choosing or appointing him, or until his earlier death, resignation or removal.         Section 4.5  Resignation and Removal. Any officer may resign by delivering his or her written resignation to the Corporation at its principal office or to the President or Secretary. Such resignation shall be 8 -------------------------------------------------------------------------------- effective upon receipt unless it is specified to be effective at some other time or upon the happening of some other event.         Any officer, other than the Chairman and President and Chief Executive Officer, may be removed at any time, with or without cause, by vote of a majority of the entire number of directors then in office. The Chairman and President and Chief Executive Officer may be removed at any time, with or without cause, by the vote of the holders of a majority of the shares of capital stock of the Corporation issued and outstanding and entitled to vote.         Except as the Board of Directors may otherwise determine, no officer who resigns or is removed shall have any right to any compensation as an officer for any period following his resignation or removal, or any right to damages on account of such removal, whether his compensation be by the month or by the year or otherwise, unless such compensation is expressly provided in a duly authorized written agreement with the Corporation.         Section 4.6  Vacancies. The Board of Directors may fill any vacancy occurring in any office for any reason and may, in its discretion, leave unfilled for such period as it may determine any offices, other than those of President and Chief Executive Officer, Treasurer and Secretary. Each such successor shall hold office for the unexpired term of his predecessor and until his successor is elected and qualified, or until his earlier death, resignation or removal. Notwithstanding the foregoing, (a) for so long as the Stockholders’ Agreement shall be in effect, if the office of Chairman becomes vacant, the remaining directors shall appoint a successor to such office as the party entitled under the Stockholders’ Agreement to designate the Chairman or such party’s assignee shall direct; and (b) if the office of President and Chief Executive Officer becomes vacant, the Board shall appoint a successor to such office only with approval of both Approval Agents.         Section 4.7  Chairman of the Board and Vice Chairman of the Board. The Chairman of the Board shall perform such duties and possess such powers as are assigned to him by the Board of Directors. Unless otherwise provided by the Board of Directors, he shall preside at all meetings of the stockholders and at all meetings of the Board of Directors. If the Board of Directors appoints a Vice Chairman of the Board, he shall, in the absence or disability of the Chairman of the Board, perform the duties and exercise the powers of the Chairman of the Board and shall perform such other duties and possess such other powers as may from time to time be vested in him by the Board of Directors.                    Section 4.8  President and Chief Executive Officer. The President and Chief Executive Officer shall be the general manager of the Corporation and shall have general charge and supervision of the business of the Corporation. He shall perform such other duties and shall have such other powers as the Board of Directors may from time to time prescribe. The President and Chief Executive Officer shall, in no event, fulfill the position of Chairman of the Board.         Section 4.9  Vice Presidents. Any Vice Presidents shall perform such duties and possess such powers as the Board of Directors or the President may from time to time prescribe. In the event of the absence, inability or refusal to act of the President, the Vice President (or if there shall be more than one, the Vice Presidents in the order determined by the Board of Directors) shall perform the duties of the President and when so performing shall have all the powers of and be subject to all the restrictions upon the President. The Board of Directors may assign to any Vice President the title of Executive Vice President, Senior Vice President or any other title selected by the Board of Directors.         Section 4.10  Secretary and Assistant Secretaries. The Secretary shall perform such duties and shall have such powers as the Board of Directors or the President may from time to time prescribe. In addition, the Secretary shall perform such duties and have such powers as are incident to the office of the secretary, including without limitation the duty and power to give notices of all meetings of stockholders and special meetings of the Board of Directors and keep a record of the proceedings, to maintain a stock ledger and prepare lists of stockholders and their addresses as required, to be custodian of corporate records and the corporate seal and to affix and attest to the same on documents.         Any Assistant Secretary shall perform such duties and possess such powers as the Board of Directors, the President or the Secretary may from time to time prescribe. In the event of the absence, inability or refusal to act of the Secretary, the Assistant Secretary (or if there shall be more than one, the Assistant Secretaries in the order determined by the Board of Directors) shall perform the duties and exercise the powers of the Secretary. 9 --------------------------------------------------------------------------------         In the absence of the Secretary or any Assistant Secretary at any meeting of stockholders or directors, the person presiding at the meeting shall designate a temporary secretary to keep a record of the meeting.         Section 4.11  Treasurer and Assistant Treasurer. The Treasurer shall perform such duties and shall have such powers as may from time to time be assigned to him or her by the Board of Directors or the President. In addition, the Treasurer shall perform such duties and have such powers as are incident to the office of treasurer, including without limitation the duty and power to keep and be responsible for all funds and securities of the Corporation, to deposit funds of the Corporation in depositories selected in accordance with these Bylaws, to disburse such funds, and to render, as required by the Board of Directors, statements of all such transactions and of the financial condition of the Corporation.         The Assistant Treasurers shall perform such duties and possess such powers as the Board of Directors, the President or the Treasurer may from time to time prescribe. In the event of the absence, inability or refusal to act of the Treasurer, the Assistant Treasurer (or if there shall be more than one, the Assistant Treasurers in the order determined by the Board of Directors) shall perform the duties and exercise the powers of the Treasurer.         Section 4.12  Salaries. Officers of the Corporation shall be entitled to such salaries, compensation or reimbursement as shall be fixed or allowed from time to time by the Board of Directors. ARTICLE V CAPITAL STOCK         Section 5.1  Issuance of Stock. Unless otherwise voted by the stockholders and subject to the provisions of the Certificate of Incorporation, the whole or any part of any unissued balance of the authorized capital stock of the Corporation or the whole or any part of any unissued balance of the authorized capital stock of the Corporation held in its treasury may be issued, sold, transferred or otherwise disposed of by vote of the Board of Directors in such manner, for such consideration and on such terms as the Board of Directors may determine.         Section 5.2  Certificates of Stock. Every holder of stock of the Corporation shall be entitled to have a certificate, in such form as may be prescribed by law and by the Board of Directors, certifying the number and class of shares owned by him or her in the Corporation. Each such certificate shall be signed by, or in the name of the Corporation by, the Chairman or Vice Chairman, if any, of the Board of Directors, or the President or a Vice President, and the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Corporation. Any or all of the signatures on the certificate may be a facsimile.         Each certificate for shares of stock which are subject to any restriction on transfer pursuant to the Certificate of Incorporation, these Bylaws, applicable securities laws or any agreement among any number of stockholders, or among such holders and the Corporation, shall have conspicuously noted on the face or back of the certificate either the full text of the restriction or a statement of the existence of such restriction.         Section 5.3  Transfers. Except as otherwise established by rules and regulations adopted by the Board of Directors, and subject to applicable law, shares of stock may be transferred on the books of the Corporation by the surrender to the Corporation or its transfer agent of the certificate representing such shares properly endorsed or accompanied by a written assignment or power of attorney properly executed, and with such proof of authority or the authenticity of signature as the Corporation or its transfer agent may reasonably require. Except as may be otherwise required by law, by the Certificate of Incorporation or by these Bylaws, the Corporation shall be entitled to treat the record holder of stock as shown on its books as the owner of such stock for all purposes, including the payment of dividends and the right to vote with respect to such stock, regardless of any transfer, pledge or other disposition of such stock until the shares have been transferred on the books of the Corporation in accordance with the requirements of these Bylaws.         Section 5.4  Lost, Stolen or Destroyed Certificates. The Corporation may issue a new certificate of stock in place of any previously issued certificate alleged to have been lost, stolen or destroyed, upon such terms and conditions as the Board of Directors may prescribe, including the presentation of reasonable evidence of such loss, theft or destruction and the giving of such indemnity as the Board of Directors may require for the protection of the Corporation or any transfer agent or registrar.         Section 5.5  Record Date. The Board of Directors may fix, in advance, a date as a record date for the determination of the stockholders entitled to notice of or to vote at any meeting of stockholders, or entitled to 10 -------------------------------------------------------------------------------- receive payment of any dividend or other distribution or allotment of any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action. Such record date shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action to which such record date relates.         If no record date is fixed, the record date for determining stockholders entitled to notice of, or to vote at, a meeting of stockholders shall be at the close of business on the day before the day on which notice is given, or, if notice is waived, at the close of business on the day before the day on which the meeting is held. The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating to such purpose.         A determination of stockholders of record entitled to notice of, or to vote at, a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.         Section 5.6   Dividends. Profits and cash distributions shall be made on an annual basis to stockholders on a pro rata basis, subject to agreed prior allocations of profit and R&D, reserves and other items approved by the Board of Directors. ARTICLE VI GENERAL PROVISIONS         Section 6.1  Fiscal Year. Except as from time to time otherwise designated by the Board of Directors, the fiscal year of the Corporation shall begin on the first day of January in each year and end on the last day of the following December         Section 6.2  Corporate Seal. The corporate seal shall be in such form as shall be approved by the Board of Directors.         Section 6.3  Waiver of Notice. Whenever any notice whatsoever is required to be given by law, by the Certificate of Incorporation or by these Bylaws, a waiver of such notice either in writing signed by the person entitled to such notice or such person’s duly authorized attorney, or by telegraph, cable or any other available method, whether before, at or after the time stated in such waiver, or the appearance of such person or persons at such meeting in person or by proxy, shall be deemed equivalent to such notice.         Section 6.4  Voting for Securities. Except as the directors may otherwise designate, the President or Treasurer may waive notice of, and act as, or appoint any person or persons to act as, proxy or attorney-in-fact for the Corporation (with or without power of substitution) at any meeting of stockholders or shareholders of any other corporation or organization, the securities of which may be held by the Corporation.         Section 6.5  Evidence of Authority. A certificate by the Secretary, or an Assistant Secretary, or a temporary Secretary, as to any action taken by the stockholders, directors, a committee or any officer or representative of the Corporation shall, as to all persons who rely on the certificate in good faith, be conclusive evidence of such action.         Section 6.6  Certificate of Incorporation. All references in these Bylaws to the Certificate of Incorporation shall be deemed to refer to the Certificate of Incorporation of the Corporation, as amended and in effect from time to time.         Section 6.7  Transactions with Interested Parties. No contract or transaction between the Corporation and one or more of the directors or officers, or between the Corporation and any other corporation, partnership, association or other organization in which one or more of the directors or officers have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or a committee of the Board of Directors which authorizes the contract or transaction or solely because his or their votes are counted for such purpose if:               (1)  The material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; 11 --------------------------------------------------------------------------------               (2)  The material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or               (3)  The contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board of Directors, a committee of the Board of Directors, or the stockholders.         Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction.         Section 6.8  Dissolution. Dissolution of the Corporation shall only be by mutual agreement by the holders of at least two-thirds (2/3) of the shares of capital stock of the Corporation issued and outstanding and entitled to vote, or at the request of at least half (½), if (i) the Corporation is unprofitable for two years in succession, or (ii) after exhausting the mechanisms of dispute resolution, the Board of Directors remains deadlocked on a matter deemed to be essential to the successful future of the Corporation and no buy/sell process is initiated within thirty (30) days, or (iii) bankruptcy or equivalent proceedings are commenced.         Section 6.9  Severability Any determination that any provision of these Bylaws is for any reason inapplicable, illegal or ineffective shall not affect or invalidate any other provision of these Bylaws.         Section 6.10  Pronouns. All pronouns used in these Bylaws shall be deemed to refer to the masculine, feminine or neuter, singular or plural, as the identity of the person or persons may require. ARTICLE VII AMENDMENTS               Except as otherwise provided by law, these Bylaws may be altered, amended or repealed or new bylaws may be adopted by the affirmative vote of the holders of a majority of the shares of the capital stock of the Corporation issued and outstanding and entitled to vote at any regular or special meeting of stockholders, provided notice of such alteration, amendment, repeal or adoption of new bylaws shall have been stated in the notice of such regular or special meeting.

QuickLinks -- Click here to rapidly navigate through this document Exhibit 10.35 SECURED REVOLVING PROMISSORY NOTE     This SECURED REVOLVING PROMISSORY NOTE is entered into as of December 8, 2000, by and between MAXIM PHARMACEUTICALS, INC. ("Company"), a Delaware Corporation, at 8899 University Center Lane, Suite 400, San Diego, CA 92122 and LARRY G. STAMBAUGH ("Executive") at [***]. RECITALS     Executive wishes to obtain credit from time to time from Company, and Company desires to extend credit to Executive. This Note sets forth the terms on which Company will advance credit to Executive, and Executive will repay the amounts owing to Company. AGREEMENT 1.DEFINITIONS         1.1  Definitions.  As used in this Note, the following terms shall have the following definitions:             "Advance" or "Advances" means payments made to Executive in accordance with this Note.             "Maturity Date" means December 8, 2001.             "Options" means options to purchase common stock of Maxim Pharmaceuticals, Inc. or any shares acquired thereunder.             "Outstanding Balance" means the sum of all Advances less the sum of all repayments of Advances to date. 2.LOAN AND TERMS OF PAYMENT         2.1  Credit Extension.  Executive promises to pay to Company, in lawful money of the United States of America, the aggregate unpaid principal amount of all Advances made by Company to Executive hereunder. Executive shall also pay interest on the Outstanding Balance of such Advances at rates in accordance with the terms hereof.         2.2  Advances.  Subject to and upon the terms and conditions of this Note, at any time from the date hereof through the Maturity Date of this Note, Company agrees to make advances to Executive in an aggregate amount up to, but not exceeding, $2,850,000.         2.3  Interest.  Interest shall accrue from the date of the first Advance at the per annum rate equal to eight and one quarter percent (8.25%). Accrued interest will be due and payable on the Maturity Date of this Note.         2.4  Payment.  Executive will pay Outstanding Balance plus all accrued unpaid interest by the Maturity Date. Executive will pay Company at Company's address shown above or at such other place as Company may designate in writing. Unless otherwise agreed or required by applicable law, payments will be applied first to accrued unpaid interest, then to any unpaid collection costs and late charges, and any remaining amount to principal.         2.5  Prepayment.  Executive may pay all or a portion of the outstanding Advances earlier than due at any time without notice and without penalty. 1 -------------------------------------------------------------------------------- 3.SECURITY.         3.1  Grant of Security Interest.  To secure the payment on the Obligations under this Note, Executive hereby grants to Company a security interest in all Options, as more fully set forth in the Exhibit A hereto. Notwithstanding the granting by the Executive of the security interest as provided herein (a) Executive acknowledges his obligation to repay the Secured Revolving Promissory Note in accordance with its terms and provisions, and (b) Company shall have full recourse against Executive for all amounts due under this Secured Revolving Promissory Note. The Executive may elect to sell common stock underlying the Options if the value of the remaining Options equals or exceeds the obligations under this Note. 4.DEFAULT         4.1.  Events of Default.  Executive will be in default (a) five (5) days after written notice of failure by Executive to make any payment in connection with this Note within ten (10) days after due; or (b) immediately when a receiver is appointed for any part of Executive's property, Executive makes an assignment for the benefit of creditors, or any proceeding is commenced either by Executive or (unless dismissed within 60 days) against Executive under any bankruptcy or insolvency laws. 5.COMPANY'S RIGHTS         5.1  Rights and Remedies.  Upon default, Company may declare the entire unpaid principal balance on this Note and all accrued interest immediately due. In such event, subject to any limits under applicable law, Executive shall also pay Company's reasonable attorney's fees and legal expenses whether or not there is a lawsuit, including attorney's fees and legal expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment collection services. Executive also will pay any court costs, in addition to all other sums provided by law. This Note has been delivered to Company and accepted by Company in the State of California. If there is a lawsuit, Executive agrees upon Company's request to submit to the jurisdiction of the courts of San Diego County, the State of California. This Note shall be governed by and construed in accordance with the laws of the State of California. 6.GENERAL PROVISIONS         6.1  Enforcement.  Company may delay or forgo enforcing any of its rights or remedies under this Note without losing them. Executive and any other person who signs, guarantees or endorses this Note, to the extent allowed by law, waive any applicable statute of limitations, presentment, demand for payment, protest and notice of dishonor. 7.NOTICES         7.1  All notices required to be given hereunder shall be given in writing and shall be effective when actually delivered or three days after deposited in the mail, first class, postage prepaid, addressed to the party to whom the notice is to be given at the address shown above. 2 --------------------------------------------------------------------------------     IN WITNESS WHEREOF, the Undersigned has caused this Secured Revolving Promissory Note to be duly executed as of the day and year first above written.     EXECUTIVE     By: /s/ LARRY G. STAMBAUGH    -------------------------------------------------------------------------------- Larry G. Stambaugh     MAXIM PHARMACEUTICALS, INC.     By: /s/ DALE A. SANDER    -------------------------------------------------------------------------------- Dale A. Sander Chief Financial Officer 3 -------------------------------------------------------------------------------- QuickLinks SECURED REVOLVING PROMISSORY NOTE RECITALS AGREEMENT

QuickLinks -- Click here to rapidly navigate through this document EXHIBIT 10(t) FIRST AMENDMENT TO MINNTECH CORPORATION SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN     THIS FIRST AMENDMENT to the Minntech Corporation Supplemental Executive Retirement Plan restated as of April 1, 2000 shall be effective as of September 27, 2000.     Pursuant to Section 10.3 of the Plan, the Plan is hereby amended as follows:     Section 5.2(b) shall be amended by deleting "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." and substituting the following therefor:     "Lump sum distributions shall be paid as soon as administratively possible immediately following the date the applicable event specified in subsection (a) occurs. The first of any installment payment shall be paid on the 15th day of the first calendar quarter immediately following the date the applicable event specified in subsection (a) occurs, with succeeding amounts paid on the 15th day of each calendar quarter thereafter until paid in full."     The remainder of the Plan shall remain in full force and effect.   MINNTECH CORPORATION                                   By   /s/ William Hope       --------------------------------------------------------------------------------       Its       Chairman & CEO       -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- QUICKLINKS FIRST AMENDMENT TO MINNTECH CORPORATION SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

Exhibit 10(i)           BERGEN BRUNSWIG THIRD AMENDED AND RESTATED SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN (As Of September 24, 1998)       -------------------------------------------------------------------------------- TABLE OF CONTENTS       Page     ARTICLE I PLAN HISTORY 1     ARTICLE II DEFINITIONS 2   2.1 "Accrued Benefit" 2   2.2 "Beneficiary" 3   2.3 "Bergen 401(k) Plan" 4   2.4 "Bergen Brunswig Corporation" 4   2.5 "Board of Directors" 5   2.6 "Break in Service" 5   2.7 "Capital Accumulation Plan" 5   2.8 "Code" 5   2.9 "Compensation" 5   2.10 "Credited Service" 6   2.11 "Employee" 6   2.12 "Employer" 7   2.13 "Employment" 7   2.14 "Equivalent" 7   2.15 "ERISA" 8   2.16 "Executive Benefits" 8   2.17 "Key Management Benefits" 8   2.18 "Normal Benefit Form" 8   2.19 "Normal Retirement Age" 9   2.20 "Optional Benefit Form" 9   2.21 "Participant" 9   2.22 "Plan" 9   2.23 "Plan Administrator" 9   2.24 "Plan Rules" 9   2.25 "Plan Year" 9   2.26 "Service" 9   2.27 "Spouse" 10   2.28 "Trust" 11   2.29 "Vested" 11   2.30 "Vesting Service" 11         ARTICLE III PARTICIPATION 11   3.1 Requirements for Participation 11   3.2 Former Participants 13         ARTICLE IV AMOUNT OF BENEFIT 13   4.1 Determination of Benefit Amount 13         ARTICLE V VESTING 17   5.1 Vesting of Accrued Benefit 17   5.2 Forfeiture of Benefits 22         ARTICLE VI PAYMENT OF BENEFITS 22   6.1 Benefits on Termination of Employment 22   6.2 Death Benefits 22   6.3 Joint and Survivor Annuities 22   6.4 Optional Benefit Forms 24   6.5 Funeral Benefit 25   6.6 Delay in Distribution 25   6.7 No Suspension of Benefits 26   6.8 Release Required 26         ARTICLE VII ADMINISTRATION OF THE PLAN 26   7.1 Duties of the Plan Administrator 26   7.2 Delegation of Administrative Responsibility 27   7.3 Compensation, Expenses and Indemnity 28   7.4 Claims Procedure 29   7.5 Effect of Plan Administrator Action 32         ARTICLE VIII AMENDMENT AND TERMINATION OF THE PLAN 33   8.1 Amendments 33   8.2 Termination of Plan 34         ARTICLE IX FUNDING OF BENEFITS 34   9.1 Plan is Unfunded 34   9.2 Trust 34   9.3 Interrelationship of the Plan and the Trust 35         ARTICLE X MISCELLANEOUS PROVISIONS 35   10.1 Payments 35   10.2 Consolidation or Merger of Companies 36   10.3 Adoption of Plan to Cover Other Companies, Facilities or Groups 36   10.4 Termination of Employment 37   10.5 Determination of Hours of Service 40   10.6 Alienation 40   10.7 Division of Benefits by Domestic Relations Orders 40   10.8 Legal Costs; Increased Benefit 43   10.9 Duty to Provide Data 44   10.10 Limitation on Rights of Employees 45   10.11 Restrictions 45   10.12 Service of Process 46   10.13 Spouse's Interest 46   10.14 Distribution in the Event of Taxation 46   10.15 Governing Law 46   10.16 Plurals 46   10.17 Titles 47   10.18 References 46   10.19 Entire Agreement 46   10.20 Severability 47   10.21 Withholding 47 --------------------------------------------------------------------------------   ARTICLE I PLAN HISTORY                  Bergen Brunswig Corporation, a New Jersey corporation (sometimes hereinafter referred to as the "Company") adopted the Bergen Brunswig Capital Accumulation Plan in 1980. The Capital Accumulation Plan was frozen effective October 7, 1987. To replace the Capital Accumulation Plan, Bergen Brunswig Corporation adopted this Supplemental Executive Retirement Plan, effective January 1, 1991. The Supplemental Executive Retirement Plan was amended and restated, effective July 28, 1994, and further amended and restated effective as of March 3, 1995 in order to provide the Participants (as hereinafter defined) with certain additional benefits in the event of a Change in Control (as hereinafter defined). The Company now desires to amend and restate the Supplemental Executive Retirement Plan in order to modify the method used to determine accrued benefits under Article IV and the definition of Compensation (within the meaning of Section 2.9 below) effective with respect to Participants who are Employees (as defined below) on or after September 24, 1998, and such other amendments and modifications. This Third Amendment and Restatement of the Supplemental Executive Retirement Plan is effective as of September 24, 1998 and incorporates all prior amendments (as amended and restated, the "Plan").                While the Plan is not intended to qualify under the Code as a qualified plan, the Plan is intended to be a pension benefit plan which, although subject to ERISA, is exempt from Parts 2, 3 and 4 of Title I of ERISA because it is (solely for purposes of ERISA) an unfunded plan that only covers a select group of management or highly compensated employees. Persons become participants as provided herein. Benefits under the Plan become payable on account of a Participant's retirement, termination or death.   ARTICLE II DEFINITIONS                  The following terms, when capitalized, shall have the meaning specified below unless the context clearly indicates a contrary meaning.                2.1         "Accrued Benefit" of a Participant shall be the individual's benefit under this Plan, accrued as of the time of determination. A Participant's Accrued Benefit shall only be payable to the extent Vested. Subject to this limitation, a Participant's Accrued Benefit shall be the amount by which the product of the amounts described in subsections (a) and (b) of this Section 2.1 exceeds the offsets set forth in Section 4.1(c), all as calculated as of the time of determination:                (a)         the individual's benefit under Section 4.1 before application of the offsets set forth in Section 4.1(c), and                (b)         a fraction, the numerator of which is the individual's Credited Service and the denominator of which is the greater of                (i)         the total Credited Service the individual could earn before his or her Normal Retirement Age, or                (ii)         the result determined by subtracting from fifteen the individual's years of Service completed prior to performing any services for the Employer in a Credited Service position.                In no event shall a Participant's fraction under this subsection exceed one. See Section 4.1(d) for special benefit calculation rules that apply when a Participant is demoted.                (c)         For all benefit purposes, if a Participant accumulates eighty "points" before his or her fraction in subsection (b) above equals one, his or her fraction in subsection (b) above shall be raised to one. A Participant shall accumulate 1 "point" for each year of age, 1 "point" for each year of Employment prior to becoming employed in a position covered by this Plan and 1.5 "points" for each year of Employment subsequent to becoming employed in a position covered by this Plan.                (d)         For purposes of this Section, a person shall be considered to have been employed in a position covered by this Plan if the position is a position for which he or she receives Credited Service credit.                 2.2         "Beneficiary" shall mean the person designated by a Participant to receive payments from the Plan due to the Participant's death. Beneficiary designations and determinations shall be made in accordance with the following rules:                 (a)         Each Participant shall have the right, at any time, to designate his or her Beneficiary (both primary as well as contingent) to receive any benefits payable under the Plan to a Beneficiary upon the death of a Participant. The Beneficiary designated under this Plan may be the same as or different from the Beneficiary designation under any other plan of an Employer in which the Participant participates. A Participant shall designate his or her Beneficiary by completing and signing a Beneficiary Designation Form, in form and substance satisfactory to the Plan Administrator, and returning it to the Plan Administrator for acceptance. No designation or change in designation of a Beneficiary shall be effective until received, accepted and acknowledged in writing by the Plan Administrator.                 (b)         A Participant shall have the right to change a Beneficiary by completing, signing and otherwise complying with the terms of the Beneficiary Designation Form and the Plan Rules as in effect from time to time. Upon the acceptance by the Plan Administrator of a new Beneficiary Designation Form, all Beneficiary designations previously filed shall be canceled. The Plan Administrator shall be entitled to rely on the last Beneficiary Designation Form filed by the Participant and accepted by the Plan Administrator prior to his or her death.                 (c)         A Participant can designate someone other than his or her Spouse as Beneficiary, but only with written spousal consent.                 (d)         If a deceased Participant has not properly designated a Beneficiary, the Participant's Spouse shall be treated as the Beneficiary.                 (e)         If a deceased Participant is survived neither by a Spouse nor a properly designated Beneficiary, the Participant's estate shall be treated as the Beneficiary.                 (f)         With the Plan Administrator's consent and subject to any conditions which the Plan Administrator may specify, the Participant may designate more than one person to be his or her Beneficiary, provided that one Beneficiary is designated as the "measuring life" on which the duration and amount of the joint and survivor annuity is to be calculated and the portion of the survivor annuity to be paid to each Beneficiary is specified (e.g., my mother, Jane Doe, and my invalid daughter, Janet Doe, shall share equally in survivor benefits while they both live; any survivor benefits payable following the death of either my mother, Jane Doe, or my invalid daughter, Janet Doe, shall be paid to the survivor; survivor benefits are to be determined as if only my invalid daughter, Janet Doe, were the Beneficiary).                 2.3         "Bergen 401(k) Plan" shall mean the Bergen Brunswig Corporation Pre-Tax Investment Retirement Account Plus Employer Contributions Plan, or any successor to that plan.                 2.4         "Bergen Brunswig Corporation" shall mean Bergen Brunswig Corporation, a New Jersey corporation.                 2.5         "Board of Directors" shall mean the Board of Directors of Bergen Brunswig Corporation.                 2.6         "Break in Service" shall mean a period of non-Employment which causes a former Employee to lose credits under this Plan. A former Employee incurs one Break in Service upon the completion of each three hundred and sixty-five consecutive day period throughout which the individual is not an Employee. This period shall commence on the day following the last day on which the individual was an Employee. See Section 10.4 for special rules relating to maternity and paternity absences.                 2.7         "Capital Accumulation Plan" shall mean the Bergen Brunswig Corporation Capital Accumulation Plan that was originally effective July 1, 1980, and frozen effective October 7, 1987.                 2.8         "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time.                 2.9         "Compensation" shall mean the average monthly earnings payable to a Participant for the three calendar years, whether or not consecutive, in which the Participant received the highest Compensation during the five calendar years immediately preceding the Participant's termination of Employment. This average shall be computed by dividing the Participant's total "earnings" (as defined in this Section) during the three years in question by thirty-six. A Participant's "earnings" shall mean the base salary paid to the Participant during the calendar year in question, (including any salary waived or deferred under any nonqualified deferred compensation or other salary reduction arrangement) but, not including bonuses, noncash payments or cash payments other than base salary. Notwithstanding anything in the immediate preceding sentence to the contrary, in the case of a Participant who has the status of an Employee on or after September 24, 1998, a Participant's earnings for the calculation of a Participant's Compensation and the entire benefit payable under this Plan shall mean to include both the base salary and any bonus paid to the Participant during the calendar year in question (including any salary or bonus waived or deferred under any nonqualified deferred compensation or other salary reduction arrangement) but not including noncash payments or cash payments other than base salary and bonuses.                 2.10         "Credited Service" shall mean the number of years of Service in which the Participant was employed in the position he or she held at the time he or she was designated by the Plan Administrator to be a Participant or was covered by the Capital Accumulation Plan, or any position held thereafter, including years before or after the adoption of either plan, but excluding any Service while the Participant was not employed in such a position or positions. Notwithstanding the above, should a Participant change positions, the Plan Administrator can, in the exercise of the Plan Administrator's reasonable discretion, determine that the new position should not be considered a position for which such Participant shall receive any Credited Service credit.                 2.11         "Employee" shall mean an individual who renders services to the Employer as a common law employee or officer (i.e., a person whose wages from the Employer are subject to federal income tax withholding). Unless specifically approved by the Compensation/Stock Option Committee of the Board of Directors to provide a consultant with credit as an Employee, a person rendering services to the Employer purportedly as an independent contractor shall not be treated as an Employee before the Employer has acknowledged that it must withhold federal income taxes from his or her pay. For purposes of this Plan, an individual shall remain an "Employee" if he or she ceases to work for the Employer for the purposes of taking an Employer arranged job.                 2.12         "Employer" shall mean:                 (a)         Adopting Employers. Bergen Brunswig Corporation, any related company designated by Bergen Brunswig Corporation, any successor entity which continues the Plan or such companies collectively; and                 (b)         Non-Adopting Employers. Companies that have not adopted the Plan but are related to the adopting Employers as described in subsection (e).                 (c)         All Employees of adopting and non-adopting Employers shall be treated as employed by a single company for all Plan purposes, including Service crediting, except that no person shall be eligible to become a Participant or accrue Credited Service except while employed by an adopting Employer.                 (d)         In contexts in which actions are required or permitted to be taken or notice is to be given, the Employer shall mean Bergen Brunswig Corporation.                 (e)         A company is a "related company" while it and the Employer are members of a controlled group of corporations or a group of trades or businesses under common control (within the meaning of Code Sections 414(b) and (c)).                 2.13         "Employment" shall mean the period during which an individual is an Employee. Employment shall commence on the day the individual first performs services for the Employer as an Employee and shall terminate on the day such services cease.                 2.14         "Equivalent" shall mean the actuarial equivalent of a given amount or benefit payable in another manner, at another time or by any other means, determined conclusively by, or under the direction of, the Plan Administrator in accordance with actuarial principles, methods and assumptions which are found to be appropriate by the Plan's actuary. For purposes of this Plan, equivalencies shall be based on the mortality assumptions included in the indices used by Metropolitan Life Insurance Company, or such other nationally recognized insurance company, in quoting a premium to purchase a non-qualified individual annuity with survivor coverage as of the date of the event necessitating the calculation (e.g. retirement, termination of Employment, disability, etc.).                 2.15         "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time.                 2.16         "Executive Benefits" shall mean the benefits provided under this Plan for officers of Bergen Brunswig Corporation who are Participants.                 2.17         "Key Management Benefits" shall mean the benefits provided under this Plan for officers of a subsidiary of Bergen Brunswig Corporation and some directors of corporate department of Bergen Brunswig Corporation who are Participants as designated by the Plan Administrator.                 2.18         "Normal Benefit Form" shall mean the normal form of benefit under the Plan, which shall be the Equivalent of a Participant's Vested Accrued Benefit, payable as a joint and survivor annuity based on the life expectancies of the Participant and the measuring life Beneficiary at the time payment of the benefit commences, consisting of monthly payments to the Participant commencing as of the first day of the calendar month coincident with or next following the Participant's benefit commencement date and ending with the payment for the calendar month in which the Participant dies, with the provision that, if the Participant dies and is survived by the Beneficiary, such Beneficiary shall receive monthly payments of, in the case of Executive Benefits, seventy-five percent or, in the case of Key Management Benefits, fifty percent, of the monthly payments that were being made prior to the Participant's death, commencing with the payment for the calendar month following the month in which the Participant died and ending with the payment for the calendar month in which the Beneficiary dies.                 2.19         "Normal Retirement Age" of a Participant shall mean the date on which the Participant attains age sixty-two.                 2.20         "Optional Benefit Form" shall mean any form of benefit available under the Plan, other than the Normal Benefit Form.                 2.21         "Participant" shall mean any person who is included in the Plan pursuant to Article III. Any Participant who holds the title of Executive Vice President, Senior Vice President, President, Chief Operating Officer, Chief Executive Officer or Chairman of the Board of Bergen Brunswig Corporation and upon the occurrence of a Change in Control (as defined in Section 5.1(b)(ii)) shall be designated an Executive Participant and shall be eligible for the acceleration of benefits set forth in Section 5.1(b). A Participant shall cease to be a Participant at the time determined under Section 3.1(c).                 2.22         "Plan" shall mean this document. The Plan consists of two components: Executive Benefits and Key Management Benefits, as more fully described in this document.                 2.23         "Plan Administrator" shall mean Bergen Brunswig Corporation, acting through its chief executive officer or such officer's delegate.                 2.24         "Plan Rules" shall mean rules adopted by the Plan Administrator in accordance with Section 7.1(e) for the administration, interpretation or application of the Plan.                 2.25         "Plan Year" shall mean the fiscal year of the Plan, which is currently the twelve month period ending on December 31.                 2.26         "Service" shall mean an Employee's period of Employment. Special rules for calculating Service are found in Section 2.10, which explains what Service is counted for benefit accrual purposes, and Section 10.4(d), which deals with maternity and paternity absences. Service shall be calculated under the following elapsed time rules:                 (a)         Service shall be measured in days. Service shall commence with the first day on which an individual performs or resumes performing services for the Employer as an Employee (e.g., the day the individual first performs an "hour of service" for which he or she is entitled to payment by the Employer). Except as provided in subsection (b), an Employee's Service shall thereafter end on the day on which his or her Employment ends, as determined under Section 10.4. An Employee shall be credited with one year of Service for each three hundred and sixty-five days in his or her period or periods of Service; fractional results shall be rounded up to the nearest whole year.                 (b)         No more than three hundred and sixty-five days of Service will be credited for any continuous period during which an individual is an Employee but performs no duties as an Employee (except as required by law with respect to military leaves and maternity and paternity absences (see Section 10.4(d)). If an individual's Employment terminates but it resumes within three hundred and sixty-five days (i.e., before he or she incurs a Break in Service), the period between the termination and resumption will be included in his or her period of Service.                 (c)         If an individual has more than one period of Service, the periods shall be aggregated. However, a Participant's prior period of Service shall be ignored if thereafter the Participant completed five consecutive Breaks in Service before he or she has earned a Vested Accrued Benefit.                 2.27         "Spouse" shall mean the person to whom a Participant is legally married at the time in question under the laws of the state in which the Participant then resides (excluding a common-law spouse). A person shall cease to be a Spouse when his or her marriage to the Participant is deemed dissolved or annulled under the laws of the state in which the Participant then resides.                 2.28         "Trust" shall mean the trust established pursuant to that certain Master Trust Agreement, dated as of December 27, 1994, between Bergen Brunswig Corporation and the trustee named therein, as amended from time to time.                 2.29         "Vested" shall mean nonforfeitable.                 2.30         "Vesting Service" of an Employee shall mean his or her years of Service calculated in accordance with Section 2.26.   ARTICLE III PARTICIPATION                   3.1         Requirements for Participation.                 (a)         Executive Benefits. A person shall become a Participant in the Executive Benefits portion of the Plan on the date he or she becomes an officer of Bergen Brunswig Corporation and if such Executive shall become an officer of Bergen Brunswig Corporation for the first time after September 24, 1998, is selected by the Plan Administrator to be a Participant.                 (b)         Key Management Benefits. A person shall become a Participant in the Key Management Benefits portion of the Plan on the date he or she becomes an officer of a wholly-owned subsidiary of Bergen Brunswig Corporation and if such person shall become an officer of a wholly-owned subsidiary of Bergen Brunswig Corporation for the first time after September 24, 1998 or becomes a director of a corporate department of Bergen Brunswig Corporation and is selected by the Plan Administrator to be a Participant.                 (c)         Change in Status. Whenever a Participant is promoted, the Plan Administrator shall determine, in his or her sole discretion, whether such Participant is in a position that is covered by the Executive Benefits portion of the Plan, a position covered by the Key Management portion of the Plan or a position that is not covered by the Plan. If the Plan Administrator makes no such determination within thirty (30) days of the change in position, the Participant shall remain in the portion of the Plan in which he or she was covered prior to the position change. As part of the Plan Administrator's administrative duties, the Plan Administrator, from time to time, shall maintain a list of the Participants in the Executive Benefits and Key Management Benefits portions of this Plan and provide a copy of said lists to the Secretary of the Company.                 (d)         Termination. A Participant shall cease to be a Participant when his or her Employment terminates (see Section 2.13), unless the Participant becomes totally and permanently disabled while a Participant, in which case he or she shall remain a Participant until he or she attains age sixty-two. (A Participant shall be considered totally and permanently disabled while the Participant is receiving long-term disability benefits under the Bergen Brunswig Long Term Disability Plan (or would receive such benefits if the individual were covered by that plan)). A totally and permanently disabled Participant shall continue to earn Vesting Service during such disability. However, the individual shall not be granted Credited Service for any period of disability. At the option of the Plan Administrator, the Plan Administrator can terminate the Plan with respect to all the Participants and pay them the Equivalent of his or her Vested Accrued Benefit in an immediate cash lump sum payment or a monthly annuity for a term of years to be determined by the Plan Administrator, in his or her sole discretion, provided that such term of years shall not exceed the life expectancy of the Participant. If the Plan Administrator exercises his or her option, the Participant shall be deemed to be fully Vested, whether or not he or she meets the requirements set forth in Article V.                 3.2         Former Participants. A former Participant who requalifies for the Plan shall again become a Participant on the date he or she requalifies.   ARTICLE IV AMOUNT OF BENEFIT                   4.1         Determination of Benefit Amount. The Accrued Benefit payable to a Participant under the Plan shall be calculated as follows (but it shall only be paid to the extent Vested under Section 5.1):                 (a)         Executive Benefits. A Participant in the Executive Benefits portion of the Plan shall receive a benefit equal to eighty percent (80%) of his or her Compensation, subject to reduction under the fractional accrual rule in Section 2.1 and subject to the offsets, if any, described in Section 4.1(c) below. Notwithstanding anything in the foregoing sentence to the contrary, for purposes of determining the entire benefit of a Participant in the Executive Benefits portion of this Plan and who has the status of an Employee on or after September 24, 1998, said Participant shall receive a benefit of sixty percent (60%) not eighty percent (80%) of his or her Compensation and the term "Compensation" shall be interpreted to include his or her annual salary and bonus payments as described in Section 2.9.                 (b)         Key Management Benefits. A Participant in the Key Management Benefits portion of the Plan shall receive a benefit equal to sixty-five percent (not eighty percent) of his or her Compensation subject to reduction, if any, under the fractional accrual rule in Section 2.1 and subject to the offsets, if any, described in subsections (i), (ii), and (iii) of Section 4.1(c) below. Notwithstanding anything in the foregoing sentence to the contrary, a Participant in the Key Management benefits portion of the Plan and who has the status of an Employee on or after September 24, 1998, said Participant shall receive a benefit of forty-eight percent (48%) not sixty percent (60%) of his or her Compensation and the term "Compensation" shall be interpreted to include his or her annual salary and bonus payments as described in Section 2.9.                 (c)         A Participant's benefit (whether an Executive Benefit or a Key Management Benefit) shall be subject to the following offsets (each to be expressed as an Equivalent amount commencing at the Participant's Normal Retirement Age), if applicable:                 (i)         the Participant's primary insurance amount payable at age 62 under the Social Security Act with the assumption that the Participant's benefit payable under the Social Security Act is not reduced because of other income of a Participant;                 (ii)         the Participant's benefit under the Capital Accumulation Plan;                 (iii)         the monthly annuity the Participant could have purchased under the Bergen 401(k) Plan, if the Participant had made annual contributions to the Bergen 401(k) Plan of six percent of his or her taxable compensation (but not more than the maximum contribution, if any, allowable under Code Section 402(g)) and had received an annual matching Employer contribution of fifty percent of that amount or, if different, the amount determined under the table set forth below, from later of (i) the adoption of the Bergen 401(k) Plan or (ii) the date of the Participant's fortieth birthday through his or her termination. The sum of such hypothetical contributions for any calendar year shall not exceed the amount then applicable under Code Section 415(c)(1)(A). Such hypothetical contributions shall be deemed to have been made to the Bergen 401(k) Plan on the last day of each calendar year and shall be credited with earnings at a rate equal to the average yield of the Bergen 401(k) Plan's guaranteed income fund, or successor fund as determined by the Plan Administrator, as of the beginning of the plan year of the Bergen 401(k) Plan. The matching Employer contribution rate used for the calendar years in question shall be as follows:   Calendar Year Employer Matching Contribution Rate     1985 1.5%     1986 1.7%     1987 1.2%     1988 3.0%     1989 6.0%     1990 through 1998 3.0%     After 1998 4.0%                   Notwithstanding anything in the foregoing in this Section 4.1(c) to the contrary, for Participants who have the status of an Employee on or after September 24, 1998, and for the purpose of determining their entire benefit under this Plan, a Participant's contributions (whether or not hypothetical) shall not be taken into account for purposes of determining the reduction of the Participants benefits under this Plan pursuant to this subsection (iii) but only the actual matching Employer contribution shall be used as an offset pursuant to this subsection (iii).                 The offset required by this Section 4.1(c) shall apply without regard to whether the Participant was eligible for the Bergen 401(k) Plan or actually made any contributions. In calculating the offset, hypothetical contributions shall not be deemed to have been made in calendar years prior to 1985 or in calendar years beginning before the Participant's fortieth birthday, whichever is later.                 (d)         If a Participant who is covered by the Key Management Benefits portion of the Plan becomes covered by the Executive Benefits portion of the Plan, the Participant's benefit shall be calculated entirely under the Executive Benefits portion of the Plan. If a Participant who is eligible for the Executive Benefits portion of the Plan thereafter becomes eligible only for the Key Management Benefits portion of the Plan, his or her benefits under the Plan shall be the greater of (i) the benefit, if any, he or she would have had if his or her Employment terminated when the Participant ceased to be covered by the Executive Benefits portion of the Plan, or (ii) his or her benefit calculated under the Key Management Benefits portion of the Plan. If a Participant who is eligible for the Executive Benefits portion of the Plan or the Key Management Benefits portion of the Plan ceases to be employed in a position covered by this Plan, his or her benefits shall be determined as if his or her Employment terminated when the Participant ceased to be employed in a position covered by this Plan.   ARTICLE V VESTING                   5.1         Vesting of Accrued Benefit.                 (a)         General Vesting Provisions. Payments Upon Change in Control. Except as otherwise provided in Section 5.1(b) below, a Participant's Accrued Benefit shall become fully Vested upon completion of five years of Vesting Service or, if earlier, upon the later of the Participants attainment of age sixty-two while an Employee or his or her fifth anniversary of becoming a Participant.                 (b)         Vesting and Payment of Benefits Upon a Change in Control.                 (i)         Notwithstanding any other provisions of the Plan, upon the occurrence of a Change in Control (as defined below), each Participant's Accrued Benefit shall deemed to be fully Vested under the Plan and each Executive Participant shall be entitled to benefits under the Plan in accordance with the following: (A) As of the date of the Change in Control, such Executive Participant shall be deemed to have attained the Normal Retirement Age; (B) with respect to each year between such Executive Participants actual age as of the date of the Change in Control (if less than the Normal Retirement Age) and the Normal Retirement Age (the "Interim Period"), such Executive Participant shall be deemed to have been continuously employed by the Company in, and to have continuously performed (without any Breaks in Service) the duties of, the position with the Company that such Executive Participant held as of the date of the Change in Control; (C) such Executive Participant shall be deemed to be entitled to Credited Service for all times during the Interim Period; (D) such Executive Participant's base salary as of the date of the Change in Control and the Executive Participant's highest average annual bonus amount received for any three years during the last five year period immediately preceding a Change in Control shall be used for the purposes of calculating the entire benefit under this Plan and the base salary and annual bonus amount (as calculated) shall be deemed to have increased at a rate of 4.0% per year each year during the Interim Period, resulting in a corresponding increase in the Executive Participant's Compensation for purposes of calculating a Participant's benefits under this Plan; (E) such Executive Participant's Accrued Benefit under this Plan shall be calculated in accordance with the assumptions set forth in the preceding clauses (A) - (D); and (F) prior to or upon the consummation of the transactions giving rise to the Change in Control, the Company shall pay to such Executive Participant, by certified or bank cashier's check, a cash lump sum payment that is the Equivalent of such Executive Participant's Vested Accrued Benefit determined in accordance with this Section 5.1(b).                 (ii)         A Change in Control shall be deemed to occur 90 days prior to the occurrence of any of the following events:                 (w)         any "person" (as defined in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), shall become the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of Bergen Brunswig Corporation representing 50% or more of the combined voting power of Bergen Brunswig Corporation's then outstanding securities, provided, however, that for purposes of this calculation, purchases by employee benefit plans of Bergen Brunswig Corporation and purchases by Bergen Brunswig Corporation itself shall be disregarded; or (x) there shall be consummated: (A) any consolidation, merger or transaction in the nature of a Section 351 transaction under the Code (whether or not it meets the requirements for nonrecognition of gain under Section 351 of the Code) of Bergen Brunswig Corporation in which either Bergen Brunswig Corporation is not the continuing or surviving corporation, the majority of the common stock of Bergen Brunswig Corporation is no longer held by holders of Bergen Brunswig Corporation common stock immediately prior to the transaction or pursuant to which shares of Bergen Brunswig Corporation's common stock would be converted into cash, securities or other property; provided, however, that a consolidation, merger or transaction in the nature of a Section 351 transaction under the Code in which the holders of Bergen Brunswig Corporation's common stock immediately prior to the merger own, on a proportionate basis, at least 80% of the common stock of the surviving corporation immediately after the transaction shall not be considered a Change in Control; or (B) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the operating assets of Bergen Brunswig Corporation; or                 (y)         the stockholders of Bergen Brunswig Corporation approve a plan or proposal for the liquidation or dissolution of Bergen Brunswig Corporation; or                 (z)         during any rolling period of two consecutive years ending on any date after the date hereof, individuals who at the beginning of such period constituted the Board of Directors and any new director whose election or nomination for election 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; provided, however, that no director shall be considered to have been so approved if such individual initially assumed office as a result of either an actual or threatened "Election Contest" (as described in Rule 14a-11 promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a "person" (as defined in Sections 13(d) and 14(d) of the Exchange Act) other than the Board of Directors (a "Proxy Contest"), including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest.                 (iii)         In the event of a Change in Control, upon payment to each Executive Participant of the cash lump sum payment referred to in clause (F) of subsection 5.1(b)(i) above, the Company shall also pay to such Executive Participant, by certified or bank cashier's check, a cash lump sum payment equal to (x) the amount of excise tax for which such Executive Participant is or may become liable under Internal Revenue Code Section 4999 (or any successor provision) with respect to the payments made under this Section 5.1(b), taking into account all compensation includable in the computation under Internal Revenue Code Section 280G (or any successor provision), including, without limitation, payments under this subsection (iii) plus (b) the amount of such Executive Participant's income tax liability arising from the Company's payment of the excise tax liability referred to in the preceding clause (a), such that the payments under clauses (a) and (b) taken together shall provide such Participant with sufficient after-income tax dollars to pay such Participant's liability for Internal Revenue Code Section 4999 excise taxes. The maximum combined marginal federal and applicable state(s) income tax rate in effect for the year in which the payments under this subsection (iii) are to be made shall be used in computing the amount of such payments. In the event that the Company and the Executive Participant are unable to agree upon the amount of the payment required under this subsection (iii), such amount shall be determined by Tax Counsel (as defined below). The decision of such Tax Counsel shall be final and binding upon both the Company and the Executive Participant. All fees and expenses of such Tax Counsel shall be paid by the Company. As used in this subsection (iii), the term "Tax Counsel" shall mean an attorney at law or certified public accountant who is a partner at a law firm of at least 25 attorneys or a partner at a "Big 6" accounting firm, respectively, provided that such firm has not provided services to the Company or the respective Executive Participant or any affiliate of the Company or such Executive Participant within the last year.                 (iv)         Upon the occurrence of a Change in Control, (x) this subsection 5.1(b) shall become irrevocable, and (y) Sections 6.8, 7.4(h), 7.4(i), 7.5 and 10.11 hereof shall cease to apply, none of such sections shall ever thereafter be reinstated, and no similar provisions shall ever be adopted hereunder.                 5.2         Forfeiture of Benefits. The unvested portion of an Executive Participant's Accrued Benefit shall be forfeited on the date the Executive Participant completes five consecutive Breaks in Service.   ARTICLE VI PAYMENT OF BENEFITS                   6.1         Benefits on Termination of Employment. A Participant who terminates Employment on or after attaining Normal Retirement Age shall receive his or her Vested Accrued Benefit commencing immediately and payable in accordance with this Article. If the Participant terminates Employment before his or her Normal Retirement Age, the Participant shall receive the Equivalent of his or her Vested Accrued Benefit commencing immediately upon termination of Employment and payable in accordance with this Article.                 6.2         Death Benefits. Subject to Section 10.7, if a Participant with a Vested Accrued Benefit dies, at the option of the Plan Administrator, the Participant's Beneficiary shall be paid the lump sum Equivalent of the remaining balance of the Participant's Vested Accrued Benefit.                 6.3         Joint and Survivor Annuities.                 (a)         Subject to Section 6.4, a Participant's Vested Accrued Benefit shall be paid in the Normal Benefit Form. Distribution shall also be made in the form of a joint and survivor annuity if a former Spouse is entitled to survivor annuity benefits under a qualified domestic relations order, as provided in Section 10.7. More than one Spouse may be entitled to joint and survivor annuity benefits. For example, two former Spouses may have been awarded survivor benefits and there may also be a current Spouse. In such cases, this Section shall be applied by dividing the Participant's Vested Accrued Benefit in proportion to the spousal entitlements and then applying this Section to each portion as if each portion were a separate Vested Accrued Benefit belonging to the Participant and the Spouse or former Spouse in question.                 (b)         After a Participant has received the explanation required by subsection (c) of this Section 6.3, the Participant and his or her Spouse, if any, if such Spouse is a Beneficiary (or former Spouse if such Spouse has the power to do so under a qualified domestic relations order), may elect, with the consent of the Plan Administrator and in the manner prescribed by it, not to receive a joint and survivor annuity, in which case the Participant shall receive his or her Vested Accrued Benefit in an Optional Benefit Form. This election may be made at any time but must be made no later than one year preceding the time benefit payments would otherwise commence under Section 6.1. This election shall become irrevocable one year preceding the time benefit payments would otherwise commence under Section 6.1. Spousal consents to elections waiving joint and survivor annuity benefits that are required must be given in writing witnessed by a representative of the Plan Administrator or a notary public. A spousal consent will only be valid if it also consents to both the alternative form of payment chosen and the Beneficiary, if any, thereunder and only if the form of payment and the Beneficiary cannot be changed without future spousal consent (unless the written spousal consent expressly permits such changes to be made and the Spouse acknowledges that he or she understands that he or she does not have to grant this permission). A Spouse's written consent must acknowledge the effect of the payment and the Beneficiary election to which he or she is consenting. The Plan Administrator in its discretion may refuse to recognize a spousal consent if it believes for any reason that the consent is invalid. Spousal consent shall be waived by the Plan Administrator if a Participant has no Spouse and may be waived if the Spouse cannot be located or for such other reasons authorized in applicable Treasury Regulations. Revocations of previous elections to waive the joint and survivor annuity may be made at any time and any number of times within the election period and new waiver elections may thereafter be made. Revocations of elections to waive the joint and survivor annuity may be made without spousal consent. A spousal consent given by one Spouse shall be invalid as to any former or subsequent Spouse (but no benefit shall be payable under this Section to a person who becomes the Participant's Spouse after the Participant's benefit payments under the Plan have commenced).                 (c)         Assuming sufficient notice of termination of Employment has been provided to the Plan Administrator, no less than thirty nor more than ninety days before termination of Employment, the Plan Administrator shall furnish each Participant with a written explanation of the terms and conditions of the Normal Benefit Form, the Participant's right to make an election to waive the Normal Benefit Form or to revoke a previous election and the effect of such election or revocation, the rights of the Participant's Spouse in connection with an election by the Participant, and the relative values of the Optional Benefit Forms then available under the Plan.                 6.4         Optional Benefit Forms. Instead of receiving a benefit in the Normal Benefit Form, a Participant may elect to receive payments in an Optional Benefit Form. This election must be made in writing in accordance with the requirements of the Plan Administrator and must be delivered to the Plan Administrator prior to the Participant's termination of Employment. A married Participant may be required to obtain his or her Spouse's consent to this election pursuant to the rules set forth in Section 6.3(b). If an Optional Benefit Form provides benefits to a Beneficiary, election of the Optional Benefit Form shall not be effective unless the Beneficiary is alive on the date of the Participant's Retirement. The Optional Benefit Forms available to a Participant are as follows:                 (a)         A cash lump sum which is the Equivalent of the Participant's Vested Accrued Benefit.                 6.5         Funeral Benefit. In addition to any other benefit payable under the Plan, the estate of a Participant who dies before termination of Employment shall be paid a cash lump sum in the amount of $5,000 to cover funeral expenses of the Participant. This additional benefit shall be paid only if the estate gives written notice of the Participant's death to the Plan Administrator and only if the Participant had a Vested Accrued Benefit, without regard to whether any or all of the Vested Accrued Benefit will be paid. This benefit shall be reduced by the funeral benefit, if any, which became payable with respect to the Participant under section 6.3 of the Capital Accumulation Plan.                 6.6         Delay in Distribution.                 (a)         If the amount payable under this Article cannot be ascertained or the person to whom it is payable has not been determined or located and reasonable efforts to do so have been made, then distributions under this Article shall commence, retroactive to the date they would normally have commenced, within a reasonable time after such amount is ascertained or such person is determined or located.                 (b)         Distribution of benefits to a Participant shall not be triggered by the transfer of the Participant to any other job (whether or not with the Employer or an affiliate) if the transfer is arranged by the Employer. The Participant's benefit will commence when the Participant ceases to be employed by the Employer or by any other company for which the Participant worked in an Employer-arranged job.                 6.7         No Suspension of Benefits. Benefits which are in pay status shall not be suspended if a Participant subsequently performs services for the Employer in any capacity.                 6.8         Release Required. No benefits shall be payable to a Participant unless the Participant executes a general release waiving any and all claims the Participant may have against the Employer and related parties. The release shall be made on the form prescribed by the Employer and cannot be given any earlier than one month before benefit payments are expected to commence. A release shall not be required with respect to benefits that become payable under the Plan because of termination of Employment due to death.   ARTICLE VII ADMINISTRATION OF THE PLAN                   7.1         Duties of the Plan Administrator. The Plan Administrator shall be responsible for the general administration and management of the Plan. The Plan Administrator shall have all powers and duties and the discretion necessary to fulfill its responsibilities, including, but not limited to, the following powers and duties:                 (a)         To determine all questions relating to the future eligibility of persons to participate;                 (b)         To determine the amount and kind of benefits consistent with this Plan that are payable to Participants;                 (c)         To maintain all records necessary for the administration of the Plan;                 (d)         To provide for disclosure of all information and filing or provision of all reports and statements to Participants, Spouses, Beneficiaries or governmental bodies as shall be required by ERISA or any other federal law;                 (e)         To adopt or modify Plan Rules, as necessary, for the regulation or application of the Plan; such Rules may establish administrative procedures or requirements which modify the terms of this Plan but Plan Rules shall not substantially alter significant requirements or provisions of the Plan;                 (f)         To administer the claims procedure set forth in Section 7.4 below;                 (g)         To delegate any power or duty to any firm or person in accordance with Section 7.2 below; and                 (h)         To exercise all other powers or duties granted to the Plan Administrator by other provisions of the Plan.                 7.2         Delegation of Administrative.                 (a)         The Plan Administrator may delegate all or any portion of its administrative responsibilities with respect to the Plan to any other person pursuant to this Section.                 (b)         A delegation under this Section shall be accomplished by a written instrument executed by the Plan Administrator specifying responsibilities delegated and the fiduciary responsibilities allocated to such delegate. The delegation of such responsibilities shall be effective upon the date specified in the delegation, subject to written acceptance by the delegate. Any delegation of responsibilities shall provide for reports, no less often than annually, by such delegate to the Plan Administrator of such information necessary to fully inform the Plan Administrator of the status and operation of the Plan and of the delegate's discharge of responsibilities delegated.                 7.3         Compensation, Expenses and Indemnity.                 (a)         The Plan Administrator and any delegate under Section 7.2 above who is an Employee shall serve without compensation for services to the Plan. The Employer shall furnish the Plan Administrator or any such delegate with all clerical or other assistance necessary in the performance of his or her duties. The Plan Administrator is authorized to employ such legal counsel and advisors as it may deem advisable to assist in the performance of its duties hereunder.                 (b)         All costs of administering the Plan (including the cost of legal services described in subsection (a)) shall be paid by the Employer. Except as the Plan Administrator otherwise directs, any expenses incurred in resolving disputes among different claimants as to their entitlement to a benefit shall be charged against the benefit, which shall be reduced accordingly.                 (c)         To the extent permitted by applicable law, the Employer shall indemnify and save harmless the Board of Directors, the Plan Administrator and any delegate appointed pursuant to Section 7.2 above who is an Employee against any and all expenses, liabilities and claims (including legal fees incurred to defend against such liabilities and claims) arising out of their discharge in good faith of responsibilities under or incident to the Plan. Expenses and liabilities arising out of willful misconduct shall not be covered under this indemnity. This indemnity shall not preclude such further indemnities as may be available under insurance purchased by the Employer or provided by the Employer under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, as such indemnities are permitted under applicable law. Payments with respect to any indemnity and payment of expenses or fees shall be made only from assets of the Employer.                 7.4         Claims Procedure.                 (a)         Normally, a Participant, Beneficiary Contingent Annuitant or Spouse need not present a formal claim in order to qualify for rights or benefits under this Plan. However, if any such person (a "claimant") does not believe he or she will receive the benefits to which the person is entitled or believes that the Plan is not being operated properly, the claimant must file a formal claim under the procedures set forth in this Section. A formal claim must be filed within six months of the date upon which the claimant (or his or her predecessor in interest) first knew (or should have known) of the facts upon which the claim is based.                 (b)         A claim by any person shall be presented to the Plan Administrator in writing. A claims official appointed by the Plan Administrator shall, within ninety days of receiving the claim, consider the claim and issue his or her determination thereon in writing. The claims official may extend the determination period for up to an additional ninety days by giving the claimant written notice. If the claim is granted, the benefits or relief the claimant seeks will be provided.                 (c)         If the claim is wholly or partially denied, the claims official shall, within ninety days (or such longer period as described above), provide the claimant with written notice of the denial, setting forth, in a manner calculated to be understood by the claimant,                 (i)         the specific reason or reasons for the denial,                 (ii)         specific references to pertinent Plan provisions on which the denial is based,                 (iii)         a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why the material or information is necessary, and                 (iv)         an explanation of the Plan's claim review procedure.                 If the claims official fails to respond to the claim in a timely manner, the claimant may treat the claim as having been denied by the claims official.                 (d)         Each claimant shall have the opportunity to appeal in writing the claims official's denial of a claim to a review official (which may be a person or a committee) designated by the Plan Administrator for a full and fair review. A claimant must request review of a denied claim within sixty days after receipt by the claimant of written notice of denial of his or her claim or within sixty days after such written notice was due, if the written notice was not sent. In connection with the review proceeding, the claimant or his or her duly authorized representative may review pertinent documents and may submit issues and comments in writing. The claimant may only present evidence and theories during the review which the claimant presented during the claims procedure, except for information which the claims official requested the claimant to provide to perfect the claim (see subsection (c)(iii) of this Section 7.4). Any claims which the claimant does not in good faith pursue through the review stage of the procedure shall be treated as having been irrevocably waived.                 (e)         The Plan Administrator shall adopt procedures pursuant to which claims shall be reviewed and may, in its discretion, adopt different procedures for different claims without being bound by past actions. Any procedures adopted, however, shall be designed to afford a claimant a full and fair review of his or her claim.                 (f)         The decision by the review official upon review of a claim shall be made not later than sixty days after the written request for review is received by the Plan Administrator, unless special circumstances require an extension of time for processing, in which case a decision shall be rendered as soon as possible, but not later than one hundred twenty days after receipt of the request for review.                 (g)         The decision on review shall be in writing and shall include specific reasons for the decision written in a manner calculated to be understood by the claimant, with specific references to the pertinent Plan provisions on which the decision is based.                 (h)         If a claimant pursued his or her claim through the review stage of the claims procedure and the claim was denied (or the review official failed to decide the claim on a timely basis, in which case it shall be deemed denied), the claimant will be permitted to appeal the denial by arbitration pursuant to Section 7.5 below of the Plan. In no event shall any claim to which this procedure applies be subject to resolution by any means (such as in a court of law) other than by this claim procedure or arbitration under Section 7.5 below.                 (i)         This Section shall apply to a claim notwithstanding any failure by the Plan Administrator or its delegates to follow the procedures in this Section with respect to the claim. However, an arbitrator reviewing such a claim may permit a claimant to present additional evidence or theories if the arbitrator determines that the claimant was precluded from presenting them during the claim and review procedures due to procedural errors of the Plan Administrator or its delegates.                 7.5         Effect of Plan Administrator Action. The Plan shall be interpreted by the Plan Administrator and all Plan fiduciaries in accordance with the terms of the Plan and their intended meanings. However, the Plan Administrator and all Plan fiduciaries shall have the discretion to make any findings of fact needed in the administration of the Plan, and shall have the discretion to interpret or construe ambiguous, unclear or implied (but omitted) terms in any fashion they deem to be appropriate in their sole judgment. The validity of any such finding of fact, interpretation, construction or decision shall not be given de novo review if challenged in court, by arbitration or in any other forum, and shall be upheld unless clearly arbitrary or capricious. To the extent the Plan Administrator or any Plan fiduciary has been granted discretionary authority under the Plan, the Plan Administrator's or Plan fiduciary's prior exercise of such authority shall not obligate it to exercise its authority in a like fashion thereafter. If, due to errors in drafting, any Plan provision does not accurately reflect its intended meaning, as demonstrated by consistent interpretations or other evidence of intent, or as determined by the Plan Administrator in its reasonable judgment, the provision shall be considered ambiguous and shall be interpreted by the Plan Administrator and all Plan fiduciaries in a fashion consistent with its intent, as determined by the Plan Administrator. The Plan Administrator, without the need for Board of Directors' approval, shall amend the Plan retroactively to cure any such ambiguity. This Section may not be invoked by any person to require the Plan to be interpreted in a manner which is inconsistent with its interpretation by the Plan Administrator or by any Plan fiduciaries. All actions taken and all determinations made in good faith by the Plan Administrator or by Plan fiduciaries shall be final and binding upon all persons claiming any interest in or under the Plan. This Section shall cease to apply upon the occurrence or a Change in Control (see Section 5.1(b)(ii)) and it shall thereafter never be reinstated in any way.   ARTICLE VIII AMENDMENT AND TERMINATION OF THE PLAN                   8.1         Amendments.                 (a)         Bergen Brunswig Corporation, through its Board of Directors, reserves the right at any time to amend the Plan or to merge, consolidate, divide or otherwise restructure the Plan prospectively or retroactively, in accordance with this Article VIII, subject to the restrictions and accrued rights of Participants as set forth in Articles III, IV, V and VI and Section 7.5, which take effect upon the occurrence of a change in control (as defined in Section 5.1(b)(ii)).                 (b)         All amendments or other changes shall be adopted in writing by resolution of the Board of Directors or, in the case of an amendment that does not substantially alter the nature or expense of the Plan, by the Plan Administrator without Board approval.                 (c)         Any material modification of the Plan by amendment or termination shall be communicated to all interested parties in the time and manner required by law.                 (d)         No Plan amendment shall be applied retroactively to decrease the Vested percentage or Vested Accrued Benefit of a Participant or former Participant whose Employment terminated before the date the amendment became effective.                 (e)         No Plan amendment shall be applied retroactively to decrease the amount of Service credited to any person for Employment before the date the amendment became effective.                 (f)         Except as provided in subsections (d) and (e) of this Section 8.1, all rights under the Plan shall be determined under the terms of the Plan as in effect at the time the determination is made.                 8.2         Termination of Plan. The Plan is intended to be a permanent program, but any Employer, through its Board of Directors, shall have the right at any time to declare the Plan terminated completely as to it or as to any of the Employer's divisions, facilities, operational units or job classifications. If the Plan is terminated, all unvested benefits shall be forfeited but all Vested benefits shall remain payable. The Employer may accelerate the payment of such benefits, however, and pay the person entitled to the benefit the Equivalent of the remaining payments due.   ARTICLE IX FUNDING OF BENEFITS                   9.1         Plan is Unfunded. This Plan is, for purposes of ERISA and the Code, an unfunded deferred compensation plan for a select group of management and highly compensated employees. Participants and their Beneficiaries, successors and assigns shall have no legal or equitable rights, interests or claims in any property or assets of an Employer. Any and all of an Employer's assets shall be, and remain, the general, unpledged unrestricted assets of the Employer. An Employer's obligation under the Plan shall be merely that of an unfunded and unsecured promise to pay money in the future.                 9.2         Trust. Bergen Brunswig Corporation shall establish the Trust, and the Adopting Employers shall at least annually transfer over to the Trust such assets as the Adopting Employers determine, in good faith, are necessary to provide for each Employer's future liabilities created under this Plan. Whether or not an Employer funds the Trust, it shall at all times remain liable to carry out its obligations under the Plan. 9.3 Interrelationship of the Plan and the Trust. The provisions of the Plan shall govern the rights of a Participant to receive distributions pursuant to the Plan. The provisions of the Trust shall govern the rights of the Employers, Participants and the creditors of the Employers to the assets transferred to the Trust. Each Employer shall at all times remain liable to carry out its obligations under the Plan. Each Employer's obligations under the Plan may be satisfied with Trust assets distributed pursuant to the terms of the Trust, and any such distribution shall reduce the Employer's obligations under this Plan.   ARTICLE X MISCELLANEOUS PROVISIONS                   10.1         Payments.                (a)         In the event any amount becomes payable under the Plan to a minor or a person who, in the sole judgment of the Plan Administrator, is considered to be unable to give a valid receipt for the payment by reason of physical or mental condition, the Plan Administrator may direct that payment be made to any person found by the Plan Administrator, in its sole judgment, to have assumed the care of the person in question. Any payment made pursuant to such a finding shall constitute payment by the Plan and result in a full release and discharge of the Plan Administrator, the Employer and their officers, directors, employees, agents and representatives.                (b)         Payment of benefits to the person entitled thereto may be made by a check sent first class mail, address correction requested, to the last known address on file with the Plan Administrator. If within six months from the date of issuance of the check the payment letter cannot be delivered to the person entitled thereto or the check has not been negotiated, all benefits under the Plan may be forfeited at the discretion of the Plan Administrator.                (c)         If the Plan Administrator retains at the Plan's expense a private investigator or other person or service to assist in locating a missing person, all costs incurred for such services shall be charged to the benefit to which the missing person was entitled (which shall be reduced by the amount of the costs incurred), except as the Plan Administrator may otherwise direct.                10.2         Consolidation or Merger of Companies. In the event of the consolidation or merger of the Employer with or into any other business entity, or the sale by the Employer of all of its assets, the successor may continue the Plan by adopting the same by resolution of its board of directors or agreement of its partners or proprietor. This Plan shall not be construed as preventing the Employer from selling, transferring or otherwise disposing of all or any part of the business or assets of the Employer, and the purchaser of all or any part of the Employer shall not be obligated to continue this Plan. If, within ninety days from the effective date of a consolidation, merger or sale of assets, the new corporation, partnership or proprietorship does not adopt the Plan, the Plan shall be terminated in accordance with Section 8.2 above.                10.3         Adoption of Plan to Cover Other Companies, Facilities or Groups. Any company, with the approval of the Plan Administrator, may adopt the Plan (as a whole company or as to any one or more divisions or facilities or other employment classifications) effective as of the date it specifies. Adoption shall be accomplished either by action of the adopting company (without board approval) or by resolution of the adopting company's own board of directors or agreement of its partners. The same procedure shall be followed when an Employer that has adopted the Plan wishes to change the positions or facilities covered by this Plan.                 10.4         Termination of Employment                 (a)         A person's Employment shall terminate upon the first to occur of his or her resignation from or discharge by the Employer, or his or her death or retirement. A person's Employment shall not terminate on account of an authorized leave of absence, sick leave or vacation, or on account of a military leave described in subsection (b) of this Section 10.4, a direct transfer between Employers or a temporary layoff for lack of work. However,                 (i)         continuation upon a temporary layoff for lack of work for a period in excess of the number of months allowable under applicable personnel policies of the Employer shall be considered a discharge effective as of the end of the last day of such period,                 (ii)         failure to return to work upon expiration of any leave of absence, sick leave or vacation or within the time period allowed under applicable personnel policies of the Employer after recall from a temporary layoff for lack of work shall be considered a resignation effective as of the expiration of such leave of absence, sick leave, vacation or layoff, and                 (iii)         solely for purposes of this Plan, Employment shall not terminate until the expiration of all severance benefits payable by the Employer.                 (b)         Any Employee who leaves the Employer directly to perform service in the Armed Forces of the United States or in the United States Public Health Service under conditions entitling the Employee to reemployment rights, as provided in the laws of the United States, shall be on military leave. An Employee's military leave shall expire if such Employee voluntarily resigns from the Employer during the leave or if he or she fails to make application for reemployment within the period specified by such laws for the preservation of reemployment rights. In such event, the individual's Employment shall be deemed to terminate by resignation on the date the military leave expired.                 (c)         If a Participant ceases to be employed by the Employer and all related companies, as determined under Section 2.12(e), because of the disposition by the Employer or a related company of its interest in a subsidiary (within the meaning of Code Section 409(d)(3)) or substantially all of the assets (within the meaning of Code Section 409(d)(2)) used by the Employer or a related company in a trade or business, the Participant's Employment shall be considered terminated for all Plan purposes. This subsection shall not apply to the extent it is overridden by any contrary or inconsistent provision in applicable sales documents or any related documents, whether adopted before or after the sale and any such contrary or inconsistent provision shall instead apply and is hereby incorporated in the Plan by this reference.                 (d)         If an Employee is absent from work because of such individual's pregnancy, the birth of a child, placement of an adopted child, or caring for an adopted or natural child following birth or placement, determinations of whether the Employee has incurred a Break in Service because of the absence shall be made in accordance with the following special rules:                 (i)         If the maternity/paternity absence is an Employer-approved leave of absence, it shall be treated as any other approved leave of absence (i.e., a Break in Service will not occur until the individual's Employment terminates because he or she quits or is discharged or he or she is considered terminated pursuant to Section 10.4(a)).                 (ii)         If the maternity/paternity absence is not an Employer-approved leave of absence the individual's Employment will be deemed terminated as of the date determined under applicable personnel policies of the Employer but the individual shall not incur a Break in Service until the end of the second three hundred and sixty-five consecutive day period of his or her absence from Employment. If the individual returns to Employment during the first three hundred and sixty-five consecutive days of absence, the period of absence shall be treated as Service. If the individual returns to Employment during the second three hundred and sixty-five consecutive day period of absence, the portion of that second period which precedes the individual's return to Employment will not be a Break in Service but will not count as Service.                 (e)         No credit shall be given under subsection (d) unless the Employee files a written request which establishes valid reasons for the absence, as determined by the Plan Administrator.                 (f)         Except to the extent that a maternity or paternity absence constitutes an authorized leave of absence from the Employer under applicable personnel policies, an Employee who is absent from work for reasons of maternity or paternity shall be deemed to have terminated Employment for all purposes of this Plan other than the special rules in subsection (d).                 10.5         Determination of Hours of Service. This Plan uses the elapsed time system for crediting Service. Therefore, a Participant's hours of Service need not be measured or defined by this Plan.                 10.6         Alienation. Except as otherwise provided in this Plan, the rights of a Participant, Spouse or Beneficiary under the Plan shall not be subject to any claim of any creditor nor to attachment or garnishment or other legal process by any creditor. A Participant, Spouse or Beneficiary shall not have the right to alienate, anticipate, commute, pledge, encumber or assign any of the benefits or payments or proceeds which the individual may expect to receive, contingently or otherwise, under the Plan. The provisions of this Section shall not preclude any assignment or alienation expressly required under applicable pension law or other provisions of the Plan.                 10.7         Division of Benefits by Domestic Relations Orders.                 (a)         This Plan will follow the terms of any qualified domestic relations order issued with respect to a Participant. However, except as provided in subsection (e), the Plan will only follow orders which meet all of the requirements of subsection (b) or subsection (c). Subsection (c) establishes an optional standardized procedure.                 (b)         A "qualified domestic relations order" is any judgment, decree or order, including the approval of a property settlement agreement, issued by a court of competent jurisdiction, provided that                 (i)         the order relates to the provision of child support, alimony or marital property rights and is made pursuant to state domestic relations or community property laws;                 (ii)         the order creates or recognizes the existence of an alternate payee's right to receive all or a portion of a Participant's Accrued Benefit;                 (iii)         the order specifies the name and last known mailing address of the Participant and each alternate payee covered by the order;                 (iv)         the order precisely specifies the amount or percentage of the Participant's Accrued Benefit to be paid to each alternate payee or the manner in which the amount or percentage is to be determined;                 (v)         the order specifies the number of payments or the period to which the order applies;                 (vi)         the order specifically names this Plan as the plan to which the order applies;                 (vii)         the order does not require this Plan to provide any type of benefits or form of benefits not otherwise provided under this Plan;                 (viii)         the order does not require the payment of benefits to an alternate payee which are required to be paid to another alternate payee under another order previously determined by the Plan Administrator to be a qualified domestic relations order; and                 (ix)         (if the order requires that payments to the alternate payee commence before they commence with respect to the Participant) the order (x) specifies that payments will not commence before the earlier of (1) the date on which the Participant attains age fifty or the first date on which the Participant could begin receiving benefits under the Plan if the Participant's Employment terminated, whichever is later, or (2) the date benefits first become payable to the Participant and (y) does not permit the alternate payee to elect a joint and survivor annuity covering the alternate payee and a spouse (other than the Participant).                                 A qualified domestic relations order may provide that a former Spouse of the Participant is to be treated as a surviving Spouse for purposes of the pre-retirement or post-retirement joint and survivor annuity provisions of this Plan. Subsection (d) of this Section 8.7 sets forth the procedures under which the Plan Administrator shall determine whether a domestic relations order properly qualifies.                 (c)         The Plan Administrator at its discretion may furnish on request a standard form of qualified domestic relations order to a Participant or any other person. This order may provide for an immediate lump sum payment of the Equivalent of the amount to which the Plan Administrator shall treat it as a qualified domestic relations order and shall pay benefits to the alternate payee in accordance with its terms. If this procedure is not followed, the alternate payee (i) must wait until the time described in subsection (b)(ix) of this Section 10.7 before benefits which are not in pay status can become payable to the alternate payee and (ii) cannot use any special forms of benefit payment authorized in the standard form of order. Any special benefit form provisions in standard domestic relations orders adopted by the Plan Administrator shall be authorized as benefit options under this Plan, but only as Plan Administrator shall treat it as a qualified domestic relations order and shall pay benefits to the alternate payee in accordance with its terms. If this procedure is not followed, the alternate payee (x) must wait until the time described in subsection (b)(ix) of this Section 10.7 before benefits which are not in pay status can become payable to the alternate payee and (y) cannot use any special forms of benefit payment authorized in the standard form of order. Any special benefit form provisions in standard domestic relations orders adopted by the Plan Administrator shall be authorized as benefit options under this Plan, but only as to alternate payees for whom the standard order has been used.                 (d)         The Plan Administrator need not treat any judgment, decree or order as a qualified domestic relations order unless it meets all of the requirements set forth in subsection (b) or (c) of this Section 10.7 and is sufficiently precise and unambiguous so as to preclude any interpretative disputes. If the order meets these requirements, the Plan Administrator shall follow the terms of the order whether or not this Plan has been joined as a party to the litigation out of which the order arises. Upon receipt of a domestic relations order, the Plan Administrator shall notify the Participant and each alternate payee of (i) its receipt of the order and (ii) its need to determine the qualified status of the order in accordance with subsection (b) or (c) of this Section 10.7. An alternate payee may designate a representative to receive copies of future notices with respect to the qualified status of the order. To the extent an order calls for benefits to be paid to an alternate payee before the qualified nature of the order is determined, a separate account shall be established to hold the benefit payments affected by the order. This account shall be administered in accordance with the rules set forth in Section 206(d)(3)(H) of ERISA.                 (e)         The Plan Administrator in its discretion may treat a property settlement agreement or stipulation which is not contained in a judgment, decree or order as a qualified domestic relations order if it meets all of the other requirements of this Section.                 10.8         Legal Costs; Increased Benefit.                 (a)         The Employer shall pay to a Participant all reasonable attorneys' fees and necessary costs and disbursements incurred by or on behalf of such Participant in connection with or as a result of a dispute under this Agreement, whether or not the Participant ultimately prevails. Attorneys' fees shall be paid by the Employer within 30 days of presentment by the Participant to the Employer of an invoice received by the Participant from the Participant's attorneys. Any late payments under this Section shall bear interest at a rate of twenty percent (20%) per month.                 (b)         If the Employer disputes any position taken by a Participant under this Agreement and the Participant prevails, the Participant's benefit under this Plan shall be doubled and the increased amount shall become immediately due and payable to the Participant.                 10.9         Duty to Provide Data.                 (a)         Every person with an interest in the Plan or claiming benefits under the Plan shall furnish the Plan Administrator on a timely and accurate basis with such documents, evidence or information as it considers necessary or desirable for the purpose of administering the Plan. The Plan Administrator may postpone payment of benefits until such information and such documents have been furnished.                 (b)         Once every twelve months every person claiming a benefit under this Plan shall file a signed, written notice to the Plan Administrator of his or her post office address and each change of post office address. Any communication, statement or notice addressed to such a person at his or her latest post office address as filed with the Plan Administrator will, on deposit in the United States mail with postage prepaid, be as binding upon such person for all purposes of the Plan as if it had been received, whether actually received or not. If a person fails to give notice of his or her correct address, the Plan Administrator, the Employer and Plan fiduciaries shall not be obliged to search for, or to ascertain, his or her whereabouts.                 10.10         Limitation on Rights of Employees. Except as otherwise required by law or in other written agreements between the Employer and Participant, nothing contained in the Plan shall give any Participant the right to be retained in the service of the Employer or to interfere with or restrict the right of the Employer, which is hereby expressly reserved, to discharge or retire any Participant at any time, with or without cause. Except as otherwise required by law or in other written agreements between the Employer and Participant, inclusion under the Plan will not give any Participant any right or claim to any benefit hereunder except to the extent such right has specifically become fixed under the terms of the Plan. If any dispute arises under the Plan between a Participant and the Employer or any of its subsidiaries, such subsidiary or any other Participant shall not be necessary parties to the dispute and need not be named in any litigation. Except as otherwise provided herein, benefits under this Plan shall not be accelerated merely because there is a change in ownership of the Employer. This Plan shall not obligate the Employer to maintain a minimum net worth in order to insure payment of benefits. The doctrine of substantial performance shall have no application to Employees or Participants. Each condition and provision, including numerical items, has been carefully considered and constitutes the minimum limit on performance which will give rise to the applicable right.                 10.11         Restrictions. A Participant shall not at any time, either directly or indirectly, accept employment with, render service, assistance or advice to, or allow his or her name to be used by any competitor of the Employer unless approved by the Executive Committee of the Board of Directors. Determination by the Executive Committee of the Board of Directors that the Participant has engaged in any such activity shall be binding and conclusive on all parties, and in addition to all other rights and remedies which the Employer shall have, the Participant shall not be entitled to any payments hereunder. This provision shall cease to apply upon a Change in Control, as defined in Section 5.1(b)(ii).                 10.12         Service of Process. The Secretary of Bergen Brunswig Corporation is hereby designated as agent for the service of legal process on the Plan.                 10.13         Spouse's Interest. The interest in the benefits hereunder of a Spouse of a Participant who has predeceased the Participant shall automatically pass to the Participant and shall not be transferable by such Spouse in any manner, including but not limited to such Spouse's will, nor shall such interest pass under the laws of intestate succession.                 10.14         Distribution in the Event of Taxation. If, for any reason, all or any portion of a Participant's benefit under this Plan becomes taxable to the Participant prior to receipt, a Participant's Employer shall distribute to the Participant immediately available funds in an amount equal to the taxable portion of his or her benefit.                 10.15         Governing Law. Subject to ERISA, the Plan shall be interpreted, administered and enforced in accordance with the internal laws of the State of California without regard to its conflicts of laws principles.                 10.16         Plurals. Where the context so indicates, the singular shall include the plural and vice versa.                 10.17         Titles. Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of the Plan.                 10.18         References. Unless the context clearly indicates to the contrary, a reference to a Plan provision, statute, regulation or document shall be construed as referring to any subsequently enacted, adopted or executed counterpart.                 10.19         Entire Agreement. This Plan contains the full and complete understanding of the parties with respect to the subject matter hereof and supersedes all prior representations and understandings, whether oral or written.                 10.20         Severability. In the event that any provision hereof or any obligation or grant of rights herein is found invalid or unenforceable pursuant to judicial decree or decision, any such provision, obligation or grant of rights shall be deemed and construed to extend only to the maximum extent permitted by law, and the remainder of this Plan shall remain valid and enforceable according to its terms.                 10.21         Withholding. Anything in this Plan to the contrary notwithstanding, all payments required to be made hereunder to a Participant or Beneficiaries shall be subject to the withholding of such amounts relating to taxes as the Plan Administrator may reasonably determine should be withheld pursuant to any applicable law or regulation.       --------------------------------------------------------------------------------                       IN WITNESS WHEREOF, the Company has caused this Amendment and Restatement to be executed by its duly authorized officer as of the 24th day of September, 1998.         By Order of the Board of Directors of       BERGEN BRUNSWIG CORPORATION,   a New Jersey corporation           By:________________________________          Executive Vice President,          Chief Legal Officer and Secretary            

EXHIBIT 10.4 AMENDMENT NUMBER FOUR TO THE GEORGIA-PACIFIC CORPORATION 1995 SHAREHOLDER VALUE INCENTIVE PLAN (As Amended and Restated Effective December 16, 1997)           WHEREAS, pursuant to Section 5.1 of the Georgia-Pacific Corporation 1995 Shareholder Value Incentive Plan, as amended and restated effective December 16, 1997 (the "Plan"), the Board of Directors of Georgia-Pacific Corporation ("Board") has reserved the right to amend the Plan;           WHEREAS, the Board desires to amend the Plan to provide that the Participant's Option exercise period shall be extended to include any period of employment with Plum Creek Timber Company, Inc. on and after the Effective Time under the Agreement and Plan of Merger by and among Plum Creek Timber Company, Inc., Georgia-Pacific Corporation and the Spincos (as defined therein) dated July 18, 2000;           NOW THEREFORE, the Board hereby amends the Plan as follows:                     1.    Section 3.3 of the Plan is amended by adding the following sentence to the end thereof: "Notwithstanding the foregoing provisions or the terms of any Option Agreement, on and after the Effective Time as defined under the Agreement and Plan of Merger by and among Plum Creek Timber Company, Inc., Georgia-Pacific Corporation and the Spincos (as defined therein) dated July 18, 2000, a Participant's Option exercise period shall include any period of employment with Plum Creek Timber Company, Inc., provided that in no event shall such period extend beyond the 10th annivers

Execution Copy June 30, 2000 U.S. Bank National Association 610 Second Avenue South Minneapolis, Minnesota 55402 Ladies and Gentlemen:     Reference is made to that certain amended and restated letter credit facility agreement dated as of March 18, 1998, as amended by letter amendments dated May 6, 1998, August 14, 1998, February 18, 1999 and March 29, 2000 ( as so amended, the "Credit Agreement"), between Osmonics, Inc., a Minnesota corporation (the "Borrower") and U.S. Bank National Association (f/k/a First Bank National Association), a national banking association ("U.S. Bank," or in its capacity as agent for the Banks described in the Credit Agreement, the "Agent"). Capitalized terms not otherwise defined herein shall have the same meaning as defined in the Credit Agreement. The Borrower desires to amend the Credit Agreement with respect to certain provisions thereof.     Section 1.  Amendments to Credit Agreement.  Subject to Section 4 hereof, the Credit Agreement is amended as follows:     (a) Schedule 1.1 is amended to replace the amount "$30,000,000 with the amount "$24,000,000."     (b) Section 2.1 of the Credit Agreement is amended by deleting Sections 2.1(c)(iii) and (iv) thereof and substituting in lieu thereof the following:     (iii) [Reserved]     (iv) [Reserved]     (c) Section 4.11(j) of the Credit Agreement is deleted in its entirety.     (d) Section 4.20(a) of the Credit Agreement is amended to read in its entirety as follows:     (a)  Leverage Ratio.  The Borrower will not permit the Leverage Ratio (as defined in Section 7 hereof) as of the last day of any fiscal quarter ending during any period of measurement described below to be greater than the ratio set forth below for such period: Measurement Period   Maximum Leverage Ratio April 1, 2000 through September 30, 2000   3.25 to 1.00 October 1, 2000, and thereafter   2.75 to 1.00 provided , however, that if the Borrower elects to pay dividends at any time prior to March 31, 2003, as permitted pursuant to the provisions in Section 4.15(a), the maximum Leverage Ratio for the period from the date such dividends are paid shall be 2.50 to 1.00.     (e) Section 5.1(c) of the Credit Agreement is amended by deleting the clause ", or Section 3 or 4 of the Security Agreement" and substituting a period in lieu thereof.     (f)  Section 5.1(j) of the Credit Agreement is deleted in its entirety. --------------------------------------------------------------------------------     (g) Section 7 of the Credit Agreement is amended by deleting the definitions of "Control Agreement," "Loan Documents," "Revolving Commitment Amount," "Security Agreement," and "Security Documents" and substituting in lieu thereof the following definitions in the appropriate alphabetical order:     "Loan Documents": This Agreement and the Notes.     "Revolving Commitment Amount": With respect to a Bank, initially the amount set opposite such Bank's name on Schedule 1.1 hereof as its Revolving Commitment Amount, but as the same may be reduced from time to time pursuant to Section 1.7 hereof.     (h) Section 8.1 of the Credit Agreement is amended by deleting the clause "amending the Security Agreement or releasing or subordinating any of the "Collateral" (as defined therein, except as provided therein)," as it appears therein.     (i)  Exhibit A to the Credit Agreement is hereby amended and restated to read as set forth on Exhibit A to this Amendment, which Exhibit A is hereby made a part of the Credit Agreement as Exhibit A thereto.     Section 2.  [Reserved]       Section 3.  Representations and Warranties of the Borrower.  To induce the Banks to enter into this Amendment and to make and maintain the Revolving Loans under the Credit Agreement as amended hereby, the Borrower hereby warrants and represents to the Banks that it is duly authorized to execute and deliver this Amendment, and to perform its obligations under the Credit Agreement as amended hereby, and that this Amendment constitutes the legal, valid and binding obligation of the Borrower, enforceable in accordance with its terms.     Section 4.  Conditions to the Effectiveness of this Amendment.  This Amendment shall not become effective until, and shall become effective when, each and every one of the following conditions shall have been satisfied:     (a) the Agent shall have received executed counterparts of this Amendment, duly executed by the Borrower and each of the Banks.     (b) the Agent shall have received the following instruments, documents and certificates: (i)a new Revolving Note in the form of Exhibit A to this Amendment, duly executed by the Borrower; (ii)a Termination Agreement in the form of Exhibit B to this Amendment, duly executed by the parties thereto (the "Termination Agreement");     (c) the Agent shall have received for distribution pursuant to the Termination Agreement and from the proceeds of the "Collateral" subject to the Security Agreement, cash equal to not less than US$4,000,000.     (d) the representations and warranties in the Credit Agreement shall be true and correct as though made on the date hereof, except for changes that are permitted by the terms of the Credit Agreement.     (e) except as described in Section 2.1 and 2.2 hereof, no Event of Default shall have occurred and be continuing under the Credit Agreement.     Notwithstanding any provision hereof, this Amendment shall terminate and the Agent and the Banks shall have no obligation hereunder if the forgoing conditions precedent are not satisfied by 4:00 p.m. (Minneapolis time) June 30, 2000, provided, however, that the obligations of the Companies under Section 5.2 of this Amendment shall survive any such termination. 2 --------------------------------------------------------------------------------     Upon satisfaction of all of the foregoing, (a) the Agent shall notify the Borrower and the Banks that this Amendment has become effective, but the failure of the Agent to give such notice shall not affect the validity of this Amendment or prevent it from becoming effective, and (b) the Agent shall cause to be returned to the Borrower such of the Collateral (as defined in the Security Agreement) as shall not have been sold or otherwise applied pursuant to the terms hereof or the Termination Agreement.     Section 5.  General.       5.1  Construction.  All references in the Credit Agreement to "this Agreement," "herein" and similar references shall be deemed to refer to the Credit Agreement as amended by this Amendment. All references in the other Loan Documents to the "Credit Agreement" and similar references shall be deemed to refer to the Credit Agreement, as amended by this Amendment. Except as hereby amended, the Credit Agreement shall remain in full force and effect and is hereby ratified and confirmed in all respects.     5.2  Expenses.  The Borrower agrees to reimburse the Agent upon demand for all reasonable expenses (including reasonable attorneys' fees and legal expenses) incurred by the Agent in the preparation, negotiation and execution of this Amendment and any other document required to be furnished herewith, and in enforcing the obligations of the Borrower hereunder, and to pay and save the Agent and the Banks harmless from all liability for, any stamp or other taxes which may be payable with respect to the execution or delivery of this Amendment or the issuance of the Note hereunder, which obligations of the Borrower shall survive any termination of the Credit Agreement or this Amendment.     5.3  Counterparts.  This Amendment may be executed in as many counterparts as may be deemed necessary or convenient, and by the different parties hereto on separate counterparts, each of which, when so executed, shall be deemed an original but all such counterparts shall constitute but one and the same instrument.     5.4  Severability.  Any provision of this Amendment 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 portions hereof or affecting the validity or enforceability of such provisions in any other jurisdiction.     5.5  Law.  This Amendment shall be governed by, and construed in accordance with, the internal law, and not the law of conflicts, of the State of Minnesota. OSMONICS, INC. By  --------------------------------------------------------------------------------    Its  -------------------------------------------------------------------------------- Accepted and agreed to as of the day and year first above written. U.S. BANK NATIONAL ASSOCIATION (f/k/a FIRST BANK NATIONAL ASSOCIATION) in its individual capacity and as Agent By  --------------------------------------------------------------------------------    Its  -------------------------------------------------------------------------------- 3 --------------------------------------------------------------------------------

EMPLOYMENT AGREEMENT (Chairman of the Board) THIS AGREEMENT, made and entered into as of August 17, 2000, by and between Michael J. Birck (the "Executive") and Tellabs, Inc., a Delaware corporation (the "Company"); WITNESSETH THAT : WHEREAS, the parties desire to enter into this Agreement pertaining to the continuing employment of the Executive by the Company; NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth below, it is hereby covenanted and agreed by the Executive and the Company as follows: 1. Employment. Subject to the terms of this Agreement, the Company hereby agrees to employ the Executive as its Chairman of the Board of Directors during the Agreement Term (as defined below), with the authority, responsibilities and duties described in the Company's By-Laws as amended and restated August 16, 2000, with such additions or modifications thereto which are consistent with his authority, responsibilities and duties hereunder, as the Board of Directors of the Company (the "Board") may, from time to time, in its discretion and after consultation with the Executive, adopt. The "Agreement Term" shall be the period beginning on September 18, 2000 (the "Effective Date") and ending on the second anniversary of the Effective Date, subject to earlier termination as provided herein; provided, however, that the Agreement Term will be automatically extended by twelve months on the first anniversary of the Effective Date and on each anniversary thereof, unless one party to this Agreement provides written notice of non-renewal to the other party at least 30 days prior to the date of such automatic extension. 2. Performance of Duties. The Executive agrees that during his employment with the Company, he shall devote his full business time, energies and talents to serving as its Chairman of the Board of Directors and that he shall perform his duties faithfully and efficiently subject to the directions of the Board. Notwithstanding the foregoing provisions of this Section  2, the Executive may (i) serve as a director, trustee or officer or otherwise participate in not-for-profit educational, welfare, social, religious and civic organizations; (ii) after consultation with, and approval by, the Board, serve as a director of any for-profit business which does not compete with the Company or any of its subsidiaries or affiliates, and (iii) acquire passive investment interests in one or more entities; provided, that such activities described in clauses (i), (ii) and (iii) are not prohibited under the Company's Integrity Policy and do not inhibit or interfere with the performance of the Executive's duties under this Agreement. 3. Compensation. Subject to the terms of this Agreement, during the Agreement Term, while the Executive is employed by the Company, the Company shall compensate him for his services as follows: a. Base Salary. The Executive shall receive a Base Salary of $680,000 per annum payable in 26 bi-weekly installments. The Executive's Base Salary shall be reviewed and subject to increase or decrease annually by the Board pursuant to its normal performance review policies for senior executives, with the first such review occurring in 2001. b. Annual Bonus. For each calendar year, the Executive shall be eligible to receive an Annual Bonus payment in accordance with the Company's annual bonus plans as in effect from time to time. The target level for each Annual Bonus shall not be less than 50% of the Executive's Base Salary for the year, provided that the Company achieves the applicable financial and strategic objectives established for the year. Commencing with calendar year 2001, such objectives will be established by the Compensation Committee of the Board, in consultation with the Executive and other senior officers. The Executive shall be eligible to receive a bonus for calendar year 2000, based on the Company's achievement of financial and strategic goals established for the year 2000. c. Annual Equity Awards. The Executive shall be entitled to receive stock option grants or other stock based compensation as may from time to time be awarded by the Compensation Committee. d. Employee Benefits, Fringe Benefits and Perquisites. The Executive shall be provided with employee benefits, fringe benefits and perquisites on a basis no less favorable than such benefits and perquisites are provided by the Company from time to time to the Company's other senior executives. In the event of the Executive's termination of employment with the Company for any reason other than termination by the Company for Cause, the Executive shall be entitled to reimbursement of tax and financial planning costs and an office and secretarial assistance on the same basis as provided during the Agreement Term through the tenth anniversary of the date of termination of employment. e. Expense Reimbursement. The Company will reimburse the Executive for all reasonable expenses incurred by him (i) in connection with the negotiation and preparation of this Agreement, which reimbursement shall not exceed $25,000, and (ii) in the performance of his duties in accordance with the Company's policies applicable to senior executives. f. Change in Control Benefits. Following the Effective Date, the Executive and the Company shall continue to be a party to the change of control agreement which the Company has entered into with Executive, it being understood that the Executive shall only receive whatever incremental payments or benefits are provided under such change of control agreement and that there shall be no duplication of payments or benefits under this Agreement and such change of control agreement. g. Additional Payments. If any payments or benefits received or to be received by the Executive in connection with the Executive's employment (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, or any person affiliated with the Company) (the "Payments"), will be subject to the tax (the "Excise Tax") imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") (or any similar tax that may hereafter be imposed), the Company shall pay at the time specified below, an additional amount (the "Gross-Up Payment") such that the net amount retained by the Executive, after deduction of any Excise Tax on the Payments and any federal, state and local income or other applicable tax and Excise Tax upon the payment provided for by this paragraph, shall be equal to the Payments. For purposes of determining the amount of the Gross-Up Payment, the Executive shall be deemed to pay federal income taxes at the Executive's highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the Executive's highest marginal rate of taxation in the state and locality of the Executive's residence on the date on which the Excise Tax is determined, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. The computations required by this paragraph shall be made by the independent public accountants then regularly retained by the Company, in consultation with tax counsel selected by them and acceptable to the Executive. The Company shall provide the Executive with sufficient tax and compensation data to enable the Executive or his tax advisor to verify such computations and shall reimburse the Executive for reasonable fees and expenses incurred with respect thereto. In the event that the Excise Tax is subsequently determined to be less than the amount taken into account hereunder, the Executive shall repay to the Company at the time that the amount of such reduction in Excise Tax is finally determined the portion of the Gross-Up Payment attributable to such reduction (plus the portion of the Gross-Up Payment attributable to the Excise Tax and federal and state and local income tax imposed on the Gross-Up Payment being repaid by the Executive) plus interest on the amount of such repayment from the date the Gross-Up Payment was initially made to the date of repayment at the rate provided in Section 1274(b)(2)(B) of the Code (the "Applicable Rate"). In the event that the Excise Tax is determined by the Internal Revenue Service or by such independent public accountants to exceed the amount taken into account hereunder (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional Gross-Up Payment in respect of such excess (plus any interest, penalties, fines or additions to tax payable with respect to such excess) at the time that the amount of such excess if finally determined. Any payment to be made under this paragraph shall be payable within five (5) days of the determination of the accountants that such a payment is required hereunder and, if applicable, within five (5) days of such determination that the Excise Tax is greater or less than initially calculated but, in no event, later than thirty (30) days after the Executive's receipt of the Payments resulting in such Excise Tax. 4. Indemnification. The Company agrees that if the Executive is made a party, or is threatened to be made a party, to any action, suit or proceeding, whether civil, criminal, administrative or investigative (a "Proceeding"), by reason of the fact that he is or was a director, officer or employee of the Company or is or was serving at the request of the Company as a director, officer, member, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether or not the basis of such Proceeding is the Executive's alleged action in an official capacity while serving as a director, officer, member, employee or agent, the Executive shall be indemnified and held harmless by the Company to the fullest extent legally permitted or authorized by the Company's certificate of incorporation or bylaws or resolutions of the Company's Board of Directors or, if greater, by the laws of the State of Delaware, against all cost, expense, liability and loss (including, without limitation, attorneys' fees, judgments, fines, ERISA excise taxes or other liabilities or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by the Executive in connection therewith, and such indemnification shall continue as to the Executive even if he has ceased to be a director, member, employee or agent of the Company or other entity, with respect to acts or omissions which occurred prior to his cessation of employment with the Company, and shall inure to the benefit of the Executive's heirs, executors and administrators. The Company shall advance to the Executive all reasonable costs and expenses incurred by him in connection with a Proceeding within 20 calendar days after receipt by the Company of a written request for such advance. Such request shall include an undertaking by the Executive to repay the amount of such advance if it shall ultimately be determined that he is not entitled to be indemnified against such costs and expenses. 5. Termination of Employment. Upon termination of the Executive's employment for any reason, the Executive or, in the event of death, the Executive's estate shall be entitled to the Executive's Base Salary prorated through the date of termination. Any Annual Bonus awarded to the Executive for a prior award period, but not yet paid to the Executive, and any employee benefits to which the Executive is entitled by reason of his employment shall be paid to the Executive or his estate at such time as is provided by the terms of the applicable Company plan or policy. If the Executive's employment is terminated during the Agreement Term, the Executive's right to additional payments and benefits under this Agreement for periods after his date of termination shall be determined in accordance with the following provisions of this Section 5. a. Death or Disability. If the Executive's employment is terminated by reason of death or by reason of the Executive's Disability, the Executive, or, in the event of his death, his estate, shall be entitled to a prompt cash payment of a prorated Annual Bonus for the year in which such termination occurs, based on the target Annual Bonus for such year. The Executive or the Company shall be entitled to terminate the Executive's employment because of the Executive's Disability during the Agreement Term. "Disability" means that the Executive is disabled within the meaning of the Company's long-term disability policy or, if there is no such policy in effect, that (i) the Executive has been substantially unable, for 120 business days within a period of 180 consecutive business days, to perform the Executive's duties under this Agreement, as a result of physical or mental illness or injury, and (ii) a physician selected by the Company or its insurers, and reasonably acceptable to the Executive or the Executive's legal representative, has determined that the Executive is disabled. A termination of the Executive's employment by the Company for Disability shall be communicated to the Executive by written notice, and shall be effective on the 30th day after receipt of such notice by the Executive (the "Disability Effective Time"), unless the Executive returns to full-time performance of the Executive's duties before the Disability Effective Time. b. Termination for Cause or Voluntary Resignation. If the Executive's employment is terminated by the Company for Cause or if the Executive voluntarily resigns from the employ of the Company, other than pursuant to a Constructive Discharge, all payments and benefits to which the Executive would otherwise be entitled under this Agreement shall immediately cease, except as otherwise specifically provided above in this Section 5 with respect to his prorated Base Salary through the date of termination, his Annual Bonus, if any, awarded for a prior award period but not yet paid and his previously earned employee benefits. For purposes of this Agreement, the term "Cause" shall mean: i. The Executive is convicted of a felony or any crime involving moral turpitude; or ii. A reasonable determination by a vote of directors comprising two-thirds of the entire Board, after giving the Executive notice and an opportunity to be heard, that, (A) Executive has willfully and continuously failed to perform substantially his duties as contemplated by Section 2 above (other than such failure resulting from incapacity due to physical or mental illness), after a written demand for corrected performance is delivered to Executive by the Board which specifically identifies the manners in which the Board believes the Executive has not substantially performed his duties or (B) the Executive has engaged in gross neglect or gross misconduct, unless the Executive had a good faith belief that such conduct was in, or not opposed to, the best interests of the Company. c. Termination Without Cause. If the Company terminates the Executive without Cause, the Executive shall be entitled to a prompt lump sum cash payment equal to the Base Salary and Annual Bonus to which he would otherwise would have been entitled if he had remained in the employ of the Company through the last day of the Term of this Agreement. For purposes of the preceding sentence, the Annual Bonus component shall be based upon the target bonus for the year of termination and shall include a prorated bonus for the partial year ending on the last day of the Agreement Term. d. Resignation for Constructive Discharge. The Executive's voluntary resignation for Constructive Discharge shall be treated for all purposes of this Agreement as a termination by the Company without Cause. For purposes of this Agreement, "Constructive Discharge" shall mean the occurrence of any of the following circumstances: i. A reduction by the Company in the Executive's Base Salary or Annual Bonus target to an amount that is less than required under Section 3 above; ii. The removal of the Executive from the position of Chairman of the Board of Directors or the failure of the Executive to be nominated or reelected to the Company's Board of Directors; iii. Any action by the Company which results in significant diminution in the Executive's authority, power, responsibilities or duties from those contemplated by Sections 1 and 2 above, or the assignment to Executive without his written consent of any duties inconsistent with the Executive's position and status as Chairman of the Board of Directors of the Company as contemplated by Sections 1 and 2 above, which action or assignment continues after written notice thereof and a reasonable opportunity to cure of not less than fifteen (15) days has been given by Executive to the Company; or iv. Any other breach by the Company of any of its material obligations to the Executive under this Agreement, which breach continues after written notice thereof and a reasonable opportunity to cure of not less than thirty (30) days has been given by Executive to the Company. e. Change in Control. The term "Change in Control" of the Company 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 Company or any subsidiary of the Company, or any employee benefit plan of the Company or any subsidiary of the Company, or any person or entity organized, appointed or established by the Company for or pursuant to the terms of any such plan which acquires beneficial ownership of voting securities 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 20% or more of the combined voting power of the Company'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 Company; 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 and any new director (except for a director designated by a person who has entered into an agreement with the Company to effect a transaction described elsewhere in this definition of Change in Control) whose election by the Board 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 (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 Company (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 the Company 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 Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the outstanding voting securities of the Company; (ii) no person (excluding any company resulting from such Business Combination or any employee benefit plan (or related trust) of the Company 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; iv. Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company; or v. A tender offer (for which a filing has been made with the Securities and Exchange Commission "SEC") which purports to comply with the requirements of Section 14(d) of the Securities Exchange Act of 1934 and the corresponding SEC rules) is made for the stock of the Company, then the first to occur of: (A) Any time during the offer when the person making the offer owns or has accepted for payment stock of the Company with 25% or more of the total voting power of the Company's securities, or (B) Three business days before the offer is to terminate unless the offer is withdrawn first if the person making the offer could own, by the terms of the offer plus any shares owned by this person, stock with 50% or more of total voting power of the Company's securities when the offer terminates. 6. No Mitigation; No Offset. In the event of any termination of employment, the Executive shall be under no obligation to seek other employment and there shall be no offset against amounts due the Executive under this Agreement on account of any remuneration attributable to any subsequent employment that he may obtain. 7. Confidential Information. The Executive agrees that, during his employment by the Company and at all times thereafter, he shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its subsidiaries or affiliates, and their respective businesses, which shall have been obtained by the Executive during the Executive's employment by the Company or during his consultation with the Company after his termination of employment, and which shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). Except in the good faith performance of his duties for the Company, the Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it. 8. Protective Covenants. For a period of two years following the termination of Executive's employment for any reason, the Executive shall not, without the written consent of the Board, directly or indirectly, a. engage or be interested in (as owner, partner, stockholder, employee, director, officer, agent, consultant or otherwise), with or without compensation, any business which is in direct competition with the Company or of any of its subsidiaries in providing data, voice or video transport, switching/routing, network access system and/or voice quality enhancement solutions to service providers or end users; b. hire any person who was employed by the Company or any of its subsidiaries or affiliates (other than persons employed in a clerical or other non-professional position) within the six-month period preceding the date of such hiring; or c. solicit, entice, persuade or induce any person or entity doing business with the Company and its subsidiaries or affiliates, to terminate such relationship or to refrain from extending or renewing the same. Nothing in subparagraph (a) above, will prohibit the Executive from acquiring or holding not more than one percent of any class of publicly traded securities of any such business; provided that such securities entitle the Executive to no more than one percent of the total outstanding votes entitled to be cast by security holders of such business in matters on which such security holders are entitled to vote. 9. Remedies. The Executive agrees that the restrictions set forth in Sections 7 and 8 hereof are reasonably and necessary to protect the legal interests of the Company. The Executive further agrees that the Company shall be entitled to injunctive relief in the event of any actual or threatened breach of such restrictions. 10. Assignability, Binding Nature. This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors, heirs (in the case of the Executive) and assigns. No rights or obligations of the Company under this Agreement may be assigned or transferred by the Company except that such rights or obligations may be assigned or transferred pursuant to a merger or consolidation in which the Company is not the continuing entity, or the sale or liquidation of all or substantially all of the assets of the Company, provided that the assignee or transferee is the successor to all or substantially all of the assets of the Company and such assignee or transferee assumes the liabilities, obligations and duties of the Company, as contained in this Agreement, either contractually or as a matter of law. The Company further agrees that, in the event of a sale of assets or liquidation as described in the preceding sentence, it shall take whatever action it legally can in order to cause such assignee or transferee to expressly assume the liabilities, obligations and duties of the Company hereunder. No rights or obligations of the Executive under this Agreement may be assigned or transferred by the Executive other than his rights to compensation and benefits, which may be transferred only by will or operation of law. 11. Amendment. This Agreement may be amended or canceled only by mutual agreement of the parties in writing without the consent of any other person. So long as the Executive lives, no person, other than the parties hereto, shall have any rights under or interest in this Agreement or the subject matter hereof except that in the event of the Executive's Disability so as to render him incapable of such action, his legal representative may be substituted for purposes of such amendment. 12. Applicable Law. The provisions of this Agreement shall be construed in accordance with the internal laws of the State of Illinois, without regard to the conflict of law provisions of any state. 13. Severability. The invalidity or unenforceability of any provision of this Agreement will not affect the validity or enforceability of any other provision of this Agreement, and this Agreement will be construed as if such invalid or unenforceable provision were omitted (but only to the extent that such provision cannot be appropriately reformed or modified). 14. Waiver of Breach. No waiver by any party hereto of a breach of any provision of this Agreement by any other party, or of compliance with any condition or provision of this Agreement to be performed by such other party, will operate or be construed as a waiver of any subsequent breach by such other party of any similar or dissimilar provisions and conditions at the same or any prior or subsequent time. The failure of any party hereto to take any action by reason of such breach will not deprive such party of the right to take action at any time while such breach continues. 15. Notices. Notices and all other communications provided for in this Agreement shall be in writing and shall be delivered personally or sent by registered or certified mail, return receipt requested, postage prepaid, or prepaid overnight courier to the parties at the addresses set forth below (or such other addresses as shall be specified by the parties by like notice): to the Company: Tellabs, Inc. 4951 Indiana Avenue Lisle, Illinois 60532-1698 Attention: President and Chief Executive Officer or to the Executive: Michael J. Birck 4951 Indiana Avenue Lisle, Illinois 60532-1698 Each party, by written notice furnished to the other party, may modify the applicable delivery address, except that notice of change of address shall be effective only upon receipt. Such notices, demands, claims and other communications shall be deemed given in the case of delivery by overnight service with guaranteed next day delivery, the next day or the day designated for delivery; or in the case of certified or registered U.S. mail, five days after deposit in the U.S. mail; provided, however, that in no event shall any such communications be deemed to be given later than the date they are actually received. 16. Arbitration of Disputes and Reimbursement of Legal Costs. Any controversy or claim arising out of or relating to this Agreement (or the breach thereof) shall be settled by final, binding and non-appealable arbitration in Chicago, Illinois by three arbitrators. Subject to the following provisions, the arbitration shall be conducted in accordance with the rules of the American Arbitration Association (the "Association") then in effect. One of the arbitrators shall be appointed by the Company, one shall be appointed by the Executive, and the third shall be appointed by the first two arbitrators. If the first two arbitrators cannot agree on the third arbitrator within 30 days of the appointment of the second arbitrator, then the third arbitrator shall be appointed by the Association and shall be experienced in the resolution of disputes under employment agreements for CEOs of major corporations. Any award entered by the arbitrators shall be final, binding and nonappealable and judgment may be entered thereon by either party in accordance with applicable law in any court of competent jurisdiction. This arbitration provision shall be specifically enforceable. The arbitrators shall have no authority to modify any provision of this Agreement or to award a remedy for a dispute involving this Agreement other than a benefit specifically provided under or by virtue of the Agreement. If the Executive prevails on any material issue which is the subject of such arbitration or lawsuit, the Company shall be responsible for all of the fees of the American Arbitration Association and the arbitrators and any expenses relating to the conduct of the arbitration (including the Company's and the Executive's reasonable attorneys' fees and expenses). Otherwise, each party shall be responsible for its own expenses relating to the conduct of the arbitration (including reasonable attorneys' fees and expenses) and shall share the fees of the American Arbitration Association equally. 17. Survivorship. Upon the expiration or other termination of this Agreement, the respective rights and obligations of the parties hereto shall survive such expiration or other termination to the extent necessary to carry out the intentions of the parties under this Agreement. 18. Entire Agreement. Except as otherwise noted herein, this Agreement constitutes the entire agreement between the parties concerning the subject matter hereof and supersedes all prior and contemporaneous agreements, if any, between the parties relating to the subject matter hereof. 19. Counterparts. This Agreement may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement. IN WITNESS THEREOF, the Executive has hereunto set his hand, and the Company has caused this Agreement to be executed in its name and on its behalf, and its corporate seal to be hereunto affixed, all as of the day and year first above written. EXECUTIVE: MICHAEL J. BIRCK COMPANY: TELLABS, INC., a Delaware corporation By: /s Brian J. Jackman Its: Executive Vice President ATTEST: Secretary

AMENDMENT NO. 5 TO AMENDED AND RESTATED REDUCING REVOLVING LOAN AGREEMENT           This Amendment No. 5 to Amended and Restated Reducing Revolving Loan Agreement (this "Amendment") dated as of October 11, 2000 is entered into with reference to the Amended and Restated Reducing Revolving Loan Agreement dated as of May 28, 1998 among Aztar Corporation ("Borrower"), the Banks party thereto, Bankers Trust Company and Societe Generale, as Documentation Agents, Bank of Scotland, Credit Lyonnais Los Angeles Branch and PNC Bank, National Association, as Co-Agents, and Bank of America, N.A. (under its former name, Bank of America National Trust and Savings Association), as Administrative Agent (the "Loan Agreement"). Capitalized terms used but not defined herein are used with the meanings set forth for those terms in the Loan Agreement.           Borrower and the Administrative Agent, acting with the consent of the Requisite Banks pursuant to Section 11.2 of the Loan Agreement, agree as follows:           1.     Increase to Permitted Distributions - Section 6.5. Section 6.5(d) of the Loan Agreement is amended to read in full as follows (with the changed text underscored and in bold for the convenience of the reader):                and (d) Distributions in the form of repurchases of Common Stock for which the aggregate purchase price does not exceed either (i) $150,000,000 or (ii) when aggregated with all other Basket Expenditures made since the Closing Date, the Aggregate Basket; provided no Default or Event of Default then exists or would result therefrom;           2.     Conditions Precedent. The effectiveness of this Amendment shall be conditioned upon the receipt by the Administrative Agent of all of the following, each properly executed by a Responsible Official of each party thereto and dated as of the date hereof:                (a)     Counterparts of this Amendment executed by all parties hereto;                (b)     Written consent of each of the Significant Subsidiaries to the execution, delivery and performance hereof, substantially in the form of Exhibit A to this Amendment; and                (c)     Written consent of the Requisite Banks as required under Section 11.2 of the Loan Agreement in the form of Exhibit B to this Amendment.           3.     Representation and Warranty. Borrower represents and warrants to the Administrative Agent and the Banks that no Default or Event of Default has occurred and remains continuing.           4.     Confirmation. In all other respects, the terms of the Loan Agreement and the other Loan Documents are hereby confirmed.           IN WITNESS WHEREOF, Borrower and the Administrative Agent have executed this Amendment as of the date first written above by their duly authorized representatives. AZTAR CORPORATION By: NEIL A. CIARFALIA          Neil A. Ciarfalia  Treasurer     [Printed Name and Title] BANK OF AMERICA, N.A., as Administrative Agent By: JANICE HAMMOND             Janice Hammond     Vice President     Exhibit A to Amendment CONSENT OF SUBSIDIARY GUARANTORS           Reference is hereby made to that certain Amended and Restated Reducing Revolving Loan Agreement dated as of May 28, 1998 among Aztar Corporation ("Borrower"), the Banks party thereto, Bankers Trust Company and Societe Generale, as Documentation Agents, Bank of Scotland, Credit Lyonnais Los Angeles Branch and PNC Bank, National Association, as Co-Agents, and Bank of America National Trust and Savings Association, as Administrative Agent (as amended, the "Loan Agreement").           Each of the undersigned hereby consents to the execution, delivery and performance by Borrower and the Administrative Agent of Amendment No. 5 to the Loan Agreement.           Each of the undersigned represents and warrants to the Administrative Agent and the Banks that there is no defense, counterclaim or offset of any type or nature to the Subsidiary Guaranty, and that the same remains in full force and effect. Dated: October 11, 2000 HOTEL RAMADA OF NEVADA By:     NED ARMSTRONG                     Nelson W. Armstrong, Jr. Title:  Vice President & Secretary RAMADA NEW JERSEY, INC. By:    NEIL A. CIARFALIA             Neil A. Ciarfalia Title: Treasurer              AZTAR DEVELOPMENT CORPORATION By:     NED ARMSTRONG                     Nelson W. Armstrong, Jr. Title:  Secretary                 ATLANTIC-DEAUVILLE INC. By:    NEIL A. CIARFALIA             Neil A. Ciarfalia Title: Treasurer              AZTAR INDIANA GAMING CORPORATION By:     NED ARMSTRONG                     Nelson W. Armstrong, Jr. Title:  Vice President & Secretary ADAMAR GARAGE CORPORATION By:    NEIL A. CIARFALIA             Neil A. Ciarfalia Title: Treasurer              AZTAR MISSOURI GAMING CORPORATION By:     NED ARMSTRONG                     Nelson W. Armstrong, Jr. Title:  Vice President & Secretary AZTAR INDIANA GAMING CORPORATION, LLC By:  Aztar Indiana      Gaming Corporation,      its Managing Member By:   NED ARMSTRONG                   Nelson W. Armstrong, Jr. Title:Vice President & Secretary RAMADA NEW JERSEY HOLDINGS CORPORATION By:    NEIL A. CIARFALIA             Neil A. Ciarfalia Title: Treasurer              AZTAR RIVERBOAT HOLDING COMPANY, LLC By:  Aztar Indiana      Gaming Corporation,      its Member      Aztar Missouri      Gaming Corporation,      its Member By:   NED ARMSTRONG                   Nelson W. Armstrong, Jr. Title:Vice President & Secretary MANCHESTER MALL, INC. By:    NEIL A. CIARFALIA             Neil A. Ciarfalia Title: Treasurer              AZTAR MISSOURI RIVERBOAT GAMING COMPANY, LLC By:  Aztar Missouri      Gaming Corporation,      its Managing Member By:   NED ARMSTRONG                   Nelson W. Armstrong, Jr. Title:Vice President & Secretary RAMADA EXPRESS, INC. By:     NED ARMSTRONG                     Nelson W. Armstrong, Jr. Title:  Vice President & Secretary   ADAMAR OF NEW JERSEY, INC. By:    NEIL A. CIARFALIA             Neil A. Ciarfalia Title: Treasurer                Exhibit B to Amendment CONSENT OF BANK           Reference is hereby made to that certain Amended and Restated Reducing Revolving Loan Agreement dated as of May 28, 1998 among Aztar Corporation ("Borrower"), the Banks party thereto, Bankers Trust Company and Societe Generale, as Documentation Agents, Bank of Scotland, Credit Lyonnais Los Angeles Branch and PNC Bank, National Association, as Co-Agents, and Bank of America National Trust and Savings Association, as Administrative Agent (as amended, the "Loan Agreement").           The undersigned Bank hereby consents to the execution and delivery of Amendment No. 5 to the Loan Agreement by the Administrative Agent on its behalf, substantially in the form of the most recent draft thereof presented to the undersigned Bank. Date: October 11, 2000 Bank of America N.A.        [Name of Institution] By  SCOTT L. FABER              Scott L. Faber     Managing Director          [Printed Name and Title] Date: October 6, 2000 Bank of Scotland            [Name of Institution] By  JOSEPH FRATUS               Joseph Fratus     Vice President             [Printed Name and Title] Date: October 11, 2000 Bankers Trust Company        [Name of Institution] By SUSAN L. LEFEVRE            Susan L. LeFevre    Director                   [Printed Name and Title] Date: October 6, 2000 Fleet National Bank          [Name of Institution] By JOHN HARRISON               John Harrison    Senior Vice President       [Printed Name and Title] Date: October 11, 2000 Imperial Bank              [Name of Institution] By R. VADALMA                  Ray Vadalma    Senior Managing Director     [Printed Name and Title] Date: October 11, 2000 PNC Bank National Association [Name of Institution] By GARY W. WESSELS             Gary W. Wessels    Vice President              [Printed Name and Title] Date: October 10, 2000 Societe Generale           [Name of Institution] By JANE VAN BRUSSEL           Jane Van Brussel    Vice President          [Printed Name and Title]

EXHIBIT 10.1 EMPLOYMENT AGREEMENT MEMORANDUM OF AGREEMENT entered into at Stamford, Connecticut, this 28 day of June, 2000. BY AND BETWEEN: REPAP ENTERPRISES INC. , a company duly incorporated under the laws of Canada, having its executive offices at 300 Atlantic Street, Suite 200, Stamford, Connecticut, 06901, herein acting and represented by Harold (Hap) Stephen, duly authorized to act hereunder for the purposes of the present Agreement as he so declares;   (hereinafter the "Corporation") AND STEPHEN C. LARSON , business executive, having his address for the purposes of the present Agreement at 200 Broad Street, apt. 2133, Stamford, Connecticut, 06901;   (hereinafter the "Executive") THE PARTIES DECLARE AS FOLLOWS: WHEREAS the Corporation wishes to retain the Executive's services as President and Chief Executive Officer and the Executive wishes to continue to offer his services to the Corporation in that capacity, the whole in accordance with the conditions stipulated in the present Agreement; WHEREAS the Corporation considers the continuous maintenance of sound and vital management to be essential to protecting and enhancing the best interests of the Corporation and its shareholders; WHEREAS the Corporation recognizes that the possibility of a Change in Control or other circumstances may exist and that such possibility, and the uncertainty and questions which it may raise among the Corporation's management, may result in the departure or distraction of management personnel to the detriment of the Corporation and its shareholders; WHEREAS the Corporation's Board of Directors has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Corporation's management employees to their assigned duties; NOW, THEREFORE , in consideration of the mutual promises and covenants herein contained, the parties agree as follows:   ARTICLE 1 PREAMBLE 1.1 The preamble forms an integral part of this Agreement. ARTICLE 2 DEFINITIONS 2.1 Definitions. For the purpose of this Agreement, or for the purposes of any notice or communication required hereunder, the words and expressions set out in Schedule A shall have the respective meanings set out therein, except where the context dictates otherwise. 2.2 Gender. Any reference in this Agreement to any gender shall include all genders and words used herein importing the singular number only shall include the plural and vice versa. 2.3 Headings. The insertion of headings is for convenience of reference only and shall not affect or be utilized in the construction or interpretation hereof. 2.4 Entire Agreement. This Agreement together with any instruments to be delivered pursuant hereto constitute the entire Agreement between the parties pertaining to the subject matter hereof and supersede all prior agreements, understandings, negotiations, and discussions, whether oral or written, by or among the said parties in respect of such subject matter. 2.5 Amendment. No amendment hereto shall be binding unless expressly provided for in an instrument duly executed by both parties. 2.6 Waiver. No waiver by any party hereto, whether by conduct or otherwise, of any of the provisions of this Agreement shall be deemed to constitute a waiver by such party of any other provisions (whether or not similar) nor shall such waiver constitute a continuing waiver hereof, unless otherwise expressly provided in an instrument duly executed by the party or parties to be bound thereby. 2.7 Governing Law. This Agreement shall be governed by, interpreted and construed in accordance with the laws of New York. 2.8 Currency. Unless otherwise particularly indicated herein, all dollar amounts set forth in this Agreement shall be in U.S. dollars. ARTICLE 3 DURATION 3.1 This Agreement is hereby concluded for an indefinite term, effective as of the date hereof. ARTICLE 4 ACCEPTANCE, POSITION AND DUTIES 4.1 The Executive hereby accepts such employment and agrees faithfully to render the services described below to the best of his ability and knowledge and to devote his full time, attention, skill and talents to the performance of his duties hereunder in the best interests of the Corporation. 4.2 During the term of this Agreement, the Executive will serve as President and Chief Executive Officer. In this capacity, the Executive shall have duties and responsibilities that are consistent with the Executive's position as Chief Executive Officer including but not limited to developing shareholder relationships, creating and implementing policies, managing manufacturing, sales and marketing, managing human resources including review of personnel, managing all financial relationships through the direction of the Chief Financial Officer, managing all legal relationships through the direction of the General Counsel, retaining and approving outside professionals and addressing all strategic issues regarding acquisitions and recapitalizations in conjunction with the Chairman of the Board of Directors. 4.3 The Executive hereby agrees to execute such additional tasks as may be assigned to him by the Corporation from time to time, the whole in accordance with the directives of the Board of Directors of the Corporation. 4.4 The Executive agrees to serve during the term of his employment hereunder as a Director of the Corporation and as an Officer and/or Director of any affiliates or subsidiaries of the Corporation without any compensation therefor other than that specified in this Agreement. ARTICLE 5 LOYALTY 5.1 The Executive shall devote the whole of his working time, attention, skills and competence to the Corporation. The Executive shall act with diligence, loyalty and honesty and shall make all necessary efforts to promote the Corporation's legitimate interests for the duration of this Agreement. 5.2 The Executive shall not, during the term of this Agreement, on the Executive's own behalf or on behalf of any Person, whether directly or indirectly, in any capacity whatsoever, alone, through or in connection with any Person, carry on or be engaged in or have any financial or other interest in or be otherwise commercially involved in any endeavor, activity or business that is the same as, substantially similar to or in competition with the activities of the Corporation. 5.3 The Executive shall not be in default under this Article 5 by virtue of the Executive holding, strictly for portfolio purposes and as a passive investor, no more than five percent (5 percent) of the issued and outstanding shares of any corporation which is listed on a recognized stock exchange, the business of which corporation is the same, substantially similar to or in competition with the activities of the Corporation. ARTICLE 6 PLACE OF WORK 6.1 The Executive's duties shall be carried out and performed at or from the Corporation's establishment located in the city of Stamford, Connecticut, although the Executive may be required by the Corporation to travel elsewhere from time to time. ARTICLE 7 OTHER DUTIES 7.1 The Executive shall not engage in duties other than those provided for in this Agreement, nor be employed with respect, or in relation, to any Person other than the Corporation without the prior written consent of the Corporation. 7.2 Nothing herein shall prevent the Executive from undertaking charitable, community or recreational activities which are not in conflict with obligations hereunder and for which the Executive is not remunerated. 7.3 The Executive may accept other corporate directorships with the prior authorization in writing of the Chairman of the Board of Directors of the Corporation. ARTICLE 8 CONFIDENTIALITY   8.1 General. During the term of this Agreement and at any time thereafter, the Executive agrees not to use, sell, circulate or otherwise distribute to any Person, or in any way disclose to any Person or to the public, any Confidential Information. 8.2 Permitted Uses. Notwithstanding the above, the Executive shall have the right to make use of Confidential Information as required in the performance of his duties with the Corporation provided the Executive shall at all times take necessary, useful and desirable measures to prevent the non-authorized use or disclosure of Confidential Information. Reproduction of Confidential Information shall be governed by the same principles. 8.3 Works. Any document or work assembled or composed by the Executive or the Corporation which contains Confidential Information shall constitute and be treated as Confidential Information. The Executive shall not publish or allow the publication of any material containing Confidential Information without the prior written consent of the Chairman of the Board of the Corporation. 8.4 Property. Confidential Information and the documents, works, instruments or other medium containing Confidential Information shall remain the property of the Corporation and be returned to the Corporation upon request or at the latest immediately upon termination of the Executive's employment. 8.5 Governmental Request. Nothing in this Agreement shall prevent the disclosure of Confidential Information where such disclosure must be made in response to the formal request of a governmental body, agency or a court of law but the Executive shall inform the Corporation of such request immediately and prior to disclosure in order to allow the Corporation to take the appropriate measures to contest such request for disclosure if it so decides. The Executive shall fully cooperate with the Corporation in its efforts to contest such request for disclosure. ARTICLE 9 SALARY 9.1 As President and Chief Executive Officer of the Corporation, the Executive shall receive an annual base compensation of gross $550,000 ("Base Salary") to be paid in equal monthly installments, less the applicable deductions at source. Such compensation shall be reviewed annually by the Board of Directors of the Corporation in accordance with its internal policies in effect from time to time, but shall never be less than the amount stipulated herein. ARTICLE 10 INCENTIVE PLANS 10.1 In addition to the Base Salary, the Executive shall be eligible to receive an annual payment pursuant to all bonus and incentive compensation plans in force and offered to key executives of the Corporation at the time, as may be modified by the Corporation at its sole discretion from time to time, in accordance with such plans, including but not limited to participation in Tier 1 of the Key Management Bonus Plan but at a level of 75 percent of annual salary. Such bonus will be prorated for any calendar year during which the Executive was employed for less than twelve (12) months. The Corporation agrees that during the term of this Agreement, the Executive cannot be removed as a member of the Bonus Plan. ARTICLE 11 STOCK OPTIONS 11.1 The parties recognize that the Corporation has granted to the Executive options to purchase fourteen million (14,000,000) common shares of the Corporation, which are fully vested, (the "Stock Options") at a price equal to Cdn $0.13 per share. 11.2 The parties recognize that the Corporation has, subject to all regulatory approvals and filings, granted to the Executive an additional four million (4,000,000) Stock Options of the Corporation at an exercise price of Cdn $0.13 per option as follows: Date of Vesting February 28, 2000 February 28, 2001 February 28, 2002 February 28, 2003 February 28, 2004 Options to Acquire 800,000 common shares 800,000 common shares 800,000 common shares 800,000 common shares 800,000 common shares Expiry Date February 28, 2010 February 28, 2010 February 28, 2010 February 28, 2010 February 28, 2010 11.3 The Stock Options have been granted subject to the terms and conditions set forth in the Corporation's applicable Stock Option Plan, the Share Option Agreement of February 28, 2000, and the Share Option Agreement and amendments of May 4, 2000, and the Share Option Repricing Agreement of May 4, 2000. 11.4 Unless otherwise terminated and expired in accordance with the terms hereof, the Stock Options under Article 11.1 (14,000,000) shall expire and terminate at the close of business on August 30, 2007, and the Stock Options under Article 11.2 (4,000,000) shall expire and terminate at the close of business on February 28, 2010, as to such of the optioned shares in respect of which the options granted have not then been exercised, and thereafter the Executive shall have no further rights in respect thereof. 11.5 The Stock Options shall be exercised by delivering to the Secretary of the Corporation: i. a written notice signed by the Executive ("Option Notice") setting forth the number of Optioned Shares to be purchased (which shall not be greater than the number of Optioned Shares with respect to which the Executive is entitled to exercise options in accordance with the provisions of subparagraph 11.1 and 11.2); ii. a certified cheque in the amount of the purchase price thereof. 11.6 Any such Option Notice must be received by the Secretary of the Corporation prior to the close of business on the Expiry Date mentioned in section 11.1 and 11.2 above. ARTICLE 12 BENEFITS AND VACATION 12.1 The Senior Executive shall continue to participate in all benefit programs and/or plans granted to key executives of the Corporation, the whole in accordance with the actual programs or plans that the Corporation may institute from time to time or as may otherwise be paid under any applicable law. The Executive is entitled to six (6) weeks paid vacation annually in accordance with the Corporation's existing policy as amended from time to time as well as banked vacation days in accordance with the Corporation's policy on banked vacation. 12.2 The benefit programs in place at the time of this Agreement are outlined in Articles 12.1, 12.3, 13 and 14 of this Agreement. 12.3 Insurance Related Benefits: (a) The Executive is entitled to participate in the Corporation's Group Life Insurance Plan (Union) in the case of death and the Executive is also entitled to an individual life insurance policy (N.W. Life) for CDN $1,500,000. All premiums are paid by the Corporation. Upon any termination of the Executive's employment (other than Executive's termination for Cause or the death of the Executive) the Executive shall have the right to convert the N.W. Life policy into an individual life insurance policy where the Executive becomes the owner of such policy at no additional cost to the Executive, other than the payment of premiums following the said conversion in accordance with the terms and conditions of Article 18.1 above. (b) The Executive is entitled to participate in the Corporation's Group Disability Insurance which pays a monthly benefit equal to the lesser of 60 percent of Base Salary or $10,000. The Corporation also supplements the Group Disability Insurance with individual Supplemental Long Term Disability Insurance, such policy being currently underwritten by The Guardian Insurance Company and providing an additional benefit of $13,000 per month. It is understood that the amount of the benefit may change from time to time, in accordance with the Base Salary of the Executive. (c) The Executive and the Executive's spouse are entitled to participate in the Corporation's Health, Dental and Vision Plans which may change from time to time in accordance with the Corporation's policies. All premiums on health and dental are paid by the Corporation and this coverage extends to the Executive's spouse.   ARTICLE 13 PENSION BENEFITS   13.1 The Executive is eligible to enroll in the Corporation 401(K) Plan and the Top Executive Supplemental Retirement Plan (the "Supplemental Plan"), the whole in accordance with the terms and conditions of any such plans. 13.2 The Corporation recognizes that the Executive has been credited with eight (8) years and eleven (11) months of service under the Supplemental Plan as at December 31, 1999. 13.3 The Executive is entitled to participate in the Corporation's 401(K) Plan, the terms of which require the Corporation to match employee contributions equal to 4 percent of earnings up to a maximum of $6,800 per year, as at January 1, 2000. ARTICLE 14 AUTOMOBILE AND OTHER 14.1 A company car of the Executive's choice shall continue to be provided to the Executive for his personal and professional use and all reasonable and direct expenses relating thereto shall be reimbursed to the Executive by the Corporation, upon presentation of all receipts and other documentation in support thereof; the make and model of the said car shall first be approved by the Chairman of the Board of Directors of the Corporation. 14.2 The Company will reimburse up to $10,000 per year to the Executive for annual accounting, financial planning and tax preparation fees. 14.3 The Executive shall be entitled to $45,000 annually in rent offset expenses. 14.4 The Corporation shall pay the costs incurred by the Executive to join one business club and one sport club. 14.5 The Executive shall be reimbursed for all reasonable out-of-pocket expenses actually and properly incurred by him in the performance of his duties hereunder, upon presentation of expense statements, vouchers, receipts or other such supporting documentation as the Corporation may reasonably require. ARTICLE 15 TERMINATION OF THE AGREEMENT 15.1 The parties hereto acknowledge and expressly agree that the employment of the Executive by the Corporation may be terminated upon any one of the following eventualities: (a) at any time, for Cause, upon simple written notice from the Corporation to the Executive, the whole without other notice or pay in lieu of notice or any indemnity whatsoever, except for accrued but unpaid vacation pay; or (b) upon thirty (30) days notice in writing from the Executive to the Corporation, specifying the intention of the Executive to resign effective at the end of such notice period, in which event, the Corporation shall pay to the Executive his Base Salary up to the end of the notice period and any accrued and unpaid vacation pay and earned but unpaid bonuses, as well as the amounts and benefits provided under Article 18, and the Corporation shall have no further obligations hereunder in the event of such resignation of the Executive; or (c) at any time, without Cause, upon thirty (30) days notice in writing from the Corporation to the Executive, in which event the Corporation shall pay to the Executive his Base Salary to the end of the notice period, his banked vacation pay, earned but unpaid bonuses, as well as the amounts and applicable termination benefits provided under Article 18; or (d) in accordance with Article 16.1, or (e) upon the death or Incapacity of the Executive. In any of these circumstances, the Executive's spouse or estate shall to the extent applicable, be entitled to the amounts and applicable benefits under Article 18. 15.2 The Executive hereby recognizes and accepts that the Corporation shall not, in any case, be responsible for any additional amount, indemnity in lieu of notice, severance pay or other damages arising from the termination of this Agreement, above and beyond those specifically provided for in this Agreement; 15.3 If the Board of Directors is satisfied that doing so will not prejudice the Corporation or materially increase the cost to the Corporation, the Corporation shall accede to a request by the Executive to vary the nature, manner and timing of payments to be made to the Executive pursuant to this Agreement in order to optimize the Executive's financial planning. 15.4 It shall be a condition precedent of any payment to the Executive or for the Executive's benefit on termination, other than Base Salary and vacation pay, that the Executive sign and deliver to the Corporation a full and satisfactory release of all claims against the Corporation other than for the payments and benefits provided for in this Agreement. ARTICLE 16 CHANGE IN CONTROL 16.1 In the event that a Change in Control occurs after the date hereof and during the term of the Executive's employment with the Corporation, and the Executive's employment is thereafter terminated either: (a) within the period of twelve (12) months following the Change of Control, by the Corporation without Cause, other than for death, disability or voluntary retirement at normal retirement age; or (b) within the period of six hundred and thirty (630) days that follow the first one hundred (100) days following the Change in Control, by the Executive for any reason whatsoever,   the Executive shall be entitled to a lump sum payment of gross $550,000, less applicable deductions, payable within five (5) business days following the Executive's last day of work. ARTICLE 17 TRANSACTION BONUS 17.1 The parties recognize that it may be in the Corporation's best interest for the parties to actively seek a Strategic Corporate Transaction for the Corporation. 17.2 In the event that during the term of the Executive's employment with the Corporation, a Strategic Corporate Transaction is completed, the Executive shall be entitled to receive as a bonus, in one lump sum payment payable to the Executive within five (5) business days of the completion of the said transaction, the applicable one of the following gross amounts: (a) $1,000,000, less applicable deductions, in the event that the aggregate of the cash consideration and the cash equivalent value of the non-cash consideration payable on completion of the Strategic Corporate Transaction is less than Canadian $0.19 per outstanding common share of the Corporation; or (b) $2,500,000, less applicable deductions, in the event that the aggregate of the cash consideration and the cash equivalent value of the non-cash consideration payable on completion of the Strategic Corporate Transaction is equal to or greater than Canadian $0.19 per outstanding common share of the Corporation. 17.3 For the purpose of determining the cash equivalent value of any non-cash consideration payable in connection with a Strategic Corporate Transaction if such non-cash consideration consists of shares of a publicly traded company, the weighted average trading price at which such shares have traded, on the principal stock exchange on which they are listed or posted for trading, on the ten trading days preceding the date on which such transaction was completed shall be used. 17.4 Gross-Up Payment. (a) In the event that it shall be determined that any payment, award, benefit or distribution (or any acceleration of any payment, award, benefit or distribution) by the Corporation (or any of its affiliated entities) or any entity which effectuates a Change in Control (or any of its affiliated entities) to or for the benefit of Executive (whether pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 17.4) (the "Payments") 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 Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Corporation 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 Excise Tax) imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to the sum of (x) the Excise Tax imposed upon the Payments and (y) the product of any deductions disallowed because of the inclusion of the Gross-up Payment in Executive's adjusted gross income and the highest applicable marginal rate of federal income taxation for the calendar year in which the Gross-up Payment is to be made. For purposes of determining the amount of the Gross-up Payment, the Executive shall be deemed to (i) pay federal income taxes at the highest marginal rates of federal income taxation for the calendar year in which the Gross-up Payment is to be made, (ii) pay applicable state and local income taxes at the highest marginal rate of taxation for the calendar year in which the Gross-up Payment is to be made, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes and (iii) have otherwise allowable deductions for federal income tax purposes at least equal to those which could be disallowed because of the inclusion of the Gross-up Payment in the Executive's adjusted gross income. Notwithstanding the foregoing provisions of this Section 17.4, if it shall be determined that Executive is entitled to a Gross-Up Payment, but that the Payments would not be subject to the Excise Tax if the Payments were reduced by an amount that is less than 10 percent of the portion of the Payments that would be treated as "parachute payments" under Section 280G of the Code, then the amounts payable to Executive under this Agreement shall be reduced (but not below zero) to the maximum amount that could be paid to Executive without giving rise to the Excise Tax (the "Safe Harbor Cap"), and no Gross-Up Payment shall be made to Executive. The reduction of the amounts payable hereunder, if applicable, shall be made by reducing first the payments under Sections 16.1 and 17.2, unless an alternative method of reduction is elected by Executive. For purposes of reducing the Payments to the Safe Harbor Cap, only amounts payable under this Agreement (and no other Payments) shall be reduced. If the reduction of the amounts payable hereunder would not result in a reduction of the Payments to the Safe Harbor Cap, no amounts payable under this Agreement shall be reduced pursuant to this provision. (b) Subject to the provisions of Section 17.4(a), all determinations required to be made under this Section 17.4, including whether and when a Gross-Up Payment is required, the amount of such Gross-Up Payment, the reduction of the Payments to the Safe Harbor Cap and the assumptions to be utilized in arriving at such determinations, shall be made by the public accounting firm that is retained by the Corporation as of the date immediately prior to the Change in Control (the "Accounting Firm") which shall provide detailed supporting calculations both to the Corporation and Executive within fifteen (15) business days of the receipt of notice from the Corporation or the Executive that there has been a Payment, or such earlier time as is requested by the Corporation (collectively, the "Determination"). In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change in Control, Executive may appoint another nationally recognized public accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Corporation and the Corporation shall enter into any agreement requested by the Accounting Firm in connection with the performance of the services hereunder. The Gross-up Payment under this Section 17.4 with respect to any Payments shall be made no later than thirty (30) days following such Payment. If the Accounting Firm determines that no Excise Tax is payable by Executive, it shall furnish Executive with a written opinion to such effect, and to the effect that failure to report the Excise Tax, if any, on Executive's applicable federal income tax return will not result in the imposition of a negligence or similar penalty. In the event the Accounting Firm determines that the Payments shall be reduced to the Safe Harbor Cap, it shall furnish Executive with a written opinion to such effect. (c) The Determination by the Accounting Firm shall be binding upon the Corporation and Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the Determination, it is possible that Gross-Up Payments which will not have been made by the Corporation should have been made ("Underpayment") or Gross-up Payments are made by the Corporation which should not have been made ("Overpayment"), consistent with the calculations required to be made hereunder. In the event that the Executive thereafter is required to make payment of any Excise Tax or additional Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code) shall be promptly paid by the Corporation to or for the benefit of Executive. In the event the amount of the Gross-up Payment exceeds the amount necessary to reimburse the Executive for his Excise Tax, the Accounting Firm shall determine the amount of the Overpayment that has been made and any such Overpayment (together with interest at the rate provided in Section 1274(b)(2) of the Code) shall be promptly paid by Executive (to the extent he has received a refund if the applicable Excise Tax has been paid to the Internal Revenue Service) to or for the benefit of the Corporation. Executive shall cooperate, to the extent his expenses are reimbursed by the Corporation, with any reasonable requests by the Corporation in connection with any contests or disputes with the Internal Revenue Service in connection with the Excise Tax. (d) The obligations contained in this Section 17.4 shall survive the termination or expiration of the Executive's employment with the Corporation and shall be fully enforceable thereafter. ARTICLE 18 OTHER TERMINATION BENEFITS 18.1 In addition to any amounts that may be owed to the Executive pursuant to Articles 15.1 or 16.1, the Corporation shall remit to the Executive upon the termination of the Executive's employment for any reason other than Cause, the amount of $1,050,000, less applicable deductions, which amount has been fully accrued in the Corporation's 1998 and 1999 audited financial statements, plus the following benefits: (i) a lump sum payment equal to the present value, as of the date of termination, of the Corporation's cost of providing coverage under the non-group portion of the Executive's life insurance policies owned by the Corporation on the Executive's life in force immediately prior to the date of termination for a period of four and one half (4 1/2) years from the date of termination; (ii) entitlement, for a period of four and one half (4 1/2) years following the date of termination, to the Corporation's medical, dental, drug and other health benefits and thereafter, at the election of the Executive and upon payment of all premiums associated therewith from time to time by the Executive, to continue to be entitled to the benefits of the Corporation's medical, dental, drug and other health programs; (iii) not later than the thirtieth day following the date of termination, the Corporation shall transfer to the Executive if the Executive so elects the automobile, if any, placed at his disposal, at the date of termination, at no cost to the Executive, other than such income tax as he may be required to pay; (iv) if the Executive incurs legal or other fees and expenses in an effort to establish entitlement to compensation and benefits under this Agreement or otherwise enforce the terms of this Agreement and is successful in his efforts, the Company shall reimburse to the Executive such fees and expenses incurred subject to and within ten (10) days of the receipt by the Corporation of proper documentation therefor; (v) for the purpose of the Corporation's Head Office Top Executives Supplementary Pension Plan only, a credit of four and one half (4 1/2) years past service in addition to the period of past service to which the Executive is otherwise entitled as per Article 13.2, and the Executive shall be fully vested in any pension accrued hereunder; (vi) if the Executive's employment ceases, and the Executive relocates to Scottsdale, Arizona within six (6) months from such cessation, the Corporation shall pay for all reasonable moving costs related to such relocation; 18.2 The benefits set out in clause 18.1 shall be provided at the time and in the manner therein set out in clause 18.1 and the payments of money shall be made in one lump sum, less applicable deductions, no later than five (5) days following the date of termination of the Executive's employment. ARTICLE 19 PROPERTY OF THE CORPORATION 19.1 The Executive hereby agrees to return to the Corporation, immediately upon termination of this Agreement and without making copies or disclosing information relating thereto, any and all documents, reproductions thereof, equipment, including but not limited to, printers and telecopiers if any, and other property belonging to the Corporation. ARTICLE 20 COOPERATION WITH EMPLOYER AFTER TERMINATION OF THE AGREEMENT 20.1 The Executive hereby undertakes, after the termination of this Agreement (except in the case of termination for Cause) to cooperate with the Corporation in all matters related to the conclusion of ongoing work or projects and to facilitate an orderly transfer of responsibilities or functions and duties hereunder to such other employees as may be designated by the Corporation. 20.2 Notwithstanding any provision to the contrary in any unanimous shareholders' agreement between the parties, the Executive hereby undertakes to resign as Director and Officer of the Corporation and subsidiaries or affiliated companies, upon termination of his employment for any reason whatsoever. ARTICLE 21 CONFIDENTIALITY OF AGREEMENT 21.1 The Executive hereby agrees to keep strictly confidential all information concerning the present Agreement except as required by regulatory disclosure requirements. ARTICLE 22 GENERAL 22.1 Further Assurances. The parties hereby agree in their own name and on behalf of, as the case may be, their respective heirs, legatees, successors, trustees and beneficiaries, testamentary executors and permitted assigns, to sign all documents and to take all necessary or desirable measures to fulfill the terms and intent of this Agreement. 22.2 Notice. Any offer, notice, direction or other instrument required or permitted to be given hereunder shall be in writing and given by registered mail, by delivery or sent by telecopier or similar telecommunications device and addressed to the other party at the address of such party first mentioned in this Agreement. Any notice, direction or other instrument given as aforesaid shall be deemed to have been effectively given and received, if by registered mail then on the date of delivery thereof, if sent by telecopier or similar telecommunications device on the next business day following such transmission or, if delivered, to have been given and received on the date of such a delivery. Any address for service may be changed by written notice given as aforesaid. 22.3 Assignment. Except as otherwise expressly provided for herein, this Agreement, and the rights granted and the obligations incurred hereunder, are not assignable, whether in whole or in part, by the Executive without the prior written consent of the Corporation. IN WITNESS WHEREOF this Agreement has been executed by the parties hereto on the date and at the place first hereinabove mentioned.     REPAP ENTERPRISES INC.       "Stephen C. Larson" Stephen C. Larson Date: June 28, 2000   Per: "Harold (Hap) Stephen" Harold (Hap) Stephen Chairman of the Board of Directors Date: June 28, 2000     Per: "Terry McBride" Terry McBride Vice President and General Counsel Date: June 28, 2000 SCHEDULE A   "Agreement" shall mean this Employment Agreement and all instruments supplemental hereto or in amendment or confirmation hereof; "herein", "hereof", "hereto", "hereunder" and similar expressions mean and refer to this Agreement and not to any particular Article, Section, Subsection or other subdivision; "Article", "Section", "Subsection" or other subdivision of this Agreement means and refers to the specified Article, Section, Subsection or other subdivision of this Agreement. "Cause" shall mean any of the following circumstances: (1) the Executive shall have been convicted of any act constituting a felony; (2) the Executive shall have habitually abused any substance (such as alcohol or narcotics, other than as prescribed by a physician); or (3) the Executive shall have engaged in acts of fraud, material dishonesty or gross negligence in connection with the business of the Company, or (4) a willful failure or refusal by the Executive to perform his customary duties or services or any other conduct that negatively affects the reputation of the Corporation. "Change in Control" shall mean the occurrence of any of the following events after the date hereof: (a) the purchase of at least twenty-five percent (25 percent) of the outstanding common shares of the Corporation or of Repap New Brunswick Inc. by a buyer who is a forest products industry participant; or (b) the purchase of at least thirty-three percent (33 percent) of the outstanding common shares of the Corporation or of Repap New Brunswick Inc. by a buyer other than a buyer who is described in sub-paragraph (a) of this definition; or (c) the sale of substantially all of the assets of Repap New Brunswick Inc.; or (d) the consummation of a merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Corporation or Repap New Brunswick Inc. (a "Business Combination"), unless immediately following such Business Combination: more than 66 percent of the total voting power of (x) the Corporation resulting from such Business Combination (the "Surviving Corporation"), or (y) if applicable, the ultimate parent corporation that directly or indirectly has beneficial ownership of 100 percent of the voting securities eligible to elect directors of the Surviving Corporation (the "Parent Corporation"), is represented by the common shares of the Corporation or of Repap New Brunswick, Inc., as applicable, that were outstanding immediately prior to such Business Combination (or, if applicable, is represented by shares into which such common shares were converted pursuant to such Business Combination). "Confidential Information" shall mean all information, howsoever received by the Executive from, through or relating to the Corporation, and in whatever form (whether oral, written, machine readable or otherwise), which pertains to the Corporation; provided, however, that the phrase "Confidential Information" shall not include information which: (a) is in the public domain, without any fault or responsibility on the Executive's part; (b) is properly within the legitimate possession of the Executive prior to its disclosure hereunder and without any obligation of confidence attaching thereto; (c) after disclosure, is lawfully received by the Executive from another Person who is lawfully in possession of such Confidential Information and such other Person was not restricted from disclosing the said information to the Executive; (d) is approved by the Corporation for disclosure prior to its actual disclosure. "Governmental Body" shall mean: (a) any domestic or foreign national, federal, provincial, state, municipal or other government body; (b) any subdivision, ministry, department, secretariat, bureau, agency, commission, board, instrumentality or authority of any of the foregoing governments or bodies; (c) any quasi-governmental or private body exercising any regulatory, expropriation or taxing authority under or for the account of any of the foregoing governments or bodies; or (d) any domestic or foreign judicial, quasi-judicial, arbitration or administrative court, grand jury, commission, board or panel. "Incapacity" shall mean any medical condition whatsoever, which leads to the Executive's absence from job function for a continuous period of six (6) months, without the Executive being able to resume functions on a full time basis at the expiration of such period and unsuccessful attempts to return to work for periods under fifteen (15) days shall not interrupt the calculation of the said six (6) month period. "Person" shall mean any individual or other entity possessed of juridical personality, including, without limitation, a corporation, company, cooperative, partnership, trust, unincorporated association or Governmental Body; and pronouns when they refer to a Person shall have a similarly extended meaning. "Strategic Corporate Transaction" shall mean a major transaction that provides value to the holders of common shares of the Corporation and includes a takeover bid with respect to all of the common shares of the Corporation, amalgamation, merger, sale of substantially all of the Corporation's or of Repap New Brunswick Inc.'s assets, plan of arrangement, reorganization, recapitalization, other business combination or similar transaction involving the Corporation or Repap New Brunswick Inc. or any other manner which would be in the best interests of the Corporation's shareholders and which may or may not adversely affect the Executive's employment with the Corporation subsequent to such transaction. Provided that, for the purposes hereof, a Strategic Corporate Transaction shall not include any action taken or notice given by or against the Corporation or Repap New Brunswick Inc. with a view to the winding-up, liquidation, reorganization, relief or protection from creditors of the Corporation or of Repap New Brunswick Inc. including under the Bankruptcy and Insolvency Act (Canada), the Companies' Creditors Arrangement Act (Canada) or similar legislation in the United States or any other jurisdiction; nor shall a Strategic Corporate Transaction include an amalgamation, merger, plan of arrangement, reorganization, recapitalization or similar form of corporate transaction involving the Corporation or Repap New Brunswick Inc. unless immediately following such transaction, less than 50 percent of the total voting power of (x) the Corporation resulting from such transaction (the "Surviving Corporation"), or (y) if applicable, the ultimate parent corporation that directly or indirectly has beneficial ownership of 100 percent of the voting securities eligible to elect directors of the Surviving Corporation (the "Parent Corporation"), is represented by the common shares of the Corporation or of Repap New Brunswick, Inc., as applicable, that were outstanding immediately prior to such transaction (or, if applicable, is represented by shares into which such common shares were converted pursuant to such transaction).

Exhibit 10-31   AMENDMENT No. 1 to DIRECTOR SHARE PLAN of NEW YORK STATE ELECTRIC & GAS CORPORATION      The Director Share Plan (the "Plan") of New York State Electric & Gas Corporation, amended and restated effective June 1, 1998, is hereby amended as follows: 1.     Effective June 1, 2000, Section B of Article VI of the Plan is hereby amended to read in its entirety as follows: "In addition, commencing July 1, 2000 and on each October 1, January 1, April 1 and July 1 thereafter, 400 Phantom Shares will be granted to each Director who is a Plan Participant as of that date.

QuickLinks -- Click here to rapidly navigate through this document EXHIBIT 10.1 PROMISSORY NOTE $6,692,722   Omaha, Nebraska     July 21, 2000     FOR VALUE RECEIVED, the undersigned, SD ACQUISITION INC., a Nebraska corporation and any surviving entity ("Maker"), hereby promises to pay to the order of TRANSGENOMIC, INC., a Delaware corporation ("Holder"), the principal sum of SIX MILLION SIX HUNDRED NINETY TWO THOUSAND SEVEN HUNDRED TWENTY TWO AND 00/100 DOLLARS ($6,692,722) (the "Principal Balance") together with interest thereon which has accrued on the unpaid portion of the Principal Balance through the date of payment in full ("Interest"). Interest shall accrue on the Principal Balance from the date hereof until this Note is fully paid at a rate of eight-and-three-quarters percent (8.75%) per annum computed on the basis of the actual number of days elapsed without compounding. The Principal Balance and all Interest shall be due and payable on December 30, 2000 (the "Maturity Date").     The Principal Balance of this Note may be prepaid in whole or in part at any time prior to the Maturity Date. At the time of prepayment there will be due and owing to the Holder all accrued but unpaid Interest. Payment of the Principal Balance and Interest shall be made by wire transfer to an account designated by Holder or by such other means as the Holder may reasonably require.     Upon any Event of Default (as defined below), the Holder may, without notice or demand, declare the then outstanding Principal Balance and all outstanding Interest immediately due and payable. Unless waived by the Holder, any one of the following shall constitute an Event of Default under this Note:     (a) Maker 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 this Note, that certain Asset Purchase Agreement, dated May 16, 2000, between Maker and Holder (the "Agreement"), or any other agreements between Maker and Holder;     (b) Maker fails to pay the Principal Balance and all accrued and unpaid Interest on or before the Maturity Date as may be required herein or in the Agreement; and     (c) Maker (i) fails to pay or otherwise defaults with respect to any material indebtedness, installment contract or any other material obligation; (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 Maker expressly waives presentment, protest, demand, notice of dishonor or default.     This Note shall inure to the benefit of the successors, legal representatives and assigns of the Holder.     To secure the timely payment of all Principal Balance and the Interest under this Note and the performance by Maker of all of its commitments and obligations under the Agreement, Maker hereby pledges and grants to the Holder a security interest in all of the right, title and interest of the Maker in and to all of the assets, interests and undertakings of Maker, including, without limitation, all equipment, inventory and accounts, whether now owned or hereafter acquired, existing or arising, tangible or intangible, including, without limitation, all general intangible property, wherever located, together with all renewals thereof, substitutions therefor and proceeds thereof and all interest, dividends, income and revenue therefrom (the "Collateral"); and Maker hereby grants to Holder a security interest in the 1 -------------------------------------------------------------------------------- Collateral and acknowledges and agrees to take all steps necessary to perfect such security interest in accordance with the applicable laws of the State of Nebraska, including, without limitation, the Uniform Commercial Code of the State of Nebraska as it may be amended from time to time (the "UCC").  This instrument shall constitute a security agreement to the extent the Collateral constitutes personal property, and Holder shall have all of the rights of a "Secured Party" under the UCC.     As of the date hereof, Maker represents and warrants that there are no liens, mortgages or other encumbrances affecting or otherwise limiting or restricting the transferability of any or all of the Collateral other than those existing under any capital leases or similar arrangements with respect to property or equipment leased by Maker. Maker waives any right to require Holder to proceed against another person or to exhaust the Collateral or to pursue any other remedy which Holder may have. Maker waives presentment, demand for performance, notice of nonperformance, protest, notice of protest and dishonor with respect to the Collateral. Maker waives the right to require Holder to preserve rights against prior parties to instruments or chattel paper.     Except in an Event of Default, Maker shall retain all of its rights to, and use of, the Collateral and to the use of the profits or proceeds from the Collateral.     No amendment, modification or waiver of any provision of this Note, nor consent to any departure by the Maker from the terms hereof, shall be effective unless the same shall be in a writing signed by an authorized officer of the Holder, and then only in the specific instance and for the purpose for which given. No failure to exercise, and no delay in exercising, any right under the Agreement or this Note shall operate as a waiver thereof, nor shall any single or partial exercise of any right under the Agreement or this Note preclude any other or further exercise thereof or the exercise of any other right. Each and every right granted hereunder or by law or at equity shall be deemed cumulative, and such remedies may be exercised from time to time concurrently or consecutively.     All notices which may be given in connection with this Note shall be given in the manner required for notices under the Agreement.     Any term of this Note that does not comply with applicable law will not be effective if that law does not expressly or impliedly permit variations by agreement. If any part of this Note cannot be enforced according to its terms, that fact will not affect the balance of this Note.     The Maker's rights and obligations under this Note are not assignable or delegable without the prior written consent of the Holder.     This Note will be governed by the laws of the United States and the State of Nebraska, including the Uniform Commercial Code. The terms of any agreement securing the payment of this Note may also be governed by the law of the state where the property is located.     IN WITNESS WHEREOF, the Maker has executed and delivered this Note effective as of the date first set forth above.     MAKER:           SD ACQUISITION INC.           By       /s/ STEPHEN F. DWYER    -------------------------------------------------------------------------------- Stephen F. Dwyer, President 2 -------------------------------------------------------------------------------- QUICKLINKS PROMISSORY NOTE

EXHIBIT 10.35 July 1, 2000 Steve Baker Geoworks Corporation 960 Atlantic Avenue Alameda, California 94501 Re: Executive Employment Agreement Dear Steve:               This will serve as your Executive Employment Agreement (“Agreement”), effective as of July 1, 2000. This Agreement is between Geoworks Corporation, which I refer to as the “Company”, and you, referred to as the “Executive.” This Agreement is made with reference to the fact that the Company desires to retain your services as its Chief Financial Officer and, contingent upon satisfactory performance, promotion to President and Chief Operating Officer within six months, upon the terms and conditions detailed herein and subject to approval by the Board of Directors. Likewise, you desire to be employed by the Company upon the terms and conditions detailed herein. Accordingly, the Agreement is as follows:               1.  Employment. The Company hereby employs Executive, and Executive hereby agrees to serve as the Company’s Chief Financial Officer and, based upon satisfactory performance and approval by the Board of Directors, President and Chief Operating Officer, during the Term (defined below) with duties normal and customary to such positions. Executive agrees to serve at the direction of the Company’s Board of Directors and perform such services as are necessary to the faithful execution of his duties on behalf of the Company. During the Term, Executive shall serve the Company diligently and devote all business time, attention, energy, ability and best efforts to the business needs of the Company.               2.  Term of Employment.                      (a)  The initial term of employment (the “Term”) shall be for a period of two years commencing on July 1, 2000 unless earlier terminated (i) upon death of Executive, (ii) at the option of the Company upon 90 days’ prior written notice to Executive in the event of the inability to perform by reason of injury, physical or mental illness or other incapacity of Executive for a period exceeding 90 continuous days, (iii) at the option of Executive if there is a Change of Control (defined below), (iv), subject to Section 4(d) below, upon the discharge of Executive by the Board of Directors of the Company for Cause (defined below) or (v) subject to Section 4(e) below, voluntarily by Executive, or by the Company for convenience without Cause, upon 30 days prior written notice. Renewal or extensions of the Term may occur upon such terms and co nditions as mutually agreed. Executive understands he can be terminated for convenience subject to the terms and conditions of this Agreement.                      (b)  For purposes of this Agreement, “Cause” shall mean Executive’s (i) drug, alcohol or other substance abuse materially affecting Executive’s performance, (ii) commission of a crime related to Executive’s employment, (iii) conviction of any felony, (iv) a material breach of any provision of this Agreement, or (v) a material and repeated failure to follow Company policy or to perform duties as directed, which failure under clause (v) continues after the Company shall have given to Executive notice thereof and a reasonable opportunity to cure same; provided that no such notice or opportunity to cure shall be required if a unanimous vote of the Board of Directors of the Company (excluding Executive) shall determine that the giving of any such notice and opportunity to cure would cause severe and immediate harm to the Company .                      (c)  For purposes of this Agreement, “Change of Control” shall mean any sale of all or substantially all of the assets of the Company, any merger or consolidation of the Company with and into another entity where the Company is not the surviving entity or where Executive’s position or duties are substantially changed, or any transfer (in a single transaction or in a series of related transactions) of more than 25% of the outstanding common stock of the Company.               3.  Compensation. As compensation for Executive’s services hereunder and in consideration of the agreements set forth herein, the Company shall pay Executive an annual Base Salary and Bonus (subject to normal payroll deductions and withholdings as required by law), and other benefits, all payable at the 1 -------------------------------------------------------------------------------- same time and in the same manner as the Company normally pays compensation and benefits to its executive personnel. The Company shall provide the Base Salary, Bonus, and other benefits, as follows:                      (a)  Initial Base Salary. The Company shall initially pay Executive an annual base salary equal to $200,000 (the “Base Salary”).                      (b)  Review of Base Salary and Performance Incentives. Base Salary shall be reviewed annually by the Board of Directors and may, at the discretion of the Board of Directors, be increased accordingly. Bonus, Stock Options, and other performance incentives, shall be revisited and reviewed semi-annually by the Board of Directors, and may, at the discretion of the Board, be increased accordingly.                      (c)  Bonus. For each calendar year during the Term, the Company shall award Executive a bonus of up to 30% of Base Salary (payable quarterly) based upon achievement of performance objectives for Executive and the Company for such calendar year (or portion thereof), as may be determined by the Board of Directors. The Board of Directors may, in its discretion, award additional performance bonuses to Executive.                      (d)  Stock Options. The Company will provide executive a stock option grant of 100,000 shares at the designated price per share, vesting in accordance with the Company’s applicable Stock Plans, as amended.                      (e)  Other Benefits. Executive shall be entitled to participate in the Company’s executive benefit programs with fringe benefits, perquisites, and other benefits of employment as follows:               (i)  The Company shall provide medical and dental insurance coverage for Executive and his spouse and children, with all premiums paid by the Company;               (ii)  At all times, the Company shall provide Executive with disability insurance coverage on the same basis as in (e)(i) above;               (iii)  The Company shall reimburse Executive for all reasonable travel, entertainment, professional development, and other documented expenses incurred by Executive in the performance of Executive’s duties; and               (iv)   During the Term, Executive shall be entitled to 15 vacation or personal days in each calendar year, subject to proration in respect of periods of less than a calendar year. Executive shall be entitled to be paid for accrued but unused vacation or personal days.               (v)  Insurance premiums for $500,000 term life insurance for Executive.               4.  Early Termination and Severance.                      (a)  Executive shall not be entitled to severance compensation under this provision if Executive quits his employment voluntarily.                      (b)  If Executive’s employment is terminated during the Term because of death or disability under Section 2(a)(i) or (ii), then Executive shall be entitled to, and the Company shall pay to Executive or his estate, an amount equal to Executive’s then current Base Salary for a period of ninety (90) days thereafter.                      (c)  If Executive’s employment voluntarily terminates during the Term pursuant to Section 2(a)(iii) following a Change of Control, then Executive shall be entitled to, and the Company shall pay to Executive as severance compensation, an amount equal to Executive’s then current Base Salary for the remainder of the Term of this Agreement, but not less than eighteen months, payable in equal monthly installments, and the Company shall for such concurrent time period pay and maintain in full force and effect the Other Benefits in Sections 3(e)(i)-(ii), (v), and 100% of Executive’s shares granted under Section 3(d) herein and all prior grants shall vest on the date of termination.                      (d)   If Executive is terminated by the Company for Cause during the Term under Section 2(b)(i) - (iv), then Executive shall be entitled to, and the Company shall pay to Executive as severance compensation, an amount equal to one month of Executive’s then current Base Salary, the Company shall concurrently pay and maintain in full force and effect for one month the Other Benefits in Sections 3(e)(i)-(ii), (v), 2 -------------------------------------------------------------------------------- and none of Executive’s remaining unvested shares granted herein under Section 3(d) shall vest on the date of termination.                      (e)   If Executive is terminated by the Company during the Term pursuant to Section 2(a)(v) [i.e., for convenience rather than Cause pursuant to Section 2(a)(iv), or for death or disability pursuant to Sections 2 (a)(i) or (ii)], then Executive shall be entitled to, and the Company shall pay to Executive as severance compensation, an amount equal to Executive’s then current Base Salary for the remainder of the Term of this Agreement, but not less than eighteen months, payable in equal monthly installments; and the Company shall for such concurrent time period pay and maintain in full force and effect the Other Benefits in Sections 3(e)(i)-(ii), (v); and on the date of termination [for convenience rather than for Cause pursuant to Section 2(a)(iv) or death or disability] the vesting restrictions on Executive’s remaining unvested Stock Opti ons granted under Section 3(d) will accelerate and lapse as follows: (i) all vesting restrictions on Executive’s 100,000 share option granted under Section 3(d) and all prior grants will accelerate and lapse. The Company agrees that such vesting acceleration is proper in such circumstances as it fairly reflects Executive’s previous contributions and efforts.               5.  Confidentiality.                      (a)  Executive acknowledges that during his employment or association with the Company (whether prior to or subsequent to the date hereof), Executive may access to or developed Confidential Information. “Confidential Information” means all data, information, know-how, legal information, techniques, technical plans, terms sheets, documentation, customer lists, business plans, marketing plans, financial information, and the like, in whatever form or medium, and whether or not designated or marked “Confidential” or the like, which: (1) relate to the business of the Company and/or its predecessors and (a) which have not been disclosed by the Company or its predecessors to the general public or to the Company’s trade or industry, and (b) which Executive knows or has good reason to know are not generally known to the general publ ic or to the Company’s trade or industry; or (2) are received by the Company from a third party under an ongoing obligation of confidentiality to the third party.                      (b)  Executive shall not use or disclose (directly or indirectly) any Confidential Information (whether or not developed by Executive) at any time or in any manner, except as required in the course of employment with the Company or as directed by a court of competent jurisdiction after notice to the Company. The obligations of this paragraph are continuing and survive the termination of Executive’s employment with the Company.                      (c)  All Confidential Information, documents, and equipment relating to the business of the Company, whether prepared by Executive or otherwise coming into Executive’s possession, are the exclusive property of the Company, and must not be removed from any of its premises except as required in the course of employment with the Company. All such Confidential Information, documents, and equipment shall be promptly returned by Executive to the Company upon the request of the Company, and on any termination of Executive’s employment with the Company.                      (d)  Following termination or resignation, Executive shall refrain from soliciting employees of the Company for a period of one (1) year.               6.  Miscellaneous.                      (a)  Notices. All notices or other communications hereunder shall be deemed to have been duly given and made on the date of receipt if in writing and if served by personal delivery upon the party for which it is intended or delivered by registered or certified mail, return receipt request, or by reputable overnight courier to the person at the address indicated, or such other address as may be designated in writing hereafter, in the same manner, by such person: If to the Company, at its principal executive offices marked “Attention: Chairman of the Board”; or If to Executive, to his most recent address appearing in the Company’s records.                      (b)  Amendment; Waiver. Any provision of this Agreement may be amended or waived if, and only if, such amendment or waiver is in writing and signed, in the case of an amendment, by the Company and Executive, or in the case of a waiver, by the party against whom the waiver is to be effective. No failure or delay by either party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any 3 -------------------------------------------------------------------------------- other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.                      (c)  Assignment. Executive shall not have either the right or power to assign or delegate any provision of this Agreement (including by operation of law) and any purported such assignment or delegation shall be void. The Company may assign its benefits under this Agreement (in whole but not in part) only to a person into or with which the Company is merged or consolidated or to which all or substantially all of the assets of the Company are sold.                      (d)  Entire Agreement. This Agreement contains the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral or written, with respect to such matters.                      (e)  Parties in Interest. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns. Nothing in this Agreement, express or implied, is intended to confer upon any person other than the parties hereto, or their successors or permitted assigns, any rights or remedies under or by reason of this Agreement.                      (f)  Governing Law. This agreement shall be governed by and construed in accordance with the laws of the State of California.                      (g)  Severability. If any provision of this Agreement is held invalid or unenforceable, the remainder of this Agreement shall nevertheless remain in full force and effect. If any provision is held invalid or unenforceable with respect to any particular circumstances, it shall nevertheless remain in full force and effect in all other circumstances.                      (h)  Headings. The section headings herein are for convenience only and shall not affect the construction of this Agreement.                      (i)  Counterparts. This Agreement may be executed in any number of counterparts, each of which, when executed, shall be deemed to be an original and all of which together shall constitute one instrument.                      (j)  Attorney’s Fees. In the event of any legal action for breach of this Agreement, the prevailing party shall be entitled to reasonable attorney’s fees, costs and expenses incurred in connection therewith.                      (k)  Authorization. This Agreement has been approved by the Compensation Committee and duly authorized by the Board of Directors. 4 --------------------------------------------------------------------------------               IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year first above written.      Very truly yours, GEOWORKS CORPORATION   By:   /s/ David L. Grannan      --------------------------------------------------------------------------------        David L. Grannan President & CEO      “Executive”:      /s/ Stephen T. Baker      --------------------------------------------------------------------------------        Stephen T. Baker 5

EXHIBIT 10.37 SHARE PURCHASE AGREEMENT              This Share Purchase Agreement (“Agreement”) is made as of July 4, 2000, by SanDisk Corporation, a Delaware corporation (“Buyer”), and Tower Semiconductor Ltd., an Israeli corporation (the “Company”). RECITALS              The Company desires to sell, and Buyer desires to purchase, an interest in the Company through the acquisition of 866,551 ordinary shares, par value NIS1.00 each (the “Shares”) of the Company and through the issuance and delivery of Addtional Purchase Obligations for the purchase by Buyer of additional Ordinary Shares of the Company, on the terms and subject to the conditions set forth in this Agreement and in the Addtional Purchase Obligation Agreement in the form of Exhibit B hereto.              NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the parties agree as follows: 1.  Definitions         For purposes of this Agreement, the following terms have the meanings specified or referred to in this Section 1:         “Additional Financings” – as defined in Section 3.5.         “Additional Financing Plan” – a detailed written plan, approved by the Board and detailing, among other things, the significant financial terms and timetable under which the Company will obtain the financings listed in Section 7.6 hereto, all as set forth in Section 10 to the Business Plan.         “Ancillary Agreements” – as defined in Section 3.2.4.         “Applicable Contract”- any Contract (a) under which the Company or any Subsidiary has or may acquire any rights, (b) under which the Company or any Subsidiary has or may become subject to any obligation or liability, or (c) by which the Company or any Subsidiary or any of the assets owned or used by them is or may become bound.         “Assets” – as defined in Section 3.6.         “Balance Sheet”- as defined in Section 3.4.2.         “Business Plan” means the Business Plan, dated July 4, 2000, of the Company with respect to the proposed construction, deployment and operation by the Company of Fab 2.         “Buyer”- as defined in the first paragraph of this Agreement.         “Closing”- as defined in Section 2.3.         “Closing Date”- the date and time as of which the Closing actually takes place.         “Company”- as defined in the first paragraph of this Agreement.         “Consent”- any approval, consent, ratification, waiver, or other authorization (including any Governmental Authorization).         “Contemplated Transactions”- all of the transactions contemplated by this Agreement, the Transaction Documents and the Ancillary Agreements.         “Contract”- any agreement, contract, obligation, promise, or undertaking whether oral or written that is legally binding.         “Damages”- as defined in Section 10.2. --------------------------------------------------------------------------------         “Encumbrance”- any charge, claim, community property interest, condition, equitable interest, lien, option, pledge, security interest, right of first refusal, or restriction of any kind, including any restriction on use, voting, transfer, receipt of income, or exercise of any other attribute of ownership.         “Escrow Agreement”- as defined in Section 2.4.         “Escrow Agent”- as defined in the Escrow Agreement.         “Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended, and any rules or regulations issued pursuant to that Act or any successor law.         “Excluded Securities” means Ordinary Shares or options to purchase Ordinary Shares issued to bona fide employees, directors or consultants of the Company or any Subsidiary thereof.         “Fab 2” – The Company’s new Fab project to be constructed in Migdal Haemek in Israel, all as further set forth in the Business Plan.         “Facilities”- any real property, leaseholds, or other interests currently owned or operated by the Company and any buildings, plants, structures, or equipment currently owned or operated by the Company.         “GAAP”- generally accepted Israel accounting principles, applied on a basis consistent with the basis on which the Balance Sheet and the other financial statements referred to in Section 3.4 were prepared.         “Governmental Authorization”- any approval, consent, license, permit, waiver, or other authorization issued, granted, given, or otherwise made available by or under the authority of any Governmental Body or pursuant to any Legal Requirement.         “Governmental Body”- any U.S. or Israeli federal, state, local, municipal or other government, governmental or quasi-governmental authority of any nature (including any governmental agency, branch, department, official or entity and any court or other tribunal), or body exercising or entitled to exercise any administrative, executive, judicial, legislative, police, regulatory or taxing authority or power of any nature.         “Intellectual Property Assets” - as defined in Section 3.20.         “Interim Balance Sheet”- as defined in Section 3.4.2.         “Investment Center” – the Investment Center of the Ministry of Trade and Commerce of the Israeli Government.         “Knowledge” or “knowledge”- a person will be deemed to have “Knowledge” or “knowledge” of a particular fact or other matter if any individual who is serving as a Named Director or Officer has, or at any time had, knowledge of such fact or other matter.         “Legal Requirement”- any U.S. or Israeli federal, state, local, municipal or administrative or other order, constitution, law, ordinance, principle of common law, regulation, statute, or treaty.         “Named Officers and Directors”- as defined in Section 3.3.2.         “OCS” – as defined in Section 3.21.         “Order”- any award, decision, injunction, judgment, order, ruling, subpoena, or verdict entered, issued, made, or rendered by any court, administrative agency, or other Governmental Body or by any arbitrator.         “Ordinary Course of Business”- an action taken by a Person will be deemed to have been taken in the “Ordinary Course of Business” only if: Such action is consistent with the past practices of such Person and is taken in the ordinary course of the normal day-to-day operations of such Person; and         Such action is similar in nature and magnitude to actions customarily taken in the ordinary course of the normal day-to-day operations of other Persons that are in the same line of business as such Person.         “Ordinary Shares” – the ordinary shares of the Company, par value NIS1.00 per share. --------------------------------------------------------------------------------         “Organizational Documents”- (a) the memorandum of association, articles of association, certificate of incorporation and/or the bylaws of a corporation; (b)  the partnership agreement and any statement of partnership of a general partnership; (c) the limited partnership agreement and the certificate of limited partnership of a limited partnership; (d) any charter or similar document adopted or filed in connection with the creation, formation, or organization of a Person; and (e) any amendment to any of the foregoing.         “Person”- any individual, corporation (including any non-profit corporation), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, labor union, or other entity or Governmental Body.         “Proceeding”- any action, arbitration, audit, hearing, investigation, litigation, or suit (whether civil, criminal, administrative, investigative, or informal) commenced, brought, conducted, or heard by or before, or otherwise involving, any Governmental Body or arbitrator.         “Representative”- with respect to a particular Person, any director, officer, employee, agent, consultant, advisor, or other representative of such Person, including legal counsel, accountants, and financial advisors.         “Schedule” means a schedule comprising part of the disclosure schedule delivered by the Company to Buyer concurrently with the execution and delivery of this Agreement.         “Securities Act”- the U.S. Securities Act of 1933 as amended, and regulations and rules issued pursuant to that Act or any successor law.         “Shares”- as defined in the Recitals of this Agreement.         “Steering Committee” – a committee to be formed immediately upon the signing of this Agreement and dissolved upon the Closing and comprised of three members including one representative of each of the Buyer, TIC and the Company, none of whom needs to be a member of the Board. The Steering Committee shall oversee the development, assessment and implementation, and, if applicable, any modification of the Business Plan as specified in Sections 5.6.5 of this Agreement. The Steering Committee shall not be deemed to be a committee of the Board and its members shall not have a fiduciary duty to the Company. The Steering Committee shall consider, in making decisions pursuant to Sections 5.6.5 and 7.3 hereunder, (a) the construction schedule of Fab 2 as set forth in the Business Plan and any changes thereto, (b) the Additional Financing Plan as set forth in the Business Plan and any failure to comply with the schedule for such f inancings or changes to the Additional Financing Plan, (c) any significant increase in the cost of Fab 2 beyond that set forth in the Business Plan and (d) the production capacity schedule of Fab 2 as set forth in the Business Plan and any changes thereto.         “Subsidiary”- any corporation or other Person of which securities or other interests having the power to elect a majority of that corporation’s or other Person’ s board of directors or similar governing body, or otherwise having the power to direct the business and policies of that corporation or other Person (other than securities or other interests having such power only upon the happening of a contingency that has not occurred) are held by the Company or one or more of its Subsidiaries.         “Tax Return”- any return (including any information return), report, statement, schedule, notice, form, or other document or information filed with or submitted to, or required to be filed with or submitted to, any Governmental Body in connection with the determination, assessment, collection, or payment of any Tax or in connection with the administration, implementation, or enforcement of or compliance with any Legal Requirement relating to any Tax.         “TIC”- The Israel Corporation Ltd.         “Threatened”- a claim, Proceeding, dispute, action, or other matter will be deemed to have been “Threatened” if either (a) any demand or statement has been made in writing or any notice has been given in writing or any other event has occurred or any other circumstance exists, that actually leads any Named Officer and Director to believe that such a claim, will be filed or otherwise pursued in the future or (b) any demand or statement has been made orally or any notice has been given orally to the effect that such a claim, Proceeding, dispute, action or other matter will be asserted, commenced, taken or otherwise pursued in the future. 3 --------------------------------------------------------------------------------         “Transaction Documents” – collectively, the Foundry Agreement, the Addtional Purchase Obligation Agreement, the Escrow Agreement (all as defined in Section 2.4), the Shareholders Agreement and the Registration Rights Agreement (as defined in Section 2.5.1.5.).          “Wafer Partner” – a wafer manufacturer that either invests in the equity of the Company and enters into an agreement with the Company providing for a wafer order right or that enters into a wafer manufacturing agreement with the Company on a “take or pay” basis or on a “pre-payment” basis, in each case in accordance with the provisions of Sections 7.6(ii) and 7.7 hereof.         “Additional Purchase Obligations” – Conditional obligations to purchase Ordinary Shares of the Company issued under the Additional Purchase Obligation Agreement.         Additional Defined Terms 6K Reports Section 3.4.1 Material Adverse Effect Section 3.1.1 Additional Incentive Plans Section 1.14 Offered Securities Section 11.8.1 Additional Purchase Obligation Agreement Section 2.4 Patents Section 3.20.1 Additional Purchase Obligation Shares Section 2.4 Project Committee Section 11.4 Additional Wafer Partner Financing Date Section 7.6 Pro Rata Share Section 11.8.1 Annual Report Section 3.4.1 Purchase Price Section 2.2 Articles Section2.5.1.2 Registration Right Agreement Section 2.5.1.5 Board Section 2.4 Rights in Mask Works Section 3.10.1 Copyrights Section 3.20.1 SEC Section 3.4.1 Debt Financing Term Sheet Section 5.6.4 Shareholders Agreement Section 2.5.1.5 Environmental Study Section 3.5.1 SEC Documents Section 3.4.1 Executed Transaction Documents Section 3.2.1 Steering Committee Section 5.10 Grants Section 3.2.1 Taxes Indemnified Persons Section 10.2 Toshiba Agreement Section 3.2.3 Foundry Agreement Section 2.4 Wafer Commitments Section 7.7 Marks Section3.20.1 Wafer Partner Differential Section 7.6 2.  Sale and Transfer of Shares; Purchase Price; Closings         2.1.  Delivery. Subject to the terms and conditions of this Agreement, at the Closing, the Company shall issue to the Buyer the Shares, validly authorized, duly issued, fully paid and nonassesable entitled to all rights and privileges assigned to such Shares in this Agreement and in the Articles and free of any Encumbrances (other than arising solely by or through actions of Buyer), in consideration for the release of the Purchase Price (as defined below) from the Escrow Agent to the Company.         2.2.  Purchase Price. The per share purchase price will be $23.08 (all references herein to “$” are to United States dollars) representing an aggregate purchase price (the “Purchase Price”) for the Shares of $20,000,000. Within 14 days of the execution of this Agreement, the Purchase Price will be deposited in escrow pursuant to the terms and conditions of the Escrow Agreement with an escrow agent to be appointed by the parties. At the Closing, subject to the fulfillment or waiver of all closing conditions hereto, the Purchase Price will be released from escrow to the Company all in accordance with the terms and conditions of this Agreement and the Escrow Agreement and all interest accrued with respect to the Purchase Price during the escrow period will be released to the Company.         2.3.  Closing. The closing provided for in this Agreement (the “ Closing”) will take place at the offices of Meitar, Liquornik, Geva & Co. at 16 Abba Hillel Silver Road, Ramat Gan, 52506, Israel at 10:00 a.m. (local time) on the date that is seven days following satisfaction of all the conditions specified in Sections 7 and 8, unless the parties otherwise agree, provided that the Closing may not, in any event, take place after January 31, 2001, unless the parties otherwise agree. In the event that the Closing fails to take place by January 31, 2001, or such later 4 -------------------------------------------------------------------------------- date as the parties may agree, or otherwise terminates pursuant to section 9.1, then all interest accrued with respect to the Purchase Price and the Purchase Price shall be retained by Buyer.         2.4.  Other Agreements; Company’s Resolutions. Concurrently with the execution of this Agreement, (a) the parties hereto are executing and entering into the Foundry Agreement in the form of Exhibit A hereto (the “Foundry Agreement”) and the Addtional Purchase Obligation Agreement in the form of Exhibit B hereto (the “Addtional Purchase Obligation Agreement”), each of which shall provide that they shall only be effective upon the Closing, (b) the Company is delivering to the Buyer certified resolutions of the Company’s board of directors (the “Board”) authorizing and approving the execution, delivery and performance of the Transaction Documents and the consummation of the Contemplated Transactions, including without limitation, the issuance of the Shares to the Buyer and all shares issuable upon exercise of the Addtional Purchase Obligations under the Addtional Purchase Obligatio n Agreement (the “Addtional Purchase Obligation Shares”) (subject, in relation to the issuance of the Shares and the Addtional Purchase Obligation Shares, to Company shareholder approval pursuant to a general meeting of the Company) and (c) the Company is delivering to the Buyer a certificate dated the date hereof signed by the co-Chief Executive Officer of the Company identified in Schedule 7.15 to the effect set forth in Section 7.15. The parties shall enter into the Escrow Agreement in the form of Exhibit C hereto (the “Escrow Agreement”) within 14 days of the date hereof. Buyer and TIC will execute and enter into the Shareholders Agreement in the form of Exhibit D hereto (the “Shareholders Agreement”) within 14 days of the date hereof.         2.5.  Closing Obligations. At the Closing:               2.5.1.  The Company will deliver to Buyer:                      2.5.1.1.  Certified copies of resolutions of the Company’s shareholders relating to, among other things, an increase in the Company’s registered share capital and the issuance of the Shares and the Addtional Purchase Obligation Shares, and the Board authorizing and approving the Ancillary Agreements and the transactions contemplated therein;                      2.5.1.2.  Certified copies of the Company’s Articles of Association (the “ Articles”) as amended through the Closing Date;                      2.5.1.3.  A certificate duly executed by two executive officers of the Company in the form set forth in Schedule 2.5.1.3, dated as of the date of the Closing;                      2.5.1.4.  The opinion of Yigal Arnon & Co., counsel to the Company, in the form reasonably satisfactory to Buyer and its counsel to be attached hereto as Schedule 2.5.1.4, dated as of the date of the Closing;                      2.5.1.5.  Executed copies of the Registration Rights Agreement substantially in the form of Exhibit E hereto (the “Registration Rights Agreement”), which shall provide an equal number of Demand Rights (as defined in such agreement) to Buyer and TIC.                      2.5.1.6.  Validly executed certificates representing the Shares, issued in the name of the Buyer and a certificate of the secretary of the Company confirming that the Shares were registered in the share register of the Company in the name of Buyer;                      2.5.1.7.  Copies of documents evidencing all Consents and approvals required under Section 7.3 hereof;                      2.5.1.8.  Copies of all the Ancillary Agreements duly executed and delivered and in accordance with Section 7 hereof;                      2.5.1.9.  The written consent of the OCS and the Investment Center to the execution of this Agreement and the issuance of the Shares to the Buyer.                      2.5.1.10.  The certificate required to be delivered under Section 7.15 hereof. 5 --------------------------------------------------------------------------------               2.5.2.  Buyer will deliver to the Company:                      2.5.2.1.  A copy of a letter from Buyer to the Escrow Agent irrevocably authorizing the release of the Purchase Price to the account of the Company pursuant to the terms of the Escrow Agreement;                      2.5.2.2.  A certificate duly executed by two executive officers of Buyer in the form set forth in Schedule 2.5.2.2, dated as of the date of the Closing.                      2.5.2.3.  Executed copies of the Shareholders Agreement and the Registration Rights Agreement . 3.  Representations and Warranties of the Company         The Company hereby represents and warrants to Buyer as of the date hereof and as of the Closing and as otherwise provided in the Addtional Purchase Obligation Agreement as follows:         3.1.  Organization and Good Standing               3.1.1.  The Company and each Subsidiary is a corporation duly organized, validly existing, and in good standing under the laws of its jurisdiction of incorporation, with full corporate power and authority to conduct its business as it is now being conducted and as currently approved by the Board to be conducted in the future and to own or use its properties and assets. The Company has all requisite corporate power to perform all its obligations under Applicable Contracts including, but not limited to, the Ancillary Agreements, subject, with respect to the issuance of the Shares and the Addtional Purchase Obligation Shares, to receipt of the shareholder resolutions referred to in Section 2.5.1.1. The Company and each Subsidiary is duly qualified to do business as a foreign corporation and is in good standing under the laws of each state or other jurisdiction in which either the ownership or use of the properties owned or used by it, or the nature of the activities conducted by it or proposed to be conducted by it, requires such qualification, unless such non-qualifications would not have a material adverse affect on the business, financial conditions, assets, operations and prospects of the Company and its Subsidiaries taken as a whole (a “Material Adverse Effect”). Schedule 3.1 contains a complete and accurate list for the Company and each Subsidiary of its name, its jurisdiction of incorporation, other jurisdictions in which it is authorized to do business, and its capitalization, including (i) in connection with each Subsidiary, the identity of each shareholder and the number of shares held by such shareholder, and (ii) in connection with the Company, the identity of each shareholder who to the knowledge of the Company holds more than 5% of the issued and outstanding share capital of the Company and the number of shares of the Company held by each such shareholders. Also enclose d in Schedule 3.1 is a copy of the list of shareholders maintained by the Company’s transfer agent as of a date within 5 days prior to the date hereof.               3.1.2.  The Company has delivered to Buyer copies of (i) the Organizational Documents of the Company and each Subsidiary, as currently in effect, and (ii) minutes of all meetings of the directors and shareholders of the Company and each Subsidiary held since January 1, 1995 and all resolutions passed by the directors or shareholders since January 1, 1995.         3.2.  Authority; No Conflict; Consents and Approvals               3.2.1.  Each of this Agreement, the Addtional Purchase Obligation Agreement, the Addtional Purchase Obligations, the Escrow Agreement and the Foundry Agreement (the “Executed Transaction Documents”) has been duly authorized, executed and delivered by the Company (subject, with respect to the increase in the Company’s registered share capital and issuance of the Shares and the Addtional Purchase Obligation Shares, to receipt of shareholder approval by Closing) and, assuming the due execution and delivery hereof and thereof by Buyer, constitutes the legal, valid, and binding obligation of the Company, enforceable against the Company in accordance with its terms. Upon the execution and delivery by the Company of the Transaction Documents and the other Ancillary Agreements (where applicable), and assuming the due execution and delivery thereof by the other parties thereto, the Transaction Documents and the other Ancillary Agreements (where applicable) will constitute the legal, valid, and binding obligations of the Company, enforceable against the Company in accordance with their respective terms. The Company has the absolute and unrestricted right, power, authority, and capacity to execute and deliver this Agreement and the Transaction Documents and the other Ancillary Agreements (where applicable) and to perform its obligations under this Agreement, the Transaction Documents and the other Ancillary Agreements (where applicable) (subject, with respect to the issuance of the Shares and the Addtional Purchase Obligation Shares, to receipt of Company shareholder approval by Closing) and 6 -------------------------------------------------------------------------------- has taken all corporate action necessary to consummate the transactions contemplated hereby and thereby and to perform its obligations hereunder and thereunder.               3.2.2.  Except as set forth in Schedule 3.2, neither the execution and delivery of this Agreement, any of the Transaction Documents or any of the other Ancillary Documents nor the consummation or performance of any of the foregoing is or will, directly or indirectly (with or without notice or lapse of time):                      3.2.2.1.  contravene, conflict with, or result in a violation of (A) any provision of the Organizational Documents of the Company or any Subsidiary, or (B) any resolution adopted by the board of directors or the shareholders of the Company or any Subsidiary; or                      3.2.2.2.  contravene, conflict with, or result in a violation of, or give any Governmental Body or other Person the right to challenge or to exercise any remedy or obtain any relief under, any Legal Requirement or any Order to which the Company or any Subsidiary, or any of the assets owned or used by the Company or any Subsidiary, may be subject, the breach of or default under which could have a Material Adverse Effect or could materially adversely affect the consummation of the Contemplated Transactions; or                      3.2.2.3.  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 Subsidiary or that otherwise relates to the business of, or any of the assets owned or used by, the Company or any Subsidiary, the effect of which would have a Material Adverse Effect or materially adversely affect the consummation of the Contemplated Transactions; or                      3.2.2.4.  contravene, conflict with, or result in a violation or breach of any provision of, or give any Person the right to declare a default or exercise any remedy under, or to accelerate the maturity or performance of, or to cancel, terminate, or modify, any Applicable Contract, the effect of which could have a Material Adverse Effect or materially adversely affect the consummation of the Contemplated Transactions; or                      3.2.2.5.  result in the imposition or creation of any Encumbrance upon or with respect to any of the Asset owned or used by the Company or any Subsidiary, the effect of which could have a Material Adverse Effect or materially adversely affect the consummation of the Contemplated Transactions.               3.2.3.  Except as set forth in Schedule 3.2.3, no notice to, filing with or Consent from any Person or Governmental Body is or will be required to be made or obtained in connection with the execution and delivery of (i) this Agreement, (ii) the Transaction Documents, (iii) the Technology License Agreement, effective April 7, 2000 between the Company and Toshiba Corporation (the “Toshiba Agreement”) and (iv) the Additional Incentive Plans (as defined in Section 7.14) or the consummation or performance of any of the transactions contemplated hereby or thereby.               3.2.4.  To the best knowledge of the Company and based on the Company’s investigation as of the date hereof, except as set forth in Section 5.2 to the Business Plan and Schedule 3.2.3, no notice to, filing with or Consent from any Person or Governmental Body is or will be required to be made or obtained in connection with (a) the construction, deployment and operation of Fab 2 in accordance with the Business Plan, (b) the implementation of the Additional Financing Plan (as defined), provided that the representation made in this clause (b) is given to the actual Knowledge of the Company on the date hereof in respect of equity financings to be provided by Wafer Partners, and (c) the execution, delivery and performance of the agreements entered into or to be entered into by the Company in connection therewith (such agreements, together with the agreements referred to in clauses (i)- (iv) of Section 3.2.3, the “Ancillary Agreements”), other than, in respect of each of the foregoing clauses, notices, filings or Consents, the failure of which to be made or obtained would not, individually or in the aggregate have a material adverse affect on the construction and operation of Fab 2.         3.3.  Capitalization; Issuance of Shares; Officers and Directors.               3.3.1.  The authorized share capital of the Company, immediately prior to the Closing, including the proposed increase in share capital referred to in Section 2.4, will consist of 70,000,000 Ordinary Shares, of which 12,207,007 shares are issued and outstanding and 1,784,804 are reserved for issuance of outstanding options to employees, officers and directors and 1,615,500 are reserved for future grants of options to employees, officers and directors. All of the outstanding Ordinary Shares have been duly authorized and validly issued and are fully paid and nonassessable. Schedule 3.3 sets forth the list of the Company’s shareholders of record as maintained by the 7 -------------------------------------------------------------------------------- transfer agent and a list of all the options outstanding, the vesting schedules of such options and the exercise prices thereof. Except as set forth in Schedule 3.3, there are no Contracts relating to the issuance, or to the Knowledge of the Company, sale, transfer, or Encumbrance (other than arising solely by or through actions of Buyer) of any equity securities or securities convertible or exchangeable into equity securities of the Company. When the Shares shall have been issued and delivered to Buyer as part of the Closing, such Shares will: (i) have been duly authorized for issuance by the Company’s Board, (ii) upon delivery of the consideration therefor in accordance with the terms of this Agreement and the Escrow Agreement, be duly and validly issued, fully paid and nonassessable and (iii) be free and clear of any Encumbrances, and not the subject of any preemptive or other participation rights.               3.3.2.  The Company’s and its Subsidiaries current officers and directors are those persons whose names are set forth in Schedule 3.3.2 (the “Named Officers and Directors”).               3.3.3.  Neither the Company nor any Subsidiary has any agreement, obligation or commitment with respect to the election of any Person to the Company’s Board and/or any Subsidiary’s board of directors and to the actual knowledge of the Company, there is no voting agreement or other arrangement among the Company’s shareholders or the Subsidiaries’ shareholders, and there are no agreements or arrangements between any Person which affects or relates to the voting or giving written consents with respect to the Company’s or any Subsidiaries’ securities including with respect to the nomination of a director and/or officer of the Company and/or the Subsidiary.               3.3.4.  There are no agreements, commitments and understandings, whether written or oral, with respect to any compensation to be provided by the Company and/or the Subsidiary to any of the Named Officers and Directors, and, to the best knowledge of the Company, to be provided by any third party to any of the Named Officers and Directors, except as set forth in Schedule 3.3.4.               3.3.5.  Except as set forth in Schedule 3.3.5 (a) and in the Registration Rights Agreement to be entered into hereunder, the Company is not under any obligation to register for trading on any securities exchange any of its currently outstanding securities or any of its securities which may hereafter be issued. Since its incorporation there has been no declaration or payment by the Company of dividends, or any distribution by the Company of any assets of any kind to any of its shareholders in redemption of or as the purchase price for any of the Company’s securities except as set forth in Schedule 3.3.5 (b).         3.4.  SEC Documents; Financial Statements               3.4.1.  The Company has furnished to Buyer copies of the Company’s Annual Report on Form 20-F for the year ended December 31, 1999 (the “Annual Report”) as filed with the U.S. Securities and Exchange Commission (“SEC”) on March 20, 2000. The Company represents and warrants to Buyer that: (i) the Annual Report has been duly filed with the SEC, and when filed was in compliance in all material respects with the requirements of the Exchange Act and the rules and regulations of the SEC applicable to such Annual Report; and (ii) the Annual Report was complete and correct in all material respects as of its date and, as of its date, did not contain any untrue statement of material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not mislea ding. The Company has provided the Buyer with a copy of each document submitted to the SEC on Form 6-K since January 1, 1999 (the “6K Reports” and together with the Annual Report, the “SEC Documents”). The Company represents and warrants to Buyer that: (i) the 6K Reports have been duly submitted to the SEC, and when submitted were in compliance in all material respects with the requirements of the Exchange Act and the rules and regulations of the SEC applicable to such 6K Reports; and (ii) the 6K Reports were complete and correct in all material respects as of their respective dates and, as of such dates, did not contain any untrue statement of material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. The Company represents that it has filed all the reports that the Company was required to file with the SEC since January 1, 1998, according to the requirements of the Exchange Act.               3.4.2.  The Company has delivered to Buyer: (a) audited consolidated balance sheets of the Company as at December 31 in each of the years 1998 through 1999 (the December 31, 1999 balance sheet being hereinafter referred to as the “Balance Sheet”) and the related audited consolidated statements of income, changes in shareholders’ equity, and cash flow for each of the fiscal years then ended, together with the report thereon of Brightman Almagor, independent certified public accountants, and (b) an unaudited consolidated balance sheet of the Company as at March 31, 2000 (the “Interim Balance Sheet”) and the related unaudited consolidated statements 8 -------------------------------------------------------------------------------- of income, changes in shareholders’ equity, and cash flow for the three months then ended, including in each case the notes thereto. Such financial statements and notes fairly present the financial condition and the results of operations, changes in shareholders’ equity, and cash flow of the Company as at the respective dates of and for the periods referred to in such financial statements, all in accordance with GAAP, subject, in the case of interim financial statements, to normal recurring year-end adjustments (the effect of which will not, individually or in the aggregate, be materially adverse); the financial statements referred to in this Section 3.4.2 reflect the consistent application of such accounting principles throughout the periods involved.         3.5.  Business Plan; Additional Financing Plan               True and correct copies of the Business Plan and of the Environmental Study submitted to the District Zoning Authority (the “ Environmental Study”) are attached hereto as Schedule 3.5. The Company has conducted reasonable research and surveys in preparing the Business Plan and the Environmental Study and consulted with reputable experts in the field as is reasonably appropriate in these circumstances. The Company believes that the opinions, assumptions and timetables contained in the Business Plan (including both the alternate case assumptions and the base assumptions, as defined therein, and without giving effect to any risk factors included therein) and in the Environmental Study are reasonable. The financial, business and other projections set out in the Business Plan (including both the alternate case assumptions and the base assumptions, as defined therein, and without giving effect t o any risk factors included therein) have been reasonably prepared with due diligence, care and consideration. To the Company’s knowledge, each of the Business Plan and the Environmental Study is complete and correct in all material respects and does not contain any untrue statement of material fact. To the best of the Company’s knowledge, after conducting reasonable research and surveys as is reasonably appropriate in these circumstances and after consulting with reputable experts in the field, the financings contemplated in Section 7.6 hereto (the “Additional Financings”) together with the Purchase Price and the proceeds to be paid to the Company upon exercise of the Addtional Purchase Obligations, will be sufficient to complete the construction, deployment and operation of Fab 2 in accordance with the Business Plan according to the base scenario under which management of the Company currently contemplates implementing the Business Plan. There are no other facts or matters of which the Company is aware which could render any such opinions, assumptions, timetables or projections materially misleading; provided, however, that no assurance can be or is given that any of the forecast projections will be attained or that the assumptions contained therein will not change.         3.6.  Title to Properties; Encumbrances. Except as set forth in Schedule 3.6, the Company and its Subsidiaries have good and marketable title, free and clear of all Encumbrances (other than Encumbrances for current Taxes not yet due and minor Encumbrances, if any, which in the aggregate do not materially detract from the value of the Assets (as hereinafter defined) or materially impair the conduct of business of the Company as currently conducted and as currently approved by the Board to be conducted in the future), to all of the assets, real property, interests in real property, rights, franchises, patents, trademarks, copyrights, mask works, trademarks, trade names, licenses and properties tangible or intangible, real or personal, wherever located which are used in the conduct of the business conducted and as currently approved by the Board to be conducted in the future by the Company (the “Assets”), other than property that is leased or licensed. Except as set forth in Schedule 3.6, the Company has valid and enforceable leases or licenses, as the case may be, with respect to the Assets consisting of property that is leased or licensed, under which there exists no default, event of default or event which, with notice or lapse of time or both, would constitute a default, except for such defaults which could not have a Material Adverse Effect. Except as set forth on Schedule 3.6, with respect to real property owned or leased by the Company or any Subsidiary, there are not any rights of way, building use restrictions exceptions, variances, reservations, or limitations of any nature which materially impair or could reasonably be expected to materially impair the business of the Company as conducted and as currently approved by the Board to be conducted in the future, other than such which would not have a Material Adverse Effect. All buildings, plants, and structures owned or leased by the Company or any Subsidia ry do not encroach upon the property of, or otherwise conflict with the property rights of, any other Person in a material manner.         3.7.  Condition and Sufficiency of Assets. The buildings, plants, structures, and equipment of the Company and its Subsidiaries are structurally sound, are in good operating condition and repair, and are adequate for the uses to which they are being put, and none of such buildings, plants, structures, or equipment is in need of maintenance or repairs except for ordinary, routine maintenance and repairs that are not material in nature or cost. Except as set forth in Schedule 3.7, the building, plants, structures and equipment of the Company and its Subsidiaries are sufficient for the continued conduct of the Company’s businesses after the Closing in substantially the same manner as conducted prior to the Closing. 9 --------------------------------------------------------------------------------         3.8.  Customers and Suppliers. Since January 1, 2000, there has not been any adverse change in the business relationship of the Company with any material customer or material supplier of the Company.         3.9.  Inventory. Inventories of raw materials, work in progress and finished goods of the Company and its Subsidiaries are in good condition and of a quality useable and saleable in the Ordinary Course of Business or have had appropriate financial reserves established.         3.10.  No Undisclosed Liabilities. Except as set forth in Schedule 3.10, neither the Company nor any Subsidiary has any liabilities or obligations of any nature (whether absolute, accrued, contingent or otherwise) except for liabilities or obligations reflected or reserved against in the Balance Sheet or the Interim Balance Sheet and current liabilities incurred in the Ordinary Course of Business since the respective dates thereof.         3.11.  Taxes               3.11.1.  The Company and each Subsidiary has filed or caused to be filed (on a timely basis since January 1, 1994) all Tax Returns that are or were required to be filed by or with respect to it, pursuant to applicable Legal Requirements. The Company and each Subsidiary has paid, or made provision for the payment of, all Taxes that have or may have become due pursuant to those Tax Returns or otherwise, or pursuant to any assessment received by the Company, except such Taxes, if any, as are listed in Schedule 3.11 and are being contested in good faith and as to which adequate reserves (determined in accordance with GAAP) have been provided in the Balance Sheet and the Interim Balance Sheet.               3.11.2.  Except as set forth in Schedule 3.11.2, the relevant state tax authorities have audited all such Tax Returns or such Tax Returns are closed by the applicable statute of limitations for all taxable years through December 31, 1999. All deficiencies proposed as a result of such audits have been paid, reserved against, settled, or, as described in Schedule 3.11, are being contested in good faith by appropriate proceedings. Except as described in Schedule 3.11, neither the Company nor any Subsidiary has given or been requested to give waivers or extensions (or is or would be subject to a waiver or extension given by any other Person) of any statute of limitations relating to the payment of Taxes of the Company or for which the Company may be liable.               3.11.3.  All Taxes that the Company and any Subsidiary is or was required by Legal s to withhold or collect have been duly withheld or collected and, to the extent required, have been paid to the proper Governmental Body or other Person.               3.11.4.  All Tax Returns filed by (or that include on a consolidated basis) the Company and any Subsidiary are true, correct, and complete in all material respects. There is no tax sharing agreement that will require any payment by the Company after the date of this Agreement.         3.12.  No Material Adverse Change. Except as set forth in Schedule 3.12, since the date of the Balance Sheet, there has not been any material adverse change in the business, operations, properties, assets or condition of the Company (financial or other), including in the prospects of the construction, deployment and operation of Fab 2 in accordance with the Business Plan, and no event or development has occurred or circumstance exists that may result in such a material adverse change.         3.13.  Employee Benefits; Labor               3.13.1.  Except as set forth in Schedule 3.13.1, neither the Company nor any Subsidiary is a member of any employers union or a party to any collective bargaining contract, collective labor agreement or other contract or arrangement with a labor union, trade union or other organization or body involving any of its employees, or is otherwise required (under any legal requirement, including under any profit sharing, bonus, deferred compensation, savings, insurance, pension, retirement, or other employee benefit plan for or with any employees of the Company or any of its Subsidiaries, except for the respective personal employment agreements) to provide benefits or working conditions beyond the minimum benefits and working conditions required by law. Neither the Company nor any Subsidiary has recognized or received a demand for recognition from any collective bargaining representative with res pect to any of its employees. Except as set forth in Schedule 3.13.1, neither the Company nor any Subsidiary are subject to, and no employee of the Company or any Subsidiary benefits from, any extension order (tzavei harchava) or any arrangement or custom with respect to employment or termination thereof. All of the Company’s and the Subsidiaries’ employees are “at will” employees and neither the Company nor any Subsidiary has any obligation to employ any employee for a specified period. 10 --------------------------------------------------------------------------------               3.13.2.  Except as set forth in Schedule 3.13.2, there are no claims or complaints that are pending or that have been threatened against the Company or any Subsidiary by any person who is or has been an employee or director of the Company or any Subsidiary, that may, individually or in the aggregate, have a Material Adverse Effect.               3.13.3.  Since January 1, 1995, (i) there has been no labor strike, slowdown or stoppage pending or threatened against or affecting the Company or any Subsidiary and (ii) there has been no material dispute between the Company or any Subsidiary and any group of its employees which was not resolved.               3.13.4.  Except as set forth in Schedule 3.13.4, the Company’s and its Subsidiaries’ obligations to provide severance pay to its employees are fully funded or have been properly provided for in the Financial Statements in accordance with GAAP including, by contribution to appropriate insurance funds. All other liabilities of the Company or any Subsidiary (absolute or contingent) relating to their employees were properly accrued in the Financial Statements in accordance with GAAP.               3.13.5.  All amounts that the Company or any Subsidiary is legally or contractually required either (i) to deduct from its employees’ salaries or to transfer to such employees’ pension or provident, life insurance, manager insurance, incapacity insurance, continuing education fund or other similar fund or (ii) to withhold from their employees’ salaries and pay to any Governmental Entity as required by Israeli Legal Requirements relating to any tax or any other compulsory payment have, in each case, been duly deducted, transferred, withheld and paid.               3.13.6.  The Company and each Subsidiary is in compliance in all material respects with all applicable Legal Requirements and contracts relating to employment, employment practices, wages, bonuses and other compensation matters and terms and conditions of employment.               3.13.7.  Schedule 3.13.7 sets forth true and complete details of payment by the Company or any of its Subsidiaries since January 1, 2000 of any bonuses, salaries or other compensation to any shareholder or Named Director or Officer (except in the Ordinary Course of Business) or entry into any employment, severance, or similar Contract with any Named Director or Officer.         3.14.  Compliance with Legal Requirements; Governmental Authorizations               3.14.1.  Except as set forth in Schedule 3.14 (i) the Company and its Subsidiaries are, and at all times since January 1, 1997 have been, in full compliance with each Legal Requirement that is or was applicable to them or to the conduct or operation of their business or the ownership or use of any of their assets, except for such non-compliance which would not have a Material Adverse Effect and (ii) neither the Company nor any of its Subsidiaries have received, at any time since January 1, 1997, any notice or other communication (whether oral or written) from any Governmental Body or any other Person regarding any actual, alleged, possible, or potential violation of, or failure to comply with, any Legal Requirement except for such notices and communications which could not have a Material Adverse Effect.               3.14.2.  The Company and each Subsidiary has all Governmental Authorizations necessary to permit the Company and its Subsidiaries to lawfully conduct and operate their business as currently conducted and as approved by the Board to be conducted in the future, except for such authorizations, the failure to possess which would not have a Material Adverse Effect. The Company and its Subsidiaries are and have been in full compliance with all of the terms and requirements of each Governmental Authorization that is held by the Company and its Subsidiaries or that otherwise relates to the business of the Company and its Subsidiaries as presently conducted and as approved by the Board to be conducted in the future, or to any of the assets owned or used by the Company and its Subsidiaries, except for such non-compliance which would not have a Material Adverse Effect. Each Governmental Authorization referred to in the foregoing sentence is valid and in full force and effect. No event has occurred or circumstance exists that may constitute or result directly or indirectly in a violation of or a failure to comply with any term or requirement of any such Governmental Authorization or result directly or indirectly in the revocation, withdrawal, suspension, non-renewal, cancellation, or termination of, or any modification to, any such Governmental Authorization and no notice has been received by the Company or any Subsidiary with respect to the foregoing, other than those events, circumstances or notices which would not have a Material Adverse Effect. To the best knowledge of the Company, the Company and its Subsidiaries can obtain all such renewals and Governmental Authorizations on a timely basis as needed for their respective operations and business, other than those the failure of which to be obtained could not have a Material Adverse Effect. 11 --------------------------------------------------------------------------------         3.15.  Legal Proceedings; Orders. Except as set forth in Schedule 3.15, there is no pending Proceeding (i) that has been commenced by or against the Company or that otherwise relates to or may affect the business of, or any of the assets owned or used by, the Company or any Subsidiary in a material manner; or (ii) that challenges, or that may have the effect of preventing, delaying, making illegal, or otherwise interfering with, any of the Contemplated Transactions.               3.15.1.  In addition, (A) no such Proceeding has been Threatened, and (B) no event has occurred or circumstance exists that may give rise to or serve as a basis for the commencement of any such Proceeding.               3.15.2.  Except as set forth in Schedule 3.15, (i) there is no Order to which the Company or any of its Subsidiaries, or any of the assets owned or used by the Company or any of its Subsidiaries, is subject; and (ii) the Company or any of its Subsidiaries are not subject to any Order that relates to its business as presently conducted or as approved by the Board to be conducted, or any of the assets owned or used by, the Company or any of its Subsidiaries.               3.15.3.  Except as set forth in Schedule 3.15, the Company and all its Subsidiaries are, and at all times have been, in full compliance with all of the terms and requirements of each Order to which it, or any of the assets owned or used by it, is or has been subject, other than any non-compliance which would not have a Material Adverse Effect         3.16.  Absence of Certain Changes and Events. Except as set forth in Schedule 3.16, since the date of the Balance Sheet, the Company and all its Subsidiaries have conducted their businesses only in the Ordinary Course of Business and there has not been any:               3.16.1.  entry into, termination of, or receipt of notice of termination of (i) any license, distributorship, dealer, sales representative, joint venture, credit, or similar agreement, or (ii) any Contract or transaction involving a total remaining commitment by or to the Company or any of its Subsidiaries of at least $2,000,000; or               3.16.2.  sale (other than sales of inventory in the Ordinary Course of Business), lease, or other disposition of any asset or property of the Company or any of its Subsidiaries for at least $2,000,000 or mortgage, pledge, or imposition of any lien or other encumbrance on any material asset or property of the Company or any of its Subsidiaries, including the sale, lease, or other disposition of any of the Intellectual Property Assets except in the Ordinary Course of Business; or               3.16.3.  cancellation or waiver of any claims or rights with a value to the Company or any of its Subsidiaries in excess of $2,000,000; or               3.16.4.  material change in the accounting methods used by the Company or any of its Subsidiaries; or               3.16.5.  agreement, whether oral or written, by the Company or any of its Subsidiaries to do any of the foregoing.         3.17.  Contracts; No Defaults               3.17.1.  Except as set forth in Schedule 3.17.1 and except for agreements, instruments, arrangements and contracts which are exhibits to the SEC Documents, as of the date of this Agreement, there is no Applicable Contract that:                             3.17.1.1.  involves performance of services or delivery of goods or materials by or to the Company or any of its Subsidiaries of an amount or value in excess of $1,000,000; or                      3.17.1.2.  was not entered into in the Ordinary Course of Business and that involves expenditures or receipts of the Company or any of its Subsidiaries in excess of $2,000,000; or                      3.17.1.3.  affects the ownership of, leasing of, title to, use of, or any leasehold or other interest in, any real or personal property (except personal property leases and installment and conditional sales agreements having a value per item or aggregate payments of less than $500,000 and with terms of less than one year); or 12 --------------------------------------------------------------------------------                      3.17.1.4.  relates to patents, trademarks, copyrights, or other intellectual property, except for standard agreements with current or former employees, consultants, or contractors regarding the appropriation or the non-disclosure of any of the Intellectual Property Assets; or                      3.17.1.5.  constitutes a collective bargaining agreement or other commitment to or with any labor union or other employee representative of a group of employees; or                      3.17.1.6.  involves a sharing of profits, losses, costs, or liabilities by the Company or any of its Subsidiaries with any other Person; or                      3.17.1.7.  contains covenants that in any way purport to restrict the business activity of the any of its Subsidiaries or limit the freedom of the Company or any of its Subsidiaries to engage in any line of business or to compete with any Person; or                      3.17.1.8.  provides for payments to or by any Person based on sales, purchases, or profits, other than direct payments for goods; or                      3.17.1.9.  constitutes a currently effective and outstanding power of attorney; or                      3.17.1.10.was entered into other than in the Ordinary Course of Business and that contains or provides for an express undertaking by the Company or any of its Subsidiaries to be responsible for consequential damages; or                      3.17.1.11.is for capital expenditures of the Company or any of its Subsidiaries in excess of $1,000,000; or                      3.17.1.12.  represents a written warranty, guaranty, and or other similar undertaking with respect to contractual performance extended by the Company or any of its Subsidiaries other than in the Ordinary Course of Business.               3.17.2.  Each Contract identified in Schedule 3.17.1 is in full force and effect in all respects and is valid and enforceable in accordance with its terms. No event has occurred or circumstance exists that (with or without notice or lapse of time) may materially contravene, conflict with, or result in a material violation or breach of, or give the Company or any other Person the right to declare a default or exercise any remedy under, or to accelerate the maturity or performance of, or to cancel, terminate, or modify, any Contract listed on Schedule 3.17.1,               3.17.3.  Except as set forth in Schedule 3.17.3, there are no renegotiations of any material amounts paid or payable to the Company or any of its Subsidiaries under current or completed Contracts listed on Schedule 3.17.1 with any Person and no such Person has made written demand for such renegotiations.         3.18.  Insurance. The properties, assets, employees, business and operations of the Company and its Subsidiaries are insured by policies which are in full force and effect against such risks, casualties and contingencies and of such types and amounts as are reasonable and customary for the size and scope of the Company’s and its Subsidiaries business as now conducted and as approved to be conducted by the Board in the future. All premiums due and payable for insurance policies held by the Company have been duly paid; and, except as listed in Schedule 3.18, such policies or extensions, renewals or replacements thereof (on comparable terms to the extent available) in such amounts will be outstanding and in full force and effect without interruption until the Closing Date. The Company or any of its Subsidiaries have not received any notice from any insurer, agent or broker with respect to any pending or threatened t erminations or increases in premiums other than increases contemplated by existing policies, and the consummation of the transactions contemplated by this Agreement and the Transaction Documents will not result in the termination of any such policy, or cause a material increase in any premiums thereunder, pursuant to the express terms of such policy.         3.19.  Environmental Matters. Except for (i) matters disclosed in the SEC Documents or (ii) matters disclosed in Schedule 3.19:               3.19.1.  The Company and its Subsidiaries are in material compliance with all applicable Environmental Laws and Environmental Permits. Neither the Company or any of its Subsidiaries has received any written communication from a Governmental Body or Person that alleges that the Company is not in compliance with or has liability under any applicable Environmental Law, nor does the Company or any of its Subsidiaries have a basis to expect any such actual or Threatened communication. On the date of this Agreement, there are no 13 -------------------------------------------------------------------------------- circumstances or conditions that may prevent or interfere with compliance in the future with Environmental Laws and Environmental Permits in effect as of the date of this Agreement. The Company and its Subsidiaries have all Environmental Permits required under applicable Environmental Laws to operate the business of the Company as presently conducted and as approved by the Board to be conducted in the future, except as would not have a Material Adverse Effect.               3.19.2.  There is no Environmental Claim pending or, to the best of the Company’s knowledge, Threatened against the Company or its Subsidiaries or against any Person whose liability for such an Environmental Claim the Company or its Subsidiaries have or may have retained or assumed whether contractually or by operation of law.               3.19.3.  To the best of the Company’s knowledge, there are no Materials of Environmental Concern present in or at the facilities of the Company or any of its Subsidiaries or at any geologically or hydrological adjoining property, including any Materials of Environmental Concern contained in barrels, above or underground storage tanks, landfills, land deposits, dumps, equipment (whether moveable or fixed) or other containers, either temporary or permanent, and deposited or located in land, water, sumps, or any other part of the facilities of the Company or any of its Subsidiaries or such adjoining property, or incorporated into any structure therein or thereon.               3.19.4.  The Company has delivered to Buyer true and complete copies and results of any reports, studies, analyses, tests, or monitoring possessed or initiated by the Company pertaining to Materials of Environmental Concern in, on, or under the facilities of the Company or any of its Subsidiaries, or concerning compliance by the Company, or any other Person for whose conduct it is or may be held responsible, with Environmental Laws.               3.19.5.  As used herein, the following terms shall have the meaning set forth below:               “Environmental Claim” means any claim, action, cause of action, administrative proceeding, investigation or notice by any Person alleging potential liability (including, without limitation, potential liability for investigative 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 into the environment, of any Materials of Environmental Concern at any location, whether or not owned by the Company or its Subsidiaries or (b) circumstances or conditions forming the basis of any violation, or alleged violation, of any Environmental Law.               “Environmental Laws” means all U.S. and Israeli laws, regulations, ordinances, codes, rules, orders, decrees, directives and standards relating to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, ground water, land surface, subsurface strata), including, without limitation, laws, regulations, ordinances, codes, rules, orders, decrees, directives and standards relating to the manufacture, processing, distribution, use, treatment, storage, transport, planning and building or handling of Materials of Environmental Concern.               “Environmental Permits” means permits, licenses, authorizations and registrations required pursuant to the Environmental Laws.               “Materials of Environmental Concern” means any hazardous chemicals, pollutants, contaminants, hazardous wastes, toxic substances, hazardous substances, as defined under applicable Environmental Laws or any other substance defined or regulated pursuant to Environmental Laws, including, without limitation, fluoride, asbestos, PCBs, petroleum or petroleum derived substances.               “Release” means any spilling, leaking, pumping, pouring, emitting, discharging, injecting, escaping, leaching, dumping or disposing into the environment, including, without limitation, the abandonment or discarding of barrels, containers and other closed receptacles containing Materials of Environmental Concern.         3.20.  Intellectual Property               3.20.1.  Intellectual Property Assets- The term “Intellectual Property Assets” means all such rights set forth in Sections 3.20.1.1 – 3.20.1.4, and all know-how, trade secrets, confidential information, customer lists, software, technical information, data, process technology, plans, drawings, and blue prints (collectively, “Trade Secrets”); owned, used or licensed by the Company or its Subsidiaries as licensee or licensor which are, in each 14 -------------------------------------------------------------------------------- case, used in or are necessary for the conduct of the Company’s and its Subsidiaries’ respective businesses as now conducted and as approved by the Board to be conducted, including, without limitation, the operation of Fab-2 in accordance with the Business Plan. Schedule 3.20.1 sets forth a list of the Intellectual Property Rights, other than Trade Secrets and unregistered Copyrights:                      3.20.1.1.  trading names, registered and unregistered trademarks, service marks, and applications (collectively, “Marks”);                      3.20.1.2.  all patents, patent applications, and inventions and discoveries that may be patentable (collectively, “Patents”); and                      3.20.1.3.  all copyrights in both published works and unpublished works (collectively, “Copyrights”).               3.20.2.  Agreements- Schedule 3.20.2 contains a complete and accurate list and summary description, including any royalties paid or received by the Company or its Subsidiaries, of all Contracts relating to the Intellectual Property Assets to which the Company or its Subsidiaries is a party or by which the Company or its Subsidiaries are bound, except for any license implied by the sale of a product and perpetual, paid-up licenses for commonly available software programs with a value of less than $5,000,000 under which the Company or any of its Subsidiaries is the licensee. There are no outstanding or Threatened disputes or disagreements with respect to any such agreement.               3.20.3.  Know-How Necessary for the Business                      3.20.3.1.  To the Company’s best Knowledge, the Intellectual Property Assets are all those necessary for the operation of the Company’s and its Subsidiaries’ business as it is currently conducted and as is approved by the Board to be conducted, including, without limitation, in connection with the operation of Fab-2 in acordance with the Business Plan, except as would not have a Material Adverse Effect. Except as set forth in Schedule 3.20.3, the Company is the owner of all right, title, and interest in and to each of the Intellectual Property Assets, to the Company’s best Knowledge, free and clear of all, Encumbrances, equities, and other adverse claims, and has the right to use without payment to a third party all of the Intellectual Property Assets, except as would not have a Material Adverse Effect.                      3.20.3.2.  Except as set forth in Schedule 3.20.3.2, all former and current employees of the Company and all other Persons having access to any Intellectual Property Asset have executed written Contracts with the Company and its Subsidiaries respectively, that assign to the Company and its Subsidiaries, respectively, all rights to Intellectual Property Asset including any inventions, improvements, discoveries, or information relating to the business of the Company. To the Company’s Knowledge, no employee of the Company and its Subsidiaries has entered into any Contract which requires the employee to transfer, assign or disclose information concerning his work for the Company and its Subsidiaries to anyone other than the Company and its Subsidiaries.               3.20.4.  Patents; Trademarks; Copyrights; Mask Works                      3.20.4.1.  Schedule 3.20.1 contains a complete and accurate list and summary description of all Patents, Trademarks and registered Copyrights. The Company owns all right, title, and interest in and to each of the Patents, Trademarks and Copyrights, free and clear of all liens, security interests, charges, encumbrances, entities, and other adverse claims.                      3.20.4.2.  Except as set forth in Schedule 3.20.4.2, all of the (i) issued Patents, (ii) Marks that have been registered with any trademark office and (iii) registered Copyrights are (with respect to issued Patents relating to wafer fabrication technology, to the best Knowledge of the Company) currently in compliance with formal legal requirements, are valid and enforceable, and are not subject to any maintenance fees or taxes.                      3.20.4.3.  No Patent has been or is now involved in any interference, reissue, reexamination, or opposition proceeding. To the best of the Company’s knowledge, there is no potentially interfering patent or patent application or trademark or trademark application of any third party. No Mark has been or is now involved in any opposition, invalidation, or cancellation and no such action is Threatened with the respect to any of the Marks. 15 --------------------------------------------------------------------------------                      3.20.4.4.  No Patent, Mark or Copyright is (with respect to issued Patents relating to wafer fabrication technology, to the best knowledge of the Company) infringed or, to the best of the Company’s knowledge, has been challenged or threatened in any way. To the best knowledge of the Company, none of the products manufactured and sold, nor any process or know-how used, by the Company infringes or is alleged to infringe any patent or other proprietary right of any other Person; to the best knowledge of the Company, none of the Marks used by the Company or any of its Subsidiaries infringes or is alleged to infringe any trade name, trademark, or service mark of any third party; and to the best knowledge of the Company, none of the subject matter of any of the Copyrights infringes or is alleged to infringe any copyright of any third party or is a derivative work based on the work of a third party.               3.20.5.  Trade Secrets                      3.20.5.1.  With respect to each Trade Secret, the documentation relating to such Trade Secret is current, accurate, and sufficient in detail and content to identify and explain it and to allow its full and proper use without reliance on the knowledge or memory of any individual.                      3.20.5.2.  The Company and its Subsidiaries have taken all reasonable precautions to protect the secrecy, confidentiality, and value of its Trade Secrets to the extent that the maintenance of any such Trade Secret as a legally protectible trade secret under applicable law is material to the Company.                      3.20.5.3.  The Company and its Subsidiaries have good title and an absolute (but not necessarily exclusive) right to use the Trade Secrets to the extent that the maintenance of any such Trade Secret as a legally protectible trade secret under applicable law is material to the Company. The Trade Secrets, the maintenance of any of which as a legally protectible trade secret under applicable law are material to the Company, are not part of the public knowledge or literature, and, to the Company’s Knowledge, have not been used, divulged, or appropriated either for the benefit of any Person or to the detriment of the Company or its Subsidiaries. No Trade Secret, the maintenance of which as a legally protectible trade secret under applicable law is material to the Company, is subject to any adverse claim or has been challenged or threatened in any w ay.               3.21.  Grants, Incentives and Subsidies. Schedule 3.21 provides a correct and complete list of the aggregate amount of pending and outstanding grants from each Governmental Body of the State of Israel, or from any other Governmental Body, to the Company or any Subsidiary, net of royalties paid, and any tax incentive or subsidy granted to the Company or any Subsidiary, including the material terms and benefit periods thereof (collectively, “Grants”) including, without limitation, (i) Approved Enterprise Status from the Israeli Investment Center; and (ii) Grants from the Office of the Chief Scientist of the Israel Ministry of Industry and Trade (“OCS”). The Company has made available to Buyer, prior to the date hereof, correct and complete copies of all letters of approval, and supplements thereto, granted to the Company or any Subsidiary relating to Approve d Enterprise Status from the Investment Center and Grants under from the OCS. Except for undertakings set forth in such letters of approval and undertakings under applicable laws and regulations, there are no material undertakings of the Company or any Subsidiary given in connection with the Grants. The Company and each of Subsidiary are in compliance, in all material respects, with the terms and conditions of such Grants and, except as disclosed in Schedule 3.21, have duly fulfilled, in all material respects, all the undertakings relating thereto. The Company’s application to the Israeli Investment Center with respect to Fab-2 was submitted on May 17, 2000 and was previously provided to Buyer (the “Investment Center Application”). To the extent that there are changes to the assumptions contained in the Investment Center Application as submitted, they are reflected in the Business Plan. The Investment Center Application complies as to form with all Legal Requirements.               3.22.  Disclosure                      3.22.1.  No representation or warranty of the Company in this Agreement and no statement in the Schedules omits to state a material fact necessary to make the statements herein or therein, in light of the circumstances in which they were made, not misleading.                      3.22.2.  No notice given pursuant to Section 5.5 will contain any untrue statement or omit to state a material fact necessary to make the statements therein or in this Agreement, in light of the circumstances in which they were made, not misleading.               3.23.  Relationships with Related Persons. Except as described on Schedule 3.23 or in the SEC Documents, and except for any employment and consulting contracts listed on Schedule 3.23, there are no loans, 16 -------------------------------------------------------------------------------- guarantees, contracts, transactions, understandings or other arrangements of any nature outstanding between or among the Company or any of its Subsidiaries, on the one hand, and any shareholder, or any current or former director, officer or controlling person of the Company or any of their respective Affiliates, on the other hand. Except as set forth on Schedule 3.23 or in the SEC Documents, since the date of the Annual Report, no event has occurred that would be required to be reported by Company pursuant to Item 13 of Form 20-F promulgated by the SEC under the Exchange Act .               3.24.  Brokers or Finders. The Company and its agents have incurred no obligation or liability, contingent or otherwise, for brokerage or finders’ fees or agents’ commissions or other similar payment in connection with the Contemplated Transactions. 4.  Representations and Warranties of Buyer         Buyer represents and warrants to the Company as of the date hereof and as of the Closing and except as otherwise provided in the Addtional Purchase Obligation Agreement as follows:         4.1.  Organization and Good Standing. Buyer is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware with full corporate power and authority to conduct its business as it is now being conducted and as currently proposed to be conducted, to own or use the properties and assets that it purports to own or use, and to perform all its obligations under the Transaction Documents.         4.2.  Authority; No Conflict               4.2.1.  This Agreement constitutes the legal, valid, and binding obligation of Buyer, enforceable against Buyer in accordance with its terms. Upon the execution and delivery by Buyer of the Transaction Documents, and assuming the due execution and delivery thereof by the other parties thereto, the Transaction Documents will constitute the legal, valid, and binding obligations of Buyer, enforceable against Buyer in accordance with their respective terms. Buyer has the absolute and unrestricted right, power, and authority to execute and deliver this Agreement and the Transaction Documents and to perform its obligations under this Agreement and the Transaction Documents.               4.2.2.  Except as set forth in Schedule 4.2, neither the execution and delivery of this Agreement by Buyer nor the consummation or performance of any of the Contemplated Transactions by Buyer will give any Person the right to prevent, delay, or otherwise interfere with any of the Contemplated Transactions pursuant to:                      4.2.2.1.  any provision of Buyer’s Organizational Documents;                      4.2.2.2.  any resolution adopted by the board of directors or the stockholders of Buyer;                      4.2.2.3.  any Legal Requirement or Order to which Buyer may be subject; or                      4.2.2.4.  any Contract to which Buyer is a party or by which Buyer may be bound.                      Except as set forth in Schedule 4.2, Buyer is not and will not be required to obtain any Consent from any Person in connection with the execution and delivery of this Agreement or the consummation or performance of any of the Contemplated Transactions.         4.3.  Investment Intent; No Registration               4.3.1.  Buyer is acquiring the Shares for its own account and not with a view to their distribution within the meaning of Section 2(11) of the Securities Act. Buyer has requisite knowledge and experience in financial and business matters to be capable of evaluating the merits and risks of an investment in the Company and is an accredited investor as defined under Regulation D as promulgated by the United States Securities and Exchange Commission; and               4.3.2.  Buyer understands that none of the Shares have been registered under the Securities Act, the Israeli Securities Law or the laws of any jurisdiction, and agrees that the Shares may not be sold, offered for sale, transferred, pledged, hypothecated or otherwise disposed of except in compliance with the Securities Act, Israeli Securities Law or any applicable securities laws of any jurisdiction and the terms of this Agreement. Buyer also acknowledges that the Shares, upon issuance, will bear the following legend: 17 --------------------------------------------------------------------------------               THESE SECURITIES HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE OR OTHER JURISDICTION’S SECURITIES LAWS. THESE SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE OR PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER THE ACT OR AN OPINION OF COUNSEL (SATISFACTORY IN FORM AND SUBSTANCE TO THE COMPANY) THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF THE ACT.         4.4.  Certain Proceedings. There is no pending Proceeding that has been commenced against Buyer and that challenges, or may have the effect of preventing, delaying, making illegal, or otherwise interfering with, any of the Contemplated Transactions. To Buyer’s knowledge, no such Proceeding has been Threatened.         4.5.  Due Diligence. Subject to compliance by the Company with Section 3.22 and provision to the Buyer of all materials and information requested in its due diligence review of the Company and assuming that all information and material provided to the Buyer in its due diligence review was true and accurate and did not include any material misstatement or omit to include any information requested by Buyer, (a) the Buyer has had an opportunity to ask questions and receive answers concerning the legal, financial and technical condition of the Company and has had full access to such information concerning the Company as the Buyer has requested and (b) the Buyer hereby represents and warrants that the legal, technical and financial due diligence of Buyer has been completed and that the results of the Buyer’s business, technical, legal and financial review of the books, records, agreements and other legal documents and business organization of the Company are satisfactory to the Buyer. Notwithstanding the foregoing representations and warranties of the Buyer, nothing in this Section 4.5 shall derogate from the representations and warranties of the Company in Section 3 above.         4.6.  Brokers or Finders. Buyer and its officers and agents have incurred no obligation or liability, contingent or otherwise, for brokerage or finders’ fees or agents’ commissions or other similar payment in connection with the Contemplated Transactions. 5.  Covenants of the Company Prior to Closing         5.1.  Access and Investigation. Between the date of this Agreement and the Closing Date, the Company will, and will cause its Representatives to, (i) afford Buyer and its Representatives (collectively, “Buyer’s Advisors”) full and free access to the Company’s personnel, properties, contracts, books and records, and other documents and data, (ii) furnish Buyer and Buyer’s Advisors with copies of all such contracts, books and records, and other existing documents and data as Buyer may reasonably request, and (iii) furnish Buyer and Buyer’s Advisors with such additional financial, operating, technical and other data and information as Buyer may reasonably request. All information so provided to Buyer and its representatives will be subject to the Non-Disclosure Agreement dated April 4, 2000 between the parties (except for Section 6 thereof which shall expire upon signing of this Agree ment).         5.2.  Operation of the Company’s Business. Between the date of this Agreement and the Closing Date, the Company will:               5.2.1.  conduct its business only in the Ordinary Course of Business; and               5.2.2.  use its best efforts to preserve intact the current business organization of the Company and its Subsidiaries, keep available the services of the current Named Officers, employees, and agents of the Company and its Subsidiaries, and maintain the relations and good will with suppliers, customers, landlords, creditors, employees, agents, and others having business relationships with the Company and its Subsidiaries; and               5.2.3.  otherwise report periodically to Buyer concerning the status of the business, operations, finances and prospects of the Company and its Subsidiaries; and               5.2.4.  not (i) take or agree or commit to take any action other than in the Ordinary Course of Business that would make any representation or warranty of the Company hereunder inaccurate in any respect at, or as of any time prior to, the Closing Date, provided that no such action taken in the Ordinary Course of Business that Buyer has not consented to in writing shall be taken into account in consideration of whether the conditions set forth in Section 7 below have been complied with or (ii) omit or agree or commit to omit to take any action within its control necessary to prevent any such representation or warranty from being inaccurate in any material respect at any such time. 18 --------------------------------------------------------------------------------         5.3.  Negative Covenant. Except as otherwise expressly permitted by this Agreement or as is consistent with the Ordinary Course of Business, between the date of this Agreement and the Closing Date, the Company will not, without the prior written consent of Buyer, take any affirmative action, or fail to take any reasonable action within their or its control, as a result of which any of the changes or events listed in Section 3.16 is likely to occur.         5.4.  Consents; Required Approvals; Construction. The Company will, as promptly as practicable after the date of this Agreement, take all action required to obtain as promptly as practicable all necessary Consents and agreements of, and to give all notices and make all other filings with, any third parties, including Governmental Bodies, necessary to authorize, approve or permit the consummation of the transactions contemplated hereby, the Contemplated Transactions and the transactions contemplated by the Ancillary Agreements, including, without limitation, all Consents, approvals and waivers referred to in Section 5.2 to the Business Plan and all Consents, approvals and waivers referred to in Section 7.3 hereof and the updated Business Plan referred to in Section 7.17 (which the parties shall endeavor to complete within 60 days from the date hereof). The Company will periodically update Buyer as to the matters discussed in the preceding sentence. Between the date of this Agreement and the Closing Date, the Company will (i) cooperate with Buyer with respect to all filings that Buyer elects to make or is required by Legal Requirements to make in connection with the Contemplated Transactions, and (ii) cooperate with Buyer in obtaining all consents identified in Schedule 4.2. In addition, the Company will, as promptly as practicable after the date of this Agreement, take all action required to select contractors and other experts and enter into agreements with such parties and take other necessary actions in order to facilitate the implementation of the construction of Fab 2 in accordance with the time table set forth in the Business Plan.         5.5.  Notification. Between the date of this Agreement and the Closing Date, the Company will promptly notify Buyer in writing if the Company becomes aware of any fact or condition that causes or constitutes a material breach of any of the Company’s representations and warranties as of the date of this Agreement (except that such representations and warranties specifically qualified by materiality shall be read for purposes of this Section 5.5 so as not to require an additional degree of materiality), or if the Company becomes aware of the occurrence after the date of this Agreement of any fact or condition that could (except as expressly contemplated by this Agreement) cause or constitute a breach of any such representation or warranty had such representation or warranty been made as of the time of occurrence or discovery of such fact or condition (except for such representations and warranties that are e xpressly correct as of the date of this Agreement). Should any such fact or condition require any change in the Schedules if the Schedules were dated the date of the occurrence or discovery of any such fact or condition, the Company will promptly deliver to Buyer a supplement to the Schedules specifying such change. During the same period, the Company will promptly notify Buyer of the occurrence of any breach of any covenant of the Company in this Section 5 or of the occurrence of any event that may make the satisfaction of the conditions in Section 7 below impossible or unlikely.         5.6.  Financings.               5.6.1.  Between the date of this Agreement and the Closing Date, the Company will use its best efforts to achieve each of the conditions set forth in Section 7.4 and 7.6 in relation to the Additional Financings.               5.6.2.  The Company shall provide to the Investment Center such other information and data, in addition to the information and data contained in the Investment Center Application, as reasonably necessary in order to secure the approval of the grant referred to in Section 7.4.               5.6.3.  The proceeds from each of the equity financing sources referred to in clauses (ii) and (iii) of Section 7.6 with respect to Wafer Partners shall be obtained only from parties acceptable to Buyer upon Buyer’s prior approval. In addition, in the event that the underlying agreements with respect thereto contain any terms or conditions (including, without limitation, (a) pricing terms and (b) other economic terms taken as a whole) more favorable (the “Terms of the Other Agreements”) than those provided hereunder and in the Transaction Agreements, the terms and conditions of this Agreement and the Transaction Agreements, as the case may be, shall be automatically amended, without further action by the parties hereto and thereto, to provide such terms and conditions that are at least equally favorable to the Buyer as the Terms of the Other Agreements. The Company shall not enter into any agreement with respect to the equity financings referred to in clauses (ii) and (iii) of Section 7.6 if any of such agreements contain provisions that would impede the ability of the Company to effect the terms of the preceding sentence.               5.6.4.  The proceeds from each of the debt financing sources referred to in clause (i) of Section 7.6 and the underlying agreements with respect thereto shall be obtained only on terms and conditions that are 19 -------------------------------------------------------------------------------- materially consistent with the terms and conditions to be set forth in a term sheet or similar agreement or document relating to such financing (a “Debt Financing Term Sheet”). The Company shall consult with Buyer in advance of execution of any Debt Financing Term Sheet and shall enter into such Debt Financing Term Sheet only upon the consent of Buyer which shall not be unreasonably withheld. The terms and conditions of such debt financing shall not be in conflict with the terms of the Contemplated Transactions and shall be consistent with the terms and conditions contained in the Additional Financing Plan and the Business Plan. The Company shall provide to the Buyer the transaction documents of each debt financing (the “Debt Fnancing Documents”) in the form presented to the Board for its approval, at least 10 business days prior to the execution thereof, in order to enable Buyer to review such documents and confirm that the terms thereof are consistent with the Debt Financing Term Sheet previously approved by Buyer. The Buyer shall deliver to the Company its written approval or other response to the Debt Financing Documents within 5 business days from its receipt of the Debt Financing Documents; Buyer’s failure to provide its written response to the Company within such period of time shall be deemed Buyer’s approval of the Debt Financing Documents.               5.6.5.  Between the date of this Agreement and the Closing Date, the Company shall not change or modify or agree to change or modify any of the terms and conditions listed in the Additional Financing Plan, the Business Plan or the Investment Center Application without the prior written unanimous approval of all members of the Steering Committee if any such change, modification or agreement would or would reasonably be expected to (a) change the construction schedule of Fab 2 as set forth in the Business Plan, (b) change the Additional Financing Plan as set forth in the Business Plan or result in a failure to comply with the schedule for the financings described therein, (c) significantly increase the cost of Fab 2 beyond that set forth in the Business Plan or (d) change the production capacity schedule of Fab 2 as set forth in the Business Plan. Any change, modification or agreement to ch ange or modify the Business Plan, the Additional Financing Plan or the Investment Center Application which does not require written unanimous approval of all members of the Steering Committee pursuant to the preceding sentence shall require written approval of a majority of the members of the Steering Committee.         5.7.  Shareholders Agreement. The Company will use its best efforts to ensure that any entity purchasing equity securities or securities exchangeable or convertible into equity securities comprising five percent (5%) or more of the outstanding Ordinary Shares of the Company pursuant to the Additional Financing Plan (other than investors purchasing any such securities in connection with a public offering conducted by the Company as part of the Additional Financing) shall execute the Shareholders Agreement as a counterparty or a similar agreement whose provisions, among other things, provide for such entity to take such actions as may be necessary to vote for the election of Buyer’s, TIC’s, and any other entity’s representative(s) to the Board, in accordance with the terms of the Shareholders Agreement.         5.8.  No Negotiation. Until the later of (i) such time, if any, as this Agreement is terminated pursuant to Section 9, and (ii) the Closing Date, the Company will not, and will cause its Representatives not to, directly or indirectly solicit, initiate, or encourage any inquiries or proposals from, discuss or negotiate with, provide any non-public information to, or consider the merits of any unsolicited inquiries or proposals from, any Person (other than Buyer) relating to any transaction involving the sale of all or a substantial portion of the business or assets, or any of the capital stock of the Company (other than (i) in the Ordinary Course of Business; (ii) in connection with issuances of stock options or shares upon the exercise thereof under the Company’s employee stock incentive plans and (iii) in connection with issuances of equity securities in accordance with Section 7.6 (ii) and (iii) below p ursuant to the Additional Financing Plan and in accordance therewith), or any merger, consolidation, business combination, or similar transaction involving the Company or any of its Subsidiaries pursuant to which the shareholders of the Company immediately prior to such merger, consolidation, business combination, or similar transaction do not continue to hold a majority of the outstanding equity of the continuing or resulting entity.         5.9.  Board of Directors. As long as Buyer has a representative on the Board, each committee of the Board shall include at least one representative of Buyer and, so long as TIC has a representative on the Board, one representative of TIC. The Company will ensure that the time period between each annual shareholders meeting shall not exceed 15 months. The Board shall meet at least once in every three months and notice of each Board meeting shall be provided in writing in English to all Board members at least 10 days in advance. All communications to the Directors will be provided in English. The quorum for each meeting of the Board shall include at least one representative of Buyer, so long as Buyer has at least two representatives on the Board. Notwithstanding the preceding sentence, in the event that quorum is not present at a meeting of the Board solely because a representative of Buyer was not present and s uch meeting is adjourned, the failure of a representative of Buyer to be present at the adjourned meeting shall not constitute lack of quorum. The Company acknowledges that 20 -------------------------------------------------------------------------------- the representatives of Buyer on the Board may at any time participate or fail to participate in any Board action concerning this Agreement if in their view such action is appropriate under applicable law.         5.10.  Steering Committee. The Steering Committee shall be established within fifteen days after the date hereof. The Steering Committee will receive from the Company’s management reports on the progress on the Fab 2 project, the Business Plan and the approvals necessary for commencement of construction and for the operation of Fab 2. The Steering Committee shall meet at least once in every four weeks.         5.11.  Company Shareholders Meeting. As soon as practicable after the date hereof, the Company shall take all necessary action to call an extraordinary general meeting of the Company’s shareholders and shall solicit proxies in order to obtain the approval of the Company’s shareholders to the issuance of the Shares and the Addtional Purchase Obligation Shares to Buyer in accordance with all aplicable laws, regulations and rules of any stock exchange and to an amendment to the Articles which shall provide that the Chairman of the Board shall be appointed by the Shareholders and to obtain any other shareholder approval which is necessary in order to execute, and consummate the transactions contemplated by, this Agreement and the Transaction Documents. 6.  Covenants of Buyer Prior to Closing Date         6.1.  Approvals of Governmental Bodies. As promptly as practicable after the date of this Agreement, Buyer will make all filings required by Legal Requirements to be made by it to consummate the Contemplated Transactions. Between the date of this Agreement and the Closing Date, Buyer will cooperate with the Company with respect to all filings that the Company is required by Legal Requirements to make in connection with the Contemplated Transactions, and will cooperate with the Company in obtaining all consents identified in Section 5.2 to the Business Plan. 7.  Conditions Precedent to Buyer’s Obligation at Closing         Buyer’s obligation to take the actions required to be taken by Buyer at the Closing is subject to the satisfaction, at or prior to the Closing, of each of the following conditions (any of which may be waived by Buyer, in whole or in part, in its sole discretion):         7.1.  Accuracy of Representations. All of the Company’s representations and warranties in this Agreement and the Transaction Agreements (considered collectively, without giving effect to any supplement to the Schedules), and each of these representations and warranties (considered individually) must have been accurate in all material respects as of the date of this Agreement and must be accurate in all material respects as of the Closing Date as if made on the Closing Date (except to the extent such representations and warranties are only given as of the date hereof), without giving effect to any supplement to the Schedules, provided that any inaccuracies in such representations and warranties will be disregarded if the circumstances giving rise to all such inaccuracies (considered collectively) do not constitute, and are not reasonably expected to result in, a Material Adverse Effect (it being understoo d that any materiality qualifications contained in such representations and warranties shall be disregarded for this purpose).         7.2.  Company’s Performance               7.2.1.  All of the covenants and obligations that the Company is required to perform or to comply with pursuant to this Agreement at or prior to the Closing (considered collectively), and each of these covenants and obligations (considered individually), must have been duly performed and complied with in all material respects.               7.2.2.  Each of the Transaction Documents and the Ancillary Agreements shall have been duly executed by the Company and shall have been in full force and effect and no party to such document (other than Buyer) shall be in a breach thereof. The Shareholders Agreement shall have been executed by Buyer and The Israel Corporation.               7.2.3.  Each document required to be delivered by the Company pursuant to Section 2.5.1 must have been delivered.         7.3.  Consents; Approvals; Other Requirements. (i) Each of the Consents, approvals or other requirements identified in Section 5.2 of the Business Plan, shall have been duly obtained or satisfied (in accordance with the schedule set forth therein), (ii) the Company shall have entered into construction agreements with respect to 21 -------------------------------------------------------------------------------- the supervising, management and implementation of the construction of Fab 2 in accordance with the Business Plan in accordance with the schedule contained therein, and (iii) the Business Plan, the financial data and project cost included therein, the list of necessary approvals and Consents included in Section 5.2 of the Business Plan, the timetable for construction of Fab 2 and the Financial Plan, all as set forth in the Business Plan attached to this Agreement as amended from time to time with the unanimous or majority consent, as the case may be, of the Steering Committee in accordance with Section 5.6.5 hereof, shall continue to be true and correct in all material respects. The condition included in this Section 7.3 shall be deemed to be satisfied only if the Steering Committee shall have unanimously decided, first, that all of the conditions included in clauses (i) - (iii) have been satisfied and second, to the extent that any of (i) – (iii) are not satisfied, that constr uction of Fab 2 by the Company in accordance with the Business Plan should properly commence. The Steering Committee shall consider, in its decision of whether the conditions set forth in this Section 7.3 have been met, the factors listed in Section 1 hereto under the definition of “Steering Committee.”         7.4.  Investment Center Approval. The Company shall have obtained a final Certificate of Approval from the Investment Center which shall be comprised of the following factors (i) granting an “Approved Enterprise” status to Fab 2 within the Grant Course under the Law for the Encouragement of Capital Investments - 1959; (ii) providing for governmental grants of at least $250,000,000, which shall constitute at least 20% of the entire qualified project cost for the construction, deployment and operation of Fab 2 in accordance with the Business Plan as it exists on the date of this Agreement, provided that in the event that such project cost changes after the date of this Agreement in accordance with Section 5.6.5, the aggregate of such grants provided for in the Certificate of Approval shall equal at least 20% of the changed total project cost; (iii) the maximum required percentage of capital investments in Fab 2 which is required to be financed by equity will be 30%; and (iii) providing that the performance term under the Certificate of Approval shall be at least 5 years from the Closing.         7.5.  OCS Approval. The Company has obtained the approval of the OCS with respect to the consummation of the Contemplated Transactions.         7.6.  Additional Financings. The Company shall have (i) entered into binding definitive agreements in accordance with Section 5.6.4 providing for loans in an aggregate amount of at least $550,000,000 from reputable financial institutions solely for the purposes of the construction of Fab 2, as described in Section 10.4 of the Financing Plan, (ii) entered into binding definitive agreements providing for at least $225,000,000 in wafer partner pre-payments or equity financing from Wafer Partners (other than Buyer) obtained in accordance with the terms of Section 5.6.3 and provided to the Company by Wafer Partners pursuant to which all closing conditions have been satisfied and at least 15% of the equity of each equity investor has been transferred to or placed in escrow for the benefit of the Company subject only to the closing of this Agreement and the balance of such financing shall be forwarded automatically u pon the occurrence of specified milestones relating to the construction and operation of Fab-2, which milestones are generally similar to the milestones described in the Addtional Purchase Obligation Agreement, (iii) in the event that the Company only satisfies the condition in the preceding clause (ii) in relation to at least $150,000,000 of the $225,000,000 referred to above (such difference being the “Wafer Partner Differential”), entered into binding definitive agreements providing for at least the Wafer Partner Differential through non-Wafer Partner equity investors; provided, however, that the Company shall be required no later than October 1, 2001 (the “Additional Wafer Partner Financing Date”) to enter into binding definitive agreements with respect to the Wafer Partner Differential from additional Wafer Partners as a condition to the exercise of Addtional Purchase Obligations not exercised prior to such time pursuant to the Addtional Purchase Obligation Agreement on the Additiona l Wafer Partner Financing Date, pursuant to which agreement(s) all closing conditions have been satisfied and at least 15% of the equity of each equity investor has been transferred to or placed in escrow for the benefit of the Company and the balance of such financing shall be forwarded automatically upon the occurrence of specified milestones relating to the construction and operation of Fab-2, which milestones are generally similar to the milestones described in the Addtional Purchase Obligation Agreement and (iv) provided to Buyer a commitment in writing to provide $100,000,000 from the Company’s own cash resources, including, but not limited to, proceeds from the exercise of employee stock options, existing cash reserves, proceeds from sales of private equity securities, royalties and sales; in the event that the Company shall close on the basis of section (iii) above, at such time as the Wafer Partner Differential shall have been raised by the Additional Wafer Partner Financing Date , the Company & #146;s commitment to provide $100,000,000 under this clause (iv) shall be reduced by the Wafer Partner Differential.         7.7.  Wafer Partners. The Company shall have entered into binding agreements, either on a “take or pay” basis or a “pre-payment” basis or, if the other party to any such agreement is making an equity investment pursuant to Section 7.6(ii), providing a wafer order right, for a term of at least 3 years (“Wafer Commitments”) 22 -------------------------------------------------------------------------------- providing for the sale of a minimum capacity in Fab 2 of at least 12,000 wafers per month if the Closing shall occur under Section 7.6 (ii) above or at least 8,000 wafers per month if the Closing shall occur under Section 7.6 (iii) above, in which case the Company shall have entered into Wafer Commitments providing that the aggregate Wafer Commitments shall equal at least 12,000 wafers per month by the Additional Wafer Partner Financing Date and such agreements shall be in full force and effect.         7.8.  Toshiba Agreement. The Toshiba Agreement shall be in full force and effect and shall not have been breached by any party thereto.         7.9.  Certificates. In addition to the documents the Company is obligated to deliver to Buyer under Section 2.5 and this Section 7, the Company shall furnish Buyer with such other documents as Buyer may reasonably request for the purpose of (i) evidencing the accuracy of any of the Company’s representations and warranties, (iii) evidencing the performance by the Company of, or the compliance by the Company with, any covenant or obligation required to be performed or complied with by the Company, (iv) evidencing the satisfaction of any condition referred to in this Section 7, or (v) otherwise facilitating the consummation or performance of any of the Contemplated Transactions.         7.10.  No Proceedings. Since the date of this Agreement, there must not have been commenced or Threatened by a third party against Buyer or the Company, or against any Person affiliated with Buyer or the Company, any Proceeding (a) involving any challenge to, or seeking material damages or other relief in connection with, any of the Contemplated Transactions, or (b) that may have the effect of making illegal, materially preventing, delaying, or otherwise interfering with any of the Contemplated Transactions.         7.11.  No Prohibition. Neither the consummation nor the performance of any of the Contemplated Transactions will, directly or indirectly (with or without notice or lapse of time), materially contravene, or conflict with, or result in a material violation of, or cause the Company, Buyer or any Person affiliated with the Company or Buyer to suffer any material adverse consequence under, (a) any applicable Legal Requirement or Order, or (b) any Legal Requirement or Order that has been published, introduced, or otherwise formally proposed by or before any Governmental Body.         7.12.  Directors. The Board of Directors of the Company shall have been reformed in accordance with the provisions of Section 2 of the Shareholders Agreement.         7.13.  No Material Adverse Change. There shall have been no material adverse change in the business, financial condition, results of operations, assets, operations or prospects of the Company.         7.14.  Incentive Plan. The Company shall have adopted stock based incentive plans (the “Additional Incentive Plans”) reserving 1,500,000 Ordinary Shares or such other number as may be approved by the Board for the purpose of the work force and human resources employed in Fab 2, such plans being satisfactory to Buyer, and the Company shall have submitted to Buyer a plan satisfactory to Buyer setting forth the Company’s efforts to recruit the required work force and human resources for Fab 2.         7.15.  Closing Disclosure. There shall be no fact known to the co-Chief Executive Officer of the Company identified in Schedule 7.15. that has specific application to the Company or any of its Subsidiaries (other than general economic or industry conditions) and that materially adversely affects the assets, business, financial condition, results of operations or prospects of the Company or any of its Subsidiaries that has not been set forth in this Agreement or the Schedules or the Business Plan (without giving effect to any risk factors included therein).         7.16.  Shareholder Approval. Shareholders of the Company shall have approved the increase in registered share capital, the issuance of the Shares hereunder, the issuance of the Shares and Addtional Purchase Obligations under the Addtional Purchase Obligation Agreement and the reconstitution of the Board.         7.17.  Updated Business Plan. Without derogating from sections 5.6 and 7.3, Buyer and the Company shall have agreed to updates to the Business Plan (which thereafter shall be deemed to be the Business Plan for all purposes of this Agreement) which shall, among other things (a) provide that water rights approvals satisfactory to the Steering Committee in the manner set forth in Section 7.3 shall have been obtained prior to Closing, (b) indicate that Seller provided the relevant Governmental Authority with an environmental study which had been prepared in 1995 and updated recently to reflect changes from the date of the original survey, which survey shall be acceptable to the relevant Governmental Authority and (c) include wafer costs data as part of the financial plan assumptions as part of the base case. 23 -------------------------------------------------------------------------------- 8.  Conditions Precedent to the Company’s Obligation at Closing         The Company’s obligation to take the actions required to be taken by the Company at the Closing is subject to the satisfaction, at or prior to the Closing, of each of the following conditions (any of which may be waived by the Company, in whole or in part, in its sole discretion):         8.1.  Accuracy of Representations. All of Buyer’s representations and warranties in this Agreement (considered collectively), and each of these representations and warranties (considered individually), must have been accurate in all material respects as of the date of this Agreement and must be accurate in all material respects as of the Closing Date as if made on the Closing Date.         8.2.  Buyer’s Performance               8.2.1.  All of the covenants and obligations that Buyer is required to perform or to comply with pursuant to this Agreement at or prior to the Closing (considered collectively), and each of these covenants and obligations (considered individually), must have been performed and complied with in all material respects.               8.2.2.  Each of the Executed Transaction Documents shall have been duly executed by the Buyer and shall have been in full force and effect and no party to such document (other than the Company) shall be in a breach thereof. Buyer must have executed and delivered the each of the documents required to be delivered by Buyer pursuant to Section 2.5.2.         8.3.  Additional Documents               8.3.1.  In addition to the documents required to be delivered in accordance with Section 2.5.2 by Buyer, Buyer shall have furnished such other documents as the Company may reasonably request for the purpose of (i)  evidencing the accuracy of any representation or warranty of Buyer, (ii) evidencing the performance by Buyer of, or the compliance by Buyer with, any covenant or obligation required to be performed or complied with by Buyer, (iii) evidencing the satisfaction of any condition referred to in this Section 8, or (iv) otherwise facilitating the consummation of any of the Contemplated Transactions.         8.4.  No Injunction. There must not be in effect any Legal Requirement or any injunction or other Order that (i) prohibits the issuance and sale of the Shares the Company to Buyer, and (ii) has been adopted or issued, or has otherwise become effective, since the date of this Agreement.         8.5.  Shareholder Approval. Shareholders of the Company shall have approved the increase in registered share capital, the issuance of the Shares hereunder, the issuance of the Shares and Addtional Purchase Obligations under the Addtional Purchase Obligation Agreement and the reconstitution of the Board. 9.  Termination         9.1.  Termination Events. This Agreement may, by written notice given prior to or at the Closing, be terminated:               9.1.1.  by either Buyer or the Company if a material breach of any provision of this Agreement has been committed by the other party and such breach has not been waived;               9.1.2.  (i) by Buyer if any of the conditions in Section 7 has not been satisfied in all material respects by January 31, 2001 (unless extended by Buyer in its discretion), and Buyer has not waived such condition on or before the Closing Date; or (ii) by the Company, if any of the conditions in Section 8 has not been satisfied in all material respects by January 31, 2001; or               9.1.3.  by mutual consent of Buyer and the Company.         9.2.  Effect of Termination. Each party’s right of termination under Section 9.1 is in addition to any other rights it may have under this Agreement or otherwise, and the exercise of a right of termination will not be an election of remedies. If this Agreement is terminated pursuant to Section 9.1, all further obligations of the parties under this Agreement will terminate, except that the obligations in Sections 12.1 and 12.3 will survive; provided, however, that if this Agreement is terminated by a party because of the breach of the Agreement by the other party or because one or more of the conditions to the terminating party’s obligations under this Agreement is not satisfied 24 -------------------------------------------------------------------------------- as a result of the other party’s failure to comply with its obligations under this Agreement, the terminating party’s right to pursue all legal remedies will survive such termination unimpaired. 10.  Indemnification; Remedies         10.1.  Survival; Right to Indemnification not Affected by Knowledge. All representations, warranties, covenants, and obligations in this Agreement and the Addtional Purchase Obligation Agreement, the schedules, the supplements to the schedules, the certificate delivered pursuant to Section 2.5.1.9, and any other certificate or document delivered pursuant to this Agreement or the Addtional Purchase Obligation Agreement will survive the Closing until the expiration of six full months in which Fab 2 is fully operated at a capacity of at least 8,000 wafers per month in compliance with the Foundry Agreement, provided, that in the event that any of the Addtional Purchase Obligations is not exercised, such survival shall only be until the date that is nine months from the last date on which Buyer could have been required to mandatorily exercise the Addtional Purchase Obligation under the terms and conditions of the Ad dtional Purchase Obligation Agreement (after giving effect to all applicable grace periods and extensions under the Addtional Purchase Obligation Agreement). The right to indemnification, payment of Damages or other remedies based on such representations, warranties, covenants, and obligations will not be affected by any investigation conducted with respect to, or any knowledge acquired (or capable of being acquired) at any time, whether before or after the execution and delivery of this Agreement or the Closing Date, with respect to the accuracy or inaccuracy of or compliance with, any such representation, warranty, covenant, or obligation.         10.2.  Indemnification and Payment of Damages by the Company. The Company will indemnify and hold harmless Buyer and its Representatives, controlling persons, and affiliates (collectively, the “Buyer Indemnified Persons”) for, and will pay to the Buyer Indemnified Persons the amount of, any loss, liability, claim, damage, expense (including costs of investigation and defense and reasonable attorneys’ fees) or diminution of value, whether or not involving a third- party claim (collectively, “Damages”), arising, directly or indirectly, from or in connection with:               10.2.1.  any breach of any representation or warranty made by the Company in this Agreement or in any other Transaction Document (without giving effect to any materiality qualification), the Schedules, the supplements to the Schedules, or any other certificate or document delivered by the Company pursuant to this Agreement, provided, however, that the determination of any breach of any representation or warranty made by the Company with respect to information contained in the Business Plan shall only be assessed when considering the Business Plan in its entirety and to any changes or modifications thereto which were made with Buyer’s approval, and that the Company shall not be liable under this clause 10.2.1 for an amount of Damages exceeding the aggregate proceeds actually provided by the Buyer to the Company pursuant to this Agreement and the Addtional Purchase Obligation Agreement , as the case may be, at the time the Company becomes required to make payment pursuant hereto; or               10.2.2.  any breach by the Company of any covenant or obligation of the Company in this Agreement; or               10.2.3.  any claim by any Person for brokerage or finder’s fees or commissions or similar payments based upon any agreement or understanding alleged to have been made by any such Person with the Company (or any Person acting on its behalf) in connection with any of the Contemplated Transactions.         10.3.  The remedies provided in Section 10.2 will be the exclusive source of remedies that may be available to Buyer or the other Indemnified Persons in relation to any financial or pecuniary damages which may be available, however Buyer shall be free to pursue all other equitable remedies available under applicable law, including without limitation, any injunctive relief.         10.4.  Notwithstanding anything to the contrary contained in Section 10.2, the Buyer shall not be entitled to seek indemnification from the Company under this Agreement with respect to any damages arising out of or resulting from Section 10.2, until the aggregate amount of such damages exceeds two hundred and fifty thousand US dollars ($250,000), and where such damages exceed two hundred and fifty thousand US dollars ($250,000), the Buyer shall be entitled to indemnification in full (including the amount of the two hundred and fifty thousand US dollars ($250,000) referred to above).         10.5.  Indemnification and Payment of Damages by Buyer. Buyer will indemnify and hold harmless the Company, its Representatives, controlling persons and affiliates (the “Company Indemnified Persons”) and will pay 25 -------------------------------------------------------------------------------- to the Company Indemnified Persons the amount of any Damages arising, directly or indirectly, from or in connection with (i) any breach of any representation or warranty made by Buyer in this Agreement or in any certificate delivered by Buyer pursuant to this Agreement, (ii) any breach by Buyer of any covenant or obligation of Buyer in this Agreement, or (iii) any claim by any Person for brokerage or finder’s fees or commissions or similar payments based upon any agreement or understanding alleged to have been made by such Person with Buyer (or any Person acting on its behalf) in connection with any of the Contemplated Transactions.         10.6.  Procedure for Indemnification - Third Party Claims               10.6.1.  Promptly after receipt by an indemnified party under Section 10.2 or 10.3 of notice of the commencement of any Proceeding against it, such indemnified party will, if a claim is to be made against an indemnifying party under such Section, give notice to the indemnifying party of the commencement of such claim, but the failure to notify the indemnifying party will not relieve the indemnifying party of any liability that it may have to any indemnified party, except to the extent that the indemnifying party demonstrates that the defense of such action is prejudiced by the indemnifying party’s failure to give such notice.               10.6.2.  If any Proceeding referred to in Section 10.6.1 is brought against an indemnified party and it gives notice to the indemnifying party of the commencement of such Proceeding, the indemnifying party will, unless the claim involves Taxes, be entitled to participate in such Proceeding and, to the extent that it wishes (unless (i) the indemnifying party is also a party to such Proceeding and the indemnified party determines in good faith that joint representation would be inappropriate, or (ii) the indemnifying party fails to provide reasonable assurance to the indemnified party of its financial capacity to defend such Proceeding and provide indemnification with respect to such Proceeding), to assume the defense of such Proceeding with counsel reasonably satisfactory to the indemnified party and, after notice from the indemnifying party to the indemnified party of its election to assum e the defense of such Proceeding, the indemnifying party will not, as long as it diligently conducts such defense, be liable to the indemnified party under this Section 10 for any fees of other counsel or any other expenses with respect to the defense of such Proceeding, in each case subsequently incurred by the indemnified party in connection with the defense of such Proceeding, other than reasonable costs of investigation. If the indemnifying party assumes the defense of a Proceeding, (i) it will be conclusively established for purposes of this Agreement that the claims made in that Proceeding are within the scope of and subject to indemnification; (ii) no compromise or settlement of such claims may be effected by the indemnifying party without the indemnified party’s consent unless (A) there is no finding or admission of any violation of Legal Requirements or any violation of the rights of any Person and no effect on any other claims that may be made against the indemnified party, and (B) the sole r elief provided is monetary damages that are paid in full by the indemnifying party; and (iii) the indemnified party will have no liability with respect to any compromise or settlement of such claims effected without its consent. If notice is given to an indemnifying party of the commencement of any Proceeding and the indemnifying party does not, within ten days after the indemnified party’s notice is given, give notice to the indemnified party of its election to assume the defense of such Proceeding, the indemnifying party will be bound by any determination made in such Proceeding or any compromise or settlement effected by the indemnified party.               10.6.3.  Notwithstanding the foregoing, if an indemnified party determines in good faith that there is a reasonable probability that a Proceeding may adversely affect it or its affiliates other than as a result of monetary damages for which it would be entitled to indemnification under this Agreement, the indemnified party may, by notice to the indemnifying party, assume the exclusive right to defend, compromise, or settle such Proceeding, but the indemnifying party will not be bound by any determination of a Proceeding so defended or any compromise or settlement effected without its consent.               10.6.4.  The Company hereby consents to the non-exclusive jurisdiction of any court in which a Proceeding is brought against any Buyer Indemnified Person for purposes of any claim that a Buyer Indemnified Person may have under this Agreement with respect to such Proceeding or the matters alleged therein, and agree that process may be served on the Company with respect to such a claim anywhere in the world.         10.7.  Procedure for Indemnification - Other Claims. A claim for indemnification for any matter not involving a third-party claim may be asserted by notice to the party from whom indemnification is sought. Any claim for indemnification which may be brought under this Section 10 may be brought until 30 days after expiration of the relevant survival period. 26 -------------------------------------------------------------------------------- 11.  Covenants of the Company Subsequent to the Closing Date         11.1.  Additional Financing. The Company shall comply with all terms, conditions, covenants and obligations of the Company under the agreements entered into in connection with the Additional Financings.         11.2.  Ancillary Agreements. The Company shall comply with all terms, conditions, covenants and obligation of the Company under the Ancillary Agreements. The Company shall not change or modify or agree to change or modify any of the terms and conditions of this Agreement, the Transaction Documents and the Toshiba Agreement without the prior written approval of Buyer (other than the Business Plan pursuant to Section 11.3).         11.3.  Business Plan. The Company shall use the proceeds of this Agreement, the Addtional Purchase Obligations and the Additional Financings solely in order to finance the construction, deployment and operation of Fab 2 in accordance with the Business Plan and the timetable included therein. The Company shall not change or modify or agree to change or modify the Business Plan and shall not deviate materially from the Business Plan (whether or not it is changed) without the prior written approval of Buyer (which shall not be unreasonably withheld) if any such change, modification or agreement would or reasonably be expected to (a) materially change the construction schedule of Fab 2 as set forth in the Business Plan, (b) significantly increase the cost of Fab 2 beyond that set forth in the Business Plan or (c) materially change the production capacity schedule of Fab 2 as set forth in the Business Plan. In addit ion, the Company shall not change or modify or agree to change or modify the Business Plan and shall not deviate materially from the Business Plan (whether or not it is changed) if any such change, modification or agreement would or reasonably be expected to materially change the Additional Financing Plan as set forth in the Business Plan or result in a material failure to comply with the schedule for the financings described therein unless such change, modification or agreement has been approved by the Company’s Board, provided, however that such approval shall not be deemed granted if two or more members of the Board shall have voted against such change, modification or agreement.         11.4.  Project Committee. As of the Closing and thereafter the Company shall create a committee of its Board (the “Project Committee”) to oversee and bear managerial responsibility for the Fab 2 Project. The Project Committee shall consist of four directors, including the Chief Executive Officer of the Company then serving on the Board, a representative of Buyer on the Board, so long as the Buyer is entitled to appoint a memer of the Board, a representative of TIC, so long as TIC is entitled to appoint a member to the Board, and one statutory external director, so long as the Company is required to appoint such an external director either to such committee or to the Board pursuant to Applicable Law.         11.5.  Project Progress Reports; Liaison Officer. The Company shall, on a monthly basis starting immediately subsequent to the date hereof, and in any other date requested by Buyer, provide to Buyer with a written report describing, in reasonable detail, the progress and status of the Fab 2 and the Additional Financings. The Buyer may appoint a liasion officer with respect to the Fab 2 project that will be an employee or consultant of the Buyer and will be permitted to obtain from the Company and its officers, directors consultants and contractors, ongoing information with respect to the progress of the project, will have free access to all relevant information and documents and will be permitted to participated in intenal meetings and discussions of the Company with respect to the progress of the project. The Company will coordinate with the liasion officer any requests in accordance with the foregoing and s hall fully cooperate with such officer.         11.6.  Information Rights. As long as Buyer, together with its Affiliates, holds at least 3% of the outstanding share capital of the Company, the Company shall deliver to Buyer copies of each report filed or furnished by the Company to the SEC, within no later than five days after such report is filed or furnished to the SEC.         11.7.  Pre-emptive Rights.               11.7.1.  Until the later of such time as (a) the Series B-1 Addtional Purchase Obligation shall have expired in accordance with its terms and (b) Buyer shall have exercised the Series B-1 Addtional Purchase Obligation and thereafter shall no longer own ten percent of the issued and outstanding share capital of the Company, if the Company proposes to issue any of its equity securities or securities convertible into such equity securities (the “Offered Securities”), other than Excluded Securities, then the Buyer shall have the right, but not the obligation, to purchase a portion of such Offered Securities, on the same terms and conditions and for the same consideration as the Offered Securities which are sold, equal to the percentage of the Company’s issued and 27 -------------------------------------------------------------------------------- outstanding share capital as is owned by the Buyer on the date on which Buyer responds to the notice to be provided under Section 11.7.2 (the “Pro Rata Share”).               11.7.2.  If the Company proposed to issue Offered Securities, it shall give the Buyer written notice of its intention (the “ Pre-emptive Notice”) and shall, in such notice, fully describe the Offered Securities and any other relevant securities and the terms and conditions and total consideration upon and for which the Company proposes to issue them. Upon receipt of such notice, the Buyer shall have 15 business days to decide and notify the Company of its decision to purchase Offered Securities in an amount not exceeding Buyer’s then current Pro Rata Share. If the Company fails to issue and sell the Offered Securities or any portion of them within 90 days from the date of the Pre-emptive Notice upon terms and conditions and for consideration that are no more favorable to the purhasers of the Offered Securities than specified in the Pre-emptive Notice, the Company shall not th ereafter issue or sell such Offered Securities without again complying with the provisions of this Section 11.7.2. 12.  General Provisions               12.1.  Expenses. Except as otherwise expressly provided in this Agreement, each party to this Agreement will bear its respective expenses incurred in connection with the preparation, execution, and performance of this Agreement and the Contemplated Transactions, including all fees and expenses of agents, representatives, counsel, and accountants, provided that upon the Closing the Company shall reimburse Buyer for its reasonable legal expenses in connection with the negotiation and execution of this Agreement in an amount of up to $30,000 plus VAT. The Company shall pay all stamp tax duties in connection with the issuance of the Shares and any shares upon exercise of the Addtional Purchase Obligations and otherwise in connection with this Agreement.               12.2.  Public Announcements. Any public announcement or similar publicity with respect to this Agreement or the Contemplated Transactions will be issued, if at all, by mutual agreement by the parties, except as required by applicable law or the regulations of the securities exchange upon which the securities of either party are traded or quoted. The Company and Buyer will consult with each other concerning the means by which the Company’s employees, customers, and suppliers and others having dealings with the Company will be informed of the Contemplated Transactions, and Buyer will have the right to be present for any such communication.               12.3.  Confidentiality. From the date hereof, Buyer and the Company will maintain in confidence, and will cause the directors, officers, employees, agents, and advisors of Buyer and the Company to maintain in confidence, any written information stamped “confidential” when originally furnished by another party in connection with this Agreement or the Contemplated Transactions (including information furnished prior to the date hereof), unless (a) such information is already known to such party or to others not bound by a duty of confidentiality or such information becomes publicly available through no fault of such party, (b) the use of such information is necessary or appropriate in making any filing or obtaining any consent or approval required for the consummation of the Contemplated Transactions, or (c) the furnishing or use of such information is required by Legal Requ irements.               If the Contemplated Transactions are not consummated, each party will return or destroy as much of such written information as the other party may reasonably request.               12.4.  Notices. All notices, consents, waivers, and other communications under this Agreement must be in writing and will be deemed to have been duly given when (a) delivered by hand (with written confirmation of receipt), (b) sent by telecopier (with written confirmation of receipt), provided that a copy is mailed by registered mail, return receipt requested, or (c) when received by the addressee, if sent by a recognized overnight delivery service (receipt requested), in each case to the appropriate addresses and telecopier numbers set forth below (or to such other addresses and telecopier numbers as a party may designate by notice to the other parties):  Company:  Attention: Co-Chief Executive Officer P.O. Box 619 Migdal Haemek 23105 Israel  Facsimile No.: 972-6-654-7788 28 --------------------------------------------------------------------------------  with a copy to: Yigal Arnon & Co. 3 Daniel Frisch Street Tel Aviv, Israel  Attention: David H. Schapiro, Adv.  Facsimile No.: 972-3-608-7714  Buyer:  Attention: President and CEO SanDisk Corporation 140 Caspian Court Sunnyvale, California 94089  Facsimile No.: (408) 542-0600  with a copy to: SanDisk Corporation 140 Caspian Court Sunnyvale, California 94089  Attention: Vice President and General Counsel  Facsimile No.: (408) 548-0385         12.5.  Jurisdiction; Service of Process. Any action or proceeding seeking to enforce any provision of, or based on any right arising out of, this Agreement may be brought against any of the parties solely in the courts of the State of California, and each of the parties consents to the jurisdiction of such courts (and of the appropriate appellate courts) in any such action or proceeding and waives any objection to venue laid therein. Process in any action or proceeding referred to in the preceding sentence may be served on any party anywhere in the world.         12.6.  Further Assurances. The parties agree (a) to furnish upon request to each other such further information, (b) to execute and deliver to each other such other documents, and (c) to do such other acts and things, all as the other party may reasonably request for the purpose of carrying out the intent of this Agreement and the documents referred to in this Agreement.         12.7.  Waiver. The rights and remedies of the parties to this Agreement are cumulative and not alternative. Neither the failure nor any delay by any party in exercising any right, power, or privilege under this Agreement or the documents referred to in this Agreement will operate as a waiver of such right, power, or privilege, and no single or partial exercise of any such right, power, or privilege will preclude any other or further exercise of such right, power, or privilege or the exercise of any other right, power, or privilege. To the maximum extent permitted by applicable law, (a) no claim or right arising out of this Agreement or the documents referred to in this Agreement can be discharged by one party, in whole or in part, by a waiver or renunciation of the claim or right unless in writing signed by the other party; (b) no waiver that may be given by a party will be applicable except in the sp ecific instance for which it is given; and (c) no notice to or demand on one party will be deemed to be a waiver of any obligation of such party or of the right of the party giving such notice or demand to take further action without notice or demand as provided in this Agreement or the documents referred to in this Agreement.         12.8.  Entire Agreement and Modification. This Agreement supersedes all prior agreements between the parties with respect to its subject matter (including the term sheet between Buyer and the Company dated March 15, 2000 and all drafts hereof and thereof) and constitutes (along with the documents referred to in this Agreement) a complete and exclusive statement of the terms of the agreement between the parties with respect to its subject matter. This Agreement may not be amended except by a written agreement executed by the party to be charged with the amendment.         12.9.  Disclosure Schedules               12.9.1.  The disclosures in the Schedules, and those in any supplement thereto, must relate only to the representations and warranties in the Section of the Agreement to which they expressly relate and not to any other representation or warranty in this Agreement. 29 --------------------------------------------------------------------------------               12.9.2.  In the event of any inconsistency between the statements in the body of this Agreement and those in the Schedules (other than an exception expressly set forth as such in the Schedules with respect to a specifically identified representation or warranty), the statements in the body of this Agreement will control.         12.10.  Assignments, Successors, and no Third-Party Rights. Neither party may assign any of its rights under this Agreement without the prior consent of the other parties, except that Buyer may assign any of its rights under this Agreement to any wholly owned Subsidiary of Buyer or to any Subsidiary which is wholly owned other than a nominal interest, so long as such ownership shall be maintained. Subject to the preceding sentence, this Agreement will apply to, be binding in all respects upon, and inure to the benefit of the successors and permitted assigns of the parties. Nothing expressed or referred to in this Agreement will be construed to give any Person other than the parties to this Agreement any legal or equitable right, remedy, or claim under or with respect to this Agreement or any provision of this Agreement. This Agreement and all of its provisions and conditions are for the sole and exclusive benef it of the parties to this Agreement and their successors and assigns.         12.11.  Severability. If any provision of this Agreement is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Agreement will remain in full force and effect. Any provision of this Agreement held invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable.         12.12.  Section Headings, Construction. The headings of Sections in this Agreement are provided for convenience only and will not affect its construction or interpretation. All references to “Section” or “Sections” refer to the corresponding Section or Sections of this Agreement. All words used in this Agreement will be construed to be of such gender or number as the circumstances require. Unless otherwise expressly provided, the word “including” does not limit the preceding words or terms.         12.13.  Time of Essence. With regard to all dates and time periods set forth or referred to in this Agreement, time is of the essence.         12.14.  Governing Law. This Agreement will be governed by the laws of the State of California without regard to conflicts of law principles.         12.15.  Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement. 30 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date first written above.      SanDisk Corporation   By:   /s/ Eli Harari      --------------------------------------------------------------------------------      Chief Executive Officer      Tower Semiconductor Ltd.   By:   /s/ Yoav Nissan Cohen      --------------------------------------------------------------------------------      Co-Chief Executive Officer

EX-10 2 q32000ex10_1.htm EXHIBIT 10.1 #390651v1 (30432/0874722) (Fleet/Nortek/Ply Gem Industries, Inc.) (3rd Amendment to 2nd Amended & Restated Credit Agreement) #390651v1 (30432/0874722) (Fleet/Nortek/Ply Gem Industries, Inc.) (3rd Amendment to 2nd Amended & Restated Credit Agreement) THIRD AMENDMENT TO SECOND AMENDED & RESTATED CREDIT AGREMENT This Third Amendment to Second Amended & Restated Credit Agreement is dated as of September 29, 2000 and is by and between Ply Gem Industries, Inc., a Delaware corporation (the "Company"), the Designated Subsidiaries party to the Credit Agreement (as defined below), the Banks party to the Credit Agreement (as defined below) and Fleet National Bank, as the Agent for the Banks (in such capacity, together with its successors in such capacity, the "Agent"). The parties hereto mutually agree as follows: 1. Capitalized terms used herein and not expressly defined herein shall have the respective meanings assigned thereto in that certain Second Amended and Restated Credit Agreement dated as of August 26, 1997, amended and restated as of December 30, 1998 and amended as of April 22, 1999 and as of September 9, 1999, among the Company, said Designated Subsidiaries, said Banks and the Agent (the "Credit Agreement"). 2. The following recitals are accurate: WHEREAS, the Company has requested the Banks to amend the Credit Agreement to revise a financial covenant contained therein; and WHEREAS, the Banks have agreed to so amend the Credit Agreement on the terms and conditions of the Credit Agreement, as amended by this Third Amendment to Second Amended and Restated Credit Agreement; 3. Section 6.10 is amended by deleting "...and thereafter..." and adding the following text immediately below "...June 30, 2000..." and "...2.00:1.00...": "...September 30, 2000 2.50:1.00 December 31, 2000 2.50:1.00 March 31, 2001 2.50:1.00 June 30, 2001 2.50:1.00 September 29, 2001 2.50:1.00 December 31, 2001 2.50:1.00 March 30, 2002 and 2.00:1.00..." thereafter 4. Section 9.14 of the Credit Agreement entitled "Governing Law; Consent to Jurisdiction; Waiver of --------------------------------------------------- Trial by Jury" is by this reference fully incorporated ------------- herein. 5. The Credit Agreement, amended as set forth above, is hereby ratified, approved and confirmed and shall remain in full force and effect. 6. The Company and the Designated Subsidiaries represent and warrant that each of the representations and warranties in Section 3 of the Credit Agreement is --------- accurate and complete as of the date hereof and that no Default or Event of Default exists under any of the Loan Documents. The Company and the Designated Subsidiaries represent and covenant that none of the Company and the Designated Subsidiaries has any claim, defense or setoff to any of its obligations under any of the Loan Documents. 7. On the date of this Third Amendment to Second Amended and Restated Credit Agreement the Company shall pay to the Agent for the pro rata account of the Banks an amendment fee equal to .065% of the Commitment. 8. This Third Amendment to Second Amended and Restated Credit Agreement shall be governed by and construed and interpreted in accordance with the laws of the State of New York. 9. This Third Amendment to Second Amended and Restated Credit Agreement may be executed by one or more of the parties on any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same instrument. 10. A set of the copies of this Third Amendment to Second Amended and Restated Credit Agreement signed by all of the parties shall be lodged with the Company and the Agent. [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF each of the parties hereto has caused this Third Amendment to Second Amended and Restated Credit Agreement to be duly executed by its duly authorized officer as of the date first set forth above. BORROWER: PLY GEM INDUSTRIES, INC. By: ----------------------- Title: DESIGNATED SUBSIDIARIES: SNE ENTERPRISES, INC. By: ---------------------------- Title: VARIFORM, INC. By: ---------------------------- Title: GREAT LAKES WINDOW, INC. By: ---------------------------- Title: AGENT: FLEET NATIONAL BANK, as Agent and as a Bank By: ---------------------------- Title: BANKS: BANK OF MONTREAL By: ---------------------------- Title: EUROPEAN AMERICAN BANK By: ---------------------------- Title: CITIZENS BANK OF RHODE ISLAND By: ---------------------------- Title: SOVEREIGN BANK By: ---------------------------- Title:

QuickLinks -- Click here to rapidly navigate through this document EXHIBIT 10(f) AMENDMENT July 26, 2000     The Minntech Corporation 1990 Employee Stock Purchase Plan, as amended and restated effective as of June 1, 1998, is hereby further amended by action of the Board of Directors effective as of July 26, 2000 as follows:     (i)  a new paragraph (c) is added to Section 3 thereof reading as follows:     (c) Six-Month Phases.  Notwithstanding the foregoing, commencing January 1, 2001, the phases under the Plan shall be the six-month periods ending on June 30 and December 31 of each year; provided that the final phase shall be the five-month period ending May 31, 2003. The phase that commenced June 1, 2000, will end on May 31, 2001; and thereafter Participants may elect to participate in the Plan as of the first day of each succeeding phase.     (ii) the last sentence of paragraph (a) of Section 6 thereof is amended to be and read, in its entirety, as follows:     The maximum number of shares subject to purchase by a Participant shall be equal to the total amount to be credited to the Participant's account under Section 5 hereof divided by the lower of the option price set forth in Section 6(b)(i) and the option price set forth in Section 6(b)(ii), below. -------------------------------------------------------------------------------- QUICKLINKS AMENDMENT July 26, 2000

EXHIBIT 10.2 EXECUTIVE EMPLOYMENT AGREEMENT This Executive Employment Agreement (“Agreement”) made effective as of the 23rd day of August, 2000, by and between NetRadio Corporation, a Minnesota corporation (“Company”) and Michael Wise (“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 Chief Financial Officer. 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 for a two- (2) year term, commencing August 1, 2000 (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 $145,000 per calendar year, prorated for partial calendar years. Executive’s salary will be paid in semimonthly 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. Bonus. The Company will pay Executive a guaranteed bonus of $35,000 during the first year of the Employment Period, with the payment to be made forty-five (45) days after the end of the Company’s fiscal year. In addition, Executive may be eligible for additional bonus compensation pursuant to the terms of the separate Executive Incentive Plan adopted by the Company. After the first year of the employment period, Executive will be eligible for bonus compensation pursuant to the terms of the Executive Compensation Plan.   --------------------------------------------------------------------------------   3.3. 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.   3.4. Vacation. Executive will be entitled to fifteen (15) days of paid vacation per calendar year of Executive’s employment hereunder, prorated for partial calendar years.   3.5. Stock Options. Executive will be granted 125,000 incentive stock options for shares of NetRadio common stock, subject to the terms of the Company’s Amended and Restated 1998 Stock Option Plan and the separate Incentive Stock Option Agreement between the Company and Executive. Those shares shall vest according to the following schedule provided Executive remains employed with the Company on the scheduled vesting date: 41,666 shares shall vest on the one-year anniversary of the date of the grant; 41,667 shares shall vest on the second anniversary of the grant; and 41,667 shares shall vest on the third anniversary of the date of the grant. The strike price for all shares granted to Executive hereunder shall be the market price 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.   3.6. 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.   3.7. 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: 2 --------------------------------------------------------------------------------       (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 Chief Financial Officer of the Company and such removal is not pursuant to Section 4.1 hereof; (ii)  Executive’s duties as Chief Financial Officer are reduced to such an extent as to constitute a constructive removal of Executive from the position of Chief Financial Officer; 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 Company prior to the date of this Agreement. 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; 3 --------------------------------------------------------------------------------         (ii) Any commissions owing 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, to 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 (v) Any restricted stock or 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:  4 --------------------------------------------------------------------------------         (i) His base salary, bonus, COBRA-eligible fringe benefits in which he participated or the economic value thereof, 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 or restricted stock previously granted to Executive shall immediately vest     Bonus payable to Executive under this paragraph will be at least the amount Executive received in the year preceding Executive’s termination from employment and will be paid within thirty (30) days following the date of termination. All amounts due under this paragraph shall be paid regardless of whether Executive obtains other employment during the remainder of the Employment Period, and shall not be subject to setoff on the basis that Executive has found other employment. 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; (ii) All unvested stock options or restricted stock 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 reimbursements   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  5 --------------------------------------------------------------------------------   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 to 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 cost 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”).  6 --------------------------------------------------------------------------------   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 judgment, 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; (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; (iii) Induce or attempt to induce any employee of or consultant to Company to do any of the foregoing or to discontinue such 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. Survival of Restrictive Covenants. The restrictive covenants contained in paragraph 7.4 shall survive expiration or termination of this Agreement. 7 -------------------------------------------------------------------------------- 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.   8.4. 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 and Restricted Stock 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. 8 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.   EXECUTIVE:     /s/ MICHAEL P. WISE -------------------------------------------------------------------------------- Michael Wise     NETRADIO CORPORATION     By: /s/ EDWARD TOMECHKO -------------------------------------------------------------------------------- Its: President & CEO -------------------------------------------------------------------------------- 9

EX-10 2 0002.htm THIRD AMENDMENT TO THE QUAKER OATS COMPANY BENEFITS PROTECTION TRUST This Agreement dated _________, 2000, is entered into by The Quaker Oats Company, a New Jersey corporation (the "Employer"), and Harris Trust and Savings Bank (the "Trustee"). WITNESSETH THAT: WHEREAS, on August 17, 1988, the Employer and Trustee entered into a trust agreement establishing The Quaker Oats Company Benefits Protection Trust (the "Trust"); and WHEREAS, under the terms of the Trust, the Employer has the ability to amend the Trust from time to time, and the Trust has been amended by First and Second Amendments thereto; and WHEREAS, the Employer deems it desirable that the Trust be further amended; NOW THEREFORE, in consideration of the mutual undertakings of the parties hereto, the Employer and Trustee agree to amend the Trust as follows: I. By substituting the following for Section 1.4 of the Trust, effective as of May 13, 1998: "1.4     'Change in Control of Quaker' shall be deemed to have occurred if: (a)     any 'Person,' which shall mean a '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 the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company, or any company 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 voting securities; (b)    during any period of 24 consecutive months (not including any period prior to May 13, 1998), individuals, who at the beginning of such period constitute the Company's Board of Directors (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 (a), (c)(2) or (d) of this Section) whose election by the Board, or whose nomination for election by the Company's stockholders, was approved by a vote of at least two-thirds (2/3) of the directors before the beginning of the period cease for any reason to constitute at least a majority thereof; (c)     the stockholders of the Company approve (1) a plan of complete liquidation of the Company or (2) the sale or disposition by the Company of all or substantially all of the Company's assets unless the acquirer of the assets or its directors shall meet the conditions for a merger or consolidation in subparagraphs (d)(1) or (d)(2) of this Section; or (d)    the stockholders of the Company approve a merger or consolidation of the Company with any  other company other than: (1)    such a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 70% of the combined voting power of the Company's or such surviving entity's outstanding voting securities immediately after such merger or consolidation; or (2)     such a merger or consolidation which would result in the directors of the Company who were directors immediately prior thereto continuing to constitute at least 50% of the directors of the surviving entity immediately after such merger or consolidation. In this paragraph (d), 'surviving entity' shall mean only an entity in which all of the Company's stockholders immediately before such merger or consolidation become stockholders by the terms of such merger or consolidation, and the phrase 'directors of the Company who were directors immediately prior thereto' shall include only individuals who were directors of the Company at the beginning of the 24 consecutive month period preceding the date of such merger or consolidation, or who were new directors (other than any director designated by a Person who has entered into an agreement with the Company to effect a transaction described in paragraph (a), (c)(2), (d)(1) or (d)(2) of this Section) whose election by the Board, or whose nomination for election by the Company's stockholders, was approved by a vote of at least two-thirds (2/3) of the directors before the beginning of such period. Notwithstanding the above, application of this Trust to all written Executive Separation Agreements and the Quaker Officers Severance Program, defined in Exhibit A, the following is to be substituted for paragraphs (c) and (d) above effective March 8, 2000: '(c.)    the stockholders of the Company approve (1) a plan of complete liquidation of the Company or (2) the sale or disposition by the Company of all or substantially all of the Company's assets unless the acquirer of the assets or its directors shall meet the conditions for a merger or consolidation in paragraph d. of this Section; or (d.)    the stockholders of the Company approve a merger or consolidation of the Company with any other company other than such a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 70% of the combined voting power of the Company's or such surviving entity's outstanding voting securities immediately after such merger or consolidation. In this paragraph d., "surviving entity" shall mean only an entity in which all of the Company's stockholders immediately before such merger or consolidation become stockholders by the terms of such merger or consolidation.' " II. By substituting the following for Exhibit A to the Trust, effective as of January 1, 1999: "EXHIBIT A TO THE QUAKER OATS COMPANY BENEFITS PROTECTION TRUST Plans/Agreements Covered:                       1.   The Quaker 415 Excess Benefit Plan The Quaker Eligible Earnings Adjustment Plan The Quaker Supplemental Executive Retirement Program (effective August 1, 1989), including all other retirement supplements provided for in written employment agreements or separation agreements Deferred Compensation Plan for Executives of The Quaker Oats Company All written Executive Separation Agreements Quaker Officers Severance Program Deferred Compensation Plan for Directors of The Quaker Oats Company The Quaker Oats Company Stock Compensation Plan for Outside Directors" IN WITNESS WHEREOF, the Employer and the Trustee have caused this Amendment to be executed on their behalf and their respective seals to be hereunder affixed and attested by their respective officers thereunto duly authorized, the day and year first above written.   ATTEST: EMPLOYER:    /s/   Gerald A. Cassioppi    By:   /s/  Pamela S. Hewitt                  Its:     Assistant Secretary   Its:          Senior Vice President           (Seal)       ATTEST: TRUSTEE:    /s/   George A. Flentge            /s/   Sarah L. Ross                                  Its:      Vice President                 Its:      Vice President                                 (Seal)  

EXHIBIT 10.2 AUTOZONE, INC. SECOND AMENDED AND RESTATED DIRECTOR COMPENSATION PLAN > SECTION 1. PURPOSE.         This Director Compensation Plan (this "Plan") is established to allow the Non-Employee Directors of AutoZone, Inc. ("AutoZone") to participate in the ownership of AutoZone through ownership of shares of AutoZone Common Stocks or units representing the right to receive shares of AutoZone Common Stock. In addition, the Plan is intended to allow AutoZone's Non-Employee Directors to defer all or a portion of their compensation for their service as directors of AutoZone. > SECTION 2. DEFINITIONS.         As used herein, the following words shall have the definitions given them below:                 "Affiliate" means any corporation, company limited by shares, partnership, limited liability company, business trust, other entity, or other business association that is controlled by AutoZone.                 "Board" means the Board of Directors of AutoZone.                 "Business Day" means on a day which AutoZone's executive offices in Memphis, Tennessee are open for business and on which trading is conducted on the New York Stock Exchange.                 "Common Stock" means the Common Stock, $0.01 par value per share, of AutoZone.                 "Compensation Date" means the first Business Day of each Plan Quarter.                 "Deferral Account" means an account established upon the conversion of a Unit Account by a Director and maintained in the Special Ledger for such Director to which cash equivalent amounts allocable to the Director under this Plan are credited.                 "Director" means any member of the Board who is not an employee or officer of AutoZone or an Affiliate.                 "Fair Market Value" means, 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 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.                 "Fee" means the amount of compensation (including, without limitation, annual Director fees and meeting fees) set by the Board from time to time as payable to a Director in each Plan Year on the terms and subject to the conditions stated in this Plan, subject to reduction for any portion thereof that a Director elects to defer as provided in this Plan.                 "First Component" means the portion of the Fee payable to a Director that accounts for at least one-half of the Fee and that is payable in Shares and may be deferred by crediting Units to a Unit Account maintained for the Director.                 "Plan Quarter" the three month period beginning each September 1, December 1, March 1, and June 1.                 "Interest Rate" means the annual rate at which interest is deemed to accrue on the amounts credited in a Deferral Account for a Director. The Interest Rate shall be set by the Board or a committee of the Board and may be changed from time to time as necessary to reflect prevailing interest rates.                 "Plan Year" means each 12-month period beginning September 1 of each year.                 "Second Component" means the balance, if any of the Fee (after reduction for the First Component) payable to a Director in cash.                 "Shares" means shares of Common Stock.                 "Special Ledger" means a record established and maintained by AutoZone in which the Deferral Accounts and Unit Accounts for the Directors, if any, and the Units and/or amounts credited to the accounts, are noted.                 "Termination Date" means the date on which a Director ceases to be a member of the Board.                 "Unit Account" shall mean the account maintained in the Special Ledger for a Director to which Units allocable to the Director under this Plan are credited.                 "Unit" means a credit in a Director Unit Account representing one share. > SECTION 3. ANNUAL FEE.         During each Plan Year in which a person is a Director and is entitled to receive the Fee during the existence of the Plan, the Director will be eligible to receive the Fee payable as follows:         At lease one-half of the Fee shall be and, at the Directors' option, up to the full amount of the Fee (defined above as the "First Component") will be (1) payable to the Director in Shares, or (2) at the Director's option, deferred by having AutoZone credit Units to a Unit Account maintained for the Director as provided in this Plan.           The balance of the Fee (defined above as the "Second Component"), if any, shall be payable to the Director in cash.                   The Fee will be payable in advance in equal quarterly installments on each Compensation Date unless deferred as provided herein. Each quarterly installment will consist of one-fourth of the First Component and one- fourth of the Second Component, if any, for each Director.   SECTION 4. ELECTIONS.           With respect to each Plan Year, each Director who was a Director during the prior Plan Year must elect by no later than August 31 of the prior Plan Year how he or she will receive the Fee for the Plan Year; provided, however, that with respect to the initial partial Plan Year beginning March 17, 1998 (the "1998 Plan Year"), each Director who was a Director during the prior Plan Year must elect by no later than April 15, 1998 how he or she will receive the Fee for the remainder of the 1998 Plan Year. Each Director who becomes a Director during a Plan Year must elect within 30 days after becoming a Director how he or she will receive the Fee for such Plan Year. Each election must be made by the Director filing an election form with the Secretary of AutoZone. If a Director does not file an election form for each Plan Year by the specified date the Director will be deemed to have elected to receive and defer the Fee in the manner elected by the Director in his or her last valid election or, if there had been no prior election, will be deemed to have elected to receive all of the Fee in Shares. Any election to defer a portion of the Fee made by a person who becomes a Director during a Plan Year will be valid as to the portion of the Fee received after the election is filed with the Secretary of AutoZone. When an election is made for a Plan Year, the Director may not revoke or change that election with respect to such Plan Year. SECTION 5. THE SHARES.           If a Director elects to receive Shares in payment of all or any part of the Director's Fee, the number of Shares to be issued on any Compensation Date shall be a whole number of shares nearest to one-fourth of the amount of the Fee to be paid in Shares for the Plan Year divided by the Fair Market Value of a Share on the Compensation Date. Any Shares issued under this Plan will be registered under the Securities Act of 1933, as amended, and, so long as shares of the Common Stock are listed for trading on the New York Stock Exchange, will be listed for trading on the New York Stock Exchange. > SECTION 6. THE UNITS.           If a Director defers any portion of the Fee in the form of Units, then on each Compensation Date, AutoZone will credit a Unit Account maintained for the Director with a number of Units (rounded to the nearest one-tenth) equal to (1) one-fourth of the dollar amount of the Fee that the Director has elected to defer in the form of Units for the Plan Year divided by (2) the Fair Market Value of a Share on the Compensation Date. If the Common Stock is the subject of a stock dividend, stock split, or a reverse stock split, the number of Units will be increased or decreased, as the case may be, in the same proportion as the outstanding shares of Common Stock. AutoZone will credit to the Director's Unit Account on the date any dividend is paid on the Common Stock, an additional number of Units equal to (i) the aggregate amount of the dividend that would be paid on a number of Shares equal to the number of Units credited to the Director's Unit Account on the date the dividend is paid divided by (ii) the Fair Market Value of a Share on that date. > SECTION 7. DISTRIBUTION OF THE AMOUNTS IN A UNIT ACCOUNT.           Upon the Termination Date for a former Director, such former Director shall be entitled to receive that whole number of Shares nearest to the number of Units with which the former Director's Unit Account is credited. Subject to Section 11 hereof, the former Director may elect to receive such Shares in any one of the following forms:           (a) a single lump-sum issuable as soon as practicable after the Termination Date; or           (b) a single lump-sum issuable as soon as practicable after the fifth anniversary of the Termination Date; or           (c) a single lump-sum issuable as soon as practicable after the tenth anniversary of the Termination Date; or           (d) two (2) equal installments, one of which shall be issuable as soon as practicable after the fifth anniversary of the Termination Date and the other of which shall be issuable as soon as practicable after the tenth anniversary of the Termination Date, as provided below.           If the former Director has elected to receive the Shares in the manner set forth in (d) above (i.e., in two equal installments), one-half of the Shares credited to the Unit Account as of the Termination Date will be issued to the former Director for each installment plus additional Shares equal to the Units credited to the Unit Account respecting dividends paid on the Common Stock since the prior installment was made (or, in the case of the first installment, since the Termination Date). > SECTION 8. CONVERSION OF UNIT ACCOUNT.           A Director who has a Unit Account may convert all (but not less than all) of the Unit Account into a Deferral Account, provided that such Director delivers notice to AutoZone of such election to convert at least 12 full months prior to the Director's Termination Date. The cash amount to be credited to the Director's Deferral Account upon the conversion shall equal (i) the number of Units credited to his or her Unit Account so converted multiplied by (ii) the Fair Market Value of a Share on the date of the Director's election to convert.           Any election to convert must be made on a form prescribed by AutoZone and filed with its Secretary. The conversion of a Unit Account or a Deferral Account shall be deemed to occur on the date of the Director's election, except that, unless the Board provides otherwise, any portion of a Unit Account granted within six months of the date of election shall be converted to a Deferral Account six months and one day from the date in which the Units representing such portion were credited to the Unit Account.           A Deferral Account shall accrue interest from the effective date of conversion at the Interest Rate, accrued and compounded quarterly. > SECTION 9. DISTRIBUTION OF THE AMOUNTS IN A DEFERRAL ACCOUNT.           Upon the Termination Date for a former Director, such former Director shall be entitled to receive an amount of cash equal to the amount with which the former Director's Deferral Account is credited. Subject to Section 11 hereof, the former Director may elect to receive such cash in any one of the following forms:           (a) a single lump-sum payable as soon as practicable after the Termination Date; or           (b) a single lump-sum payable as soon as practicable after the fifth anniversary of the Termination Date; or           (c) a single lump-sum payable as soon as practicable after the tenth anniversary of the Termination Date; or           (d) two (2) equal installments, one of which shall be payable as soon as practicable after the fifth anniversary of the Termination Date and the other of which shall be payable as soon as practicable after the tenth anniversary of the Termination Date, as provided below.           If the former Director has elected to receive the cash in the manner set forth in (d) above (i.e., in two equal installments), one-half of the amount credited to the Deferral Account as of the Termination Date will be paid in each installment, along with the additional amount credited to the Deferral Amount as interest (at the Interest Rate) since the prior installment was paid (or, in the case of the first installment, since the Termination Date). > SECTION 10. DISTRIBUTION IN THE EVENT OF A DIRECTOR'S DEATH.           Each Director who defers any part of the Fee payable to him or her in any Plan Year may designate one or more beneficiaries of the Director's Unit Account (or, if applicable, the Director's Deferral Account) which may be changed from time to time upon written notice to AutoZone. The designation of a beneficiary must be made by filing with AutoZone's Secretary a form prescribed by AutoZone. If no designation of a beneficiary is made, any deferred benefits under this Plan will be paid to the Director's or former Director's estate. If a Director dies while in office or a former Director dies during the installment payment period, AutoZone will issue the Shares that are issuable (or if applicable, pay the amounts of cash that are payable) to the Director or former Director in the manner set forth in the most recent timely election filed by such Director or former Director, or if no such election has been filed, in a single lump-sum as soon as practicable after the death of the Director or the former Director.           SECTION 11. TIMING OF ELECTION TO RECEIVE DEFERRED BENEFITS IN INSTALLMENTS.           If a Director desires to have his Unit Account and/or Deferral Account distributed in installments as provided in Section 7(d) or Section 9(d) hereof, the election to receive payments in installments must be delivered to the Secretary of AutoZone at least 12 full months prior to the Director's Termination Date. Any such election delivered by the Director within the 12-month period ending on the Director's Termination Date shall be of no force or effect. If a Director has filed more than one timely election, the most recent such election shall govern and all prior elections shall be superseded and shall be of no force or effect. > SECTION 12. HOLDING PERIOD           Notwithstanding anything contained herein, unless the Board provides otherwise, (i) no Shares issued hereunder may be sold, assigned or otherwise transferred until at least six months and one day have elapsed from the date on which such Shares were issued, and (ii) no right or interest of a Director or a former Director in Units credited his or her Unit Account hereunder (including Units credited to such Unit Account respecting dividends paid on the Common Stock) shall be sold, assigned or otherwise transferred until at least six months and one day have elapsed from the date on which such Units were credited to such Unit Account, except by will or in accordance with the laws of decent and distribution. > SECTION 13. HARDSHIP WITHDRAWALS.           Prior to the complete distribution of a Director's Unit Account and/or Deferral Account, such Director may request a withdrawal of any portion of his or her Unit Account or Deferral Account in an amount sufficient to meet a "hardship." For purposes of this Plan, "hardship" shall mean a demonstrated and severe financial hardship resulting from any one or more of the following: (i) sudden or unexpected illness or accident of the Director or of a dependent (as defined in Section 152(a) of the Internal Revenue Code of 1986, as amended) of the Director, (ii) a loss of the Director's property due to casualty, or (iii) any other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the Director's control; in each case only to the extent that the hardship is not relieved (a) through reimbursement or compensation by insurance or otherwise, (b) by liquidation of the Director's assets (to the extent that such liquidation does not itself cause a "hardship"), or (c) by cessation of deferrals under the Plan. The Board, in its sole and absolute discretion, shall determine the existence of a bona fide hardship based on non-discriminatory procedures, taking into account any then applicable rulings or regulations from the Internal Revenue Service. The standards established by the Board for determining the existence of hardship shall be uniformly applied to all Directors who request such a withdrawal and the Board's decision with respect to each such request shall be final.           An approved hardship withdrawal shall be paid to the Director in cash as soon as practicable after the approval. In the event that part or all of the withdrawal is to be made from a Unit Account, a number of Units equal to (i) the amount of the hardship withdrawal required to be made from the Unit Account, divided by (ii) the Fair Market Value of a Share on the date of approval, shall be converted into cash and paid to the Director as provided herein, and the balance of the Unit Account shall be reduced accordingly. > SECTION 14. WITHHOLDING FOR TAXES.           AutoZone will withhold the amount of cash and Shares necessary to satisfy AutoZone's obligation to withhold federal, state, and local income and other taxes on any benefits received by the Director, the former Director or a beneficiary under this Plan > SECTION 15. NO TRANSFER OF RIGHTS UNDER THE PLAN.           A Director or former Director shall not have the right to transfer, grant any security interest in or otherwise encumber rights he or she may have under this Plan, any Deferral Account or any Unit Account maintained for the Director or former Director or any interest therein. No right or interest of a Director or a former Director in a Deferral Account or a Unit Account shall be subject to any forced or involuntary disposition or to any charge, liability, or obligation of the Director or former Director, whether as the direct or indirect result of any action of the Director or former Director or any action taken in any proceeding, including any proceeding under any bankruptcy or other creditors' rights law. Any action attempting to effect any transaction of that type shall be null, void, and without effect. > SECTION 16. UNFUNDED PLAN.           This Plan will be unfunded for federal tax purposes. The Deferral Accounts and the Unit Accounts are entries in the Special Ledger only and are merely a promise to make payments in the future. AutoZone's obligations under this Plan are unsecured, general contractual obligations of AutoZone. > SECTION 17. AMENDMENT AND TERMINATION OF THE PLAN.           The Board may amend or terminate this Plan at any time. An amendment or the termination of this Plan will not adversely affect the right of a Director, former Director, or Beneficiary to receive Shares issuable or cash payable at the effective date of the amendment or termination or any rights that a Director, former Director, or a Beneficiary has in any Deferral Account or Unit Account at the effective date of the amendment or termination. If the Plan is terminated, however, AutoZone may, at its option, accelerate the payment of all deferred and other benefits payable under this Plan. > SECTION 18. GOVERNING LAW.           This Plan shall be administered, interpreted and enforced under the internal laws of the State of Nevada without regard to the conflicts of law rules thereof. AutoZone has the right to interpret this Plan, and any interpretation by AutoZone shall be conclusive as to the meaning of this Plan. > SECTION 19. SHARES SUBJECT TO THE PLAN.           AutoZone shall reserve 70,000 Shares for issuance under the Plan. All Shares issuable under the Plan shall be treasury shares of Common Stock. No Plan participant shall have any of the rights or privileges of a stockholder of the Company in respect to any of the Shares unless and until certificates representing such Shares have been issued by the Company. > SECTION 20. EFFECTIVE DATE.           The effective date of this Plan shall be March 17, 1998. This Plan was last amended and restated effective June 6, 2000.

Exhibit 10.4.c FMC CORPORATION DEFINED BENEFIT RETIREMENT TRUST           THIS AGREEMENT, effective as of the 2nd day of October, 2000, is made between FMC CORPORATION, a Delaware corporation, herein referred to as the "Company", and THE NORTHERN TRUST COMPANY, an Illinois corporation, of Chicago, Illinois, as Trustee, and constitutes a restatement of the FMC CORPORATION DEFINED BENEFIT RETIREMENT TRUST agreement, which was heretofore made by the Company as the funding medium for the FMC Corporation Employees' Retirement Program, hereinafter referred to as the "Plan", and under which the Trustee is accepting appointment as successor trustee.           The Company has appointed the Employee Welfare Benefit Plans Committee, hereinafter referred to as the "Committee", as the Plan fiduciary which has the responsibility for administering the Plan. The Committee has appointed the Pension Investment Subcommittee of the Committee as the Plan fiduciary which has the responsibility for Plan investments.           The Trust Fund shall consist of all assets held by the Trustee as of the date of this Agreement, all investments and reinvestments thereof and all additions thereto by way of contributions, earnings and increments; is intended to constitute a qualified trust as defined under Section 401(a) of the Code and is entitled to tax exemption under Section 501(a) of the Code; shall at all times be maintained as a domestic trust in the United States; and shall be held upon the following terms: ARTICLE ONE: DEFINITIONS           For the purposes of this Agreement:           1.1     "Beneficiary" means a person designated to receive a benefit under the Plan after the death of a Participant;           1.2     "Code" means the Internal Revenue Code of 1986, as in effect from time to time, and the regulations issued thereunder;           1.3     "Committee" means the Employee Welfare Benefit Plans Committee as constituted from time to time which has the responsibility for administering the Plan and shall be deemed for purposes of ERISA to be the Plan administrator and the named fiduciary for Plan administration or any designee thereof authorized to act on behalf of the Committee;           1.4     "Company" means FMC Corporation and any successor to it;           1.5     "Company Stock Account" means a Separate Account subject to the investment responsibility of the Committee as set forth in Section 5.5 hereof;           1.6     "Custodial Agent" means one or more persons or entities designated by the Investment Subcommittee to maintain custody of assets of a Separate Investment Account pursuant to Section 3.1(c);           1.7     "ERISA" means the Employee Retirement Income Security Act of 1974, as in effect from time to time, and the regulations issued thereunder;           1.8     "Investment Adviser" means an Investment Manager or an Investment Trustee to whom the Investment Subcommittee has delegated investment responsibility for a Separate Account or the Investment Committee with respect to any assets of the Trust Fund for which the Investment Committee has investment responsibility;           1.9     "Investment Subcommittee" means the Pension Investment Subcommittee of the Committee as constituted from time to time which has the responsibility for allocating the assets of the Trust Fund among the Separate Accounts and any Trustee Investment Account, for monitoring the diversification of the investments of the Trust Fund, for determining the propriety of investment of the Trust Fund in foreign securities and of maintaining the custody of foreign investments abroad, for assuring that the Plan does not violate any provisions of ERISA limiting the acquisition or holding of "employer securities" or " employer real property" and for the appointment and removal of Investment Advisers and shall be deemed for purposes of ERISA to be the named fiduciary for Plan investments;           1.10     "Investment Manager" means an investment manager as defined in Section 3(38) of ERISA, which is appointed by the Investment Subcommittee to manage a Separate Investment Account; but the Trustee shall have no responsibility to determine whether a person or entity acting as an Investment Manager meets or continues to meet this definition;           1.11     "Investment Trustee" means the trustee appointed by the Investment Subcommittee to manage a Separate Investment Trust Account;           1.12     "Participant" means a person who is a current, retired or former employee and who has rights in the Plan;           1.13     "Plan" means the FMC Corporation Employees' Retirement Program;           1.14     "Separate Account" means a Separate Investment Account, a Separate Investment Trust Account or a Separate Insurance Contract Account;           1.15     "Separate Insurance Contract Account" means assets of the Trust Fund allocated by the Investment Subcommittee to an account of the Trust for investment in insurance contracts directed by the Investment Subcommittee;           1.16     "Separate Investment Trust Account" means assets of the Trust Fund allocated by the Investment Subcommittee to an account of the Trust which is to be managed by an Investment Manager or the Investment Subcommittee;           1.17     "Separate Investment Trust Account" means assets of the Trust Fund allocated by the Investment Subcommittee to a Separate Account to be managed by an Investment Trustee;           1.18     "Subsidiary" means a subsidiary or affiliate of the Company;           1.19     "Subtrust" means assets of a Separate Investment Account which are held by a Subtrustee pursuant to an agreement which the Investment Subcommittee has approved and directed the Trustee to enter into;           1.20     "Subtrustee" means the trustee appointed by the Investment Subcommittee to act as trustee of a Subtrust;           1.21     "Trust" means the qualified defined benefit retirement trust evidenced hereby, as amended from time to time;           1.22     "Trust Fund" means all assets subject to this Agreement;           1.23     "Trustee" means The Northern Trust Company and any successor to it as trustee or trustees of the Trust Fund under this Agreement; and           1.24     "Trustee Investment Account" means assets of the Trust Fund allocated by the Investment Subcommittee to an account of the Trust to be managed by the Trustee with the written consent of the Trustee. ARTICLE TWO: DISTRIBUTIONS           2.1     The Trustee shall make distributions from the Trust Fund to such persons, in such amounts, at such times and in such manner as the Committee or its designee shall from time to time direct pursuant to the service description furnished by the Trustee to the Committee from time to time. The Trustee shall have no responsibility to ascertain whether any direction received by the Trustee from the Committee or its designee in accordance with the preceding sentence is proper and in compliance with the terms of the Plan or to see to the application of any distribution. The Trustee shall not be liable for any distribution made in accordance with any direction from the Committee or its designee in accordance with the first sentence hereof and in good faith without actual notice or knowledge of the changed condition or status of any recipient. If any distribution made by the Trustee is returned unclaimed, the Trustee shall notify the Committee or its designee and shall dispose of the distribution as the Committee or its designee shall direct. The Trustee shall have no obligation to search for or ascertain the whereabouts of any payee of benefits of the Trust Fund.           2.2     Notwithstanding the foregoing, the Committee may make distributions from the Trust Fund through a commercial banking account in a federally insured banking institution (including the Trustee) established by the Committee in the name of the Trust for such purpose after written notice to the Trustee that the commercial banking account has been so established. Upon such written notice, the Committee shall have the responsibility to assure that any such commercial banking account is established and maintained in accordance with ERISA and is properly insured. The Trustee shall make such deposits of portions of the Trust Fund to the commercial banking account as the Committee or its designee may from time to time direct. The Trustee shall have no further responsibility for funds held in or disbursed from any such commercial banking account, or to prepare any informational returns for tax purposes as to distributions made therefrom. ARTICLE THREE: SEPARATE ACCOUNTS AND INVESTMENT SUBCOMMITTEE ADVISORS           3.1     The Trust Fund shall consist of one or more Separate Accounts and, with the Trustee's written consent, one or more Trustee Investment Accounts. All Separate Accounts and any Trustee Investment Accounts shall be established by the Trustee at the direction of the Investment Subcommittee. The Investment Subcommittee shall designate assets of the Trust Fund to be allocated to each Separate Account and each Trustee Investment Account and shall direct the Trustee with respect to any transfer of assets between Separate Accounts or between a Separate Account and a Trustee Investment Account; provided that no asset shall be allocated or transferred to a Trustee Investment Account without the Trustee's written consent. The Investment Subcommittee shall have investment responsibility for any assets of the Trust Fund not otherwise allocated to a Separate Account or Trustee Investment Account, and such assets shall comprise a Separate Investment Account for which the Investment Subcommittee serves as Investment Adviser. The following provisions shall apply to the Separate Accounts:           3.2     With respect to each Separate Investment Account, the Investment Subcommittee may appoint an Investment Manager, who shall acknowledge by a writing delivered to the Investment Subcommittee and to the Trustee that it is a fiduciary with respect to the assets allocated thereto, or in the event the Investment Subcommittee does not appoint an Investment Manager, the Investment Subcommittee shall have investment responsibility with respect to such Separate Investment Account. The Trustee shall act with respect to assets allocated to a Separate Investment Account only as directed by the Investment Manager or, in the event that the Investment Subcommittee does not appoint an Investment Manager, the Investment Subcommittee. The Investment Subcommittee may direct that any or all of the assets of a Separate Investment Account be held by a Subtrustee. The Trustee shall have custody of and custodial responsibility for all assets of the Trust Fund held in a Separate Investment Account except as otherwise provided in this Agreement or as follows: >           (a)     The Subtrustee of a Subtrust shall have custody of and > custodial responsibility for any assets of a Separate Investment Account > allocated to it by the Investment Subcommittee; > >           (b)     The trustee of a collective or group trust fund (including > without limitation an Investment Manager or its bank affiliate) shall have > custody of and custodial responsibility for any assets of a Separate > Investment Account invested in such collective or group trust fund; and > >           (c)     The Investment Subcommittee may direct in writing that the > custody of additional assets of a Separate Investment Account (other than > those referred to in paragraphs (a) and (b) of this Section 3.2) be maintained > with a Custodial Agent. In such event, the Investment Subcommittee shall > approve, and direct the Trustee to enter into, a custody agreement with the > Custodial Agent (which custody agreement may authorize the Custodial Agent to > maintain custody of such assets with one or more subagents, including a broker > or dealer registered under the Securities Exchange Act of 1934 or a nominee of > such broker or dealer). The Custodial Agent shall have custodial > responsibility for any assets maintained with the Custodial Agent or its > subagents pursuant to the custody agreement. Notwithstanding any other > provision of this Agreement, the Company (which has the authority to do so > under the laws of its state of incorporation) agrees to indemnify the Trustee > from any liability, loss and expense, including reasonable legal fees and > expenses, which the Trustee sustains by reason of acting in accordance with > any directions of the Investment Committee pursuant to this paragraph (c). > This paragraph shall survive the termination of this Agreement.           3.3     With respect to each Separate Investment Trust Account, the Trustee and the Investment Trustee thereof shall upon the direction of the Investment Subcommittee execute an investment trust agreement with respect thereto. The Investment Trustee shall have custody of all of the assets of the Separate Investment Trust Account except such assets as the Investment Subcommittee may from time to time determine shall be held in the custody of the Trustee with the Trustee's written consent; the Trustee shall act with respect to any such assets in its custody only as directed by the Investment Trustee.           3.4     With respect to each Separate Insurance Contract Account, from assets allocated thereto, the Trustee shall purchase or continue in effect such insurance contracts, including annuity contracts and policies of life insurance, as the Investment Subcommittee shall direct, the issuing insurance company may credit those assets to its general account or to one or more of its separate accounts, and the Trustee shall act with respect to those contracts only as directed by the Investment Subcommittee.           3.5     The Investment Subcommittee shall have investment responsibility for assets held in any Separate Account for which an Investment Manager or Investment Trustee has not been retained, has been removed, or is for any reason unwilling or unable to act. With respect to assets or Separate Accounts for which the Investment Subcommittee has investment responsibility, the Trustee, acting only as directed by the Investment Subcommittee, shall enter into such agreements as are necessary to facilitate any investment, including agreements entering into a limited partnership, Subtrust or the participation in real estate funds. The Trustee shall not make any investment review of, or consider the propriety of holding or selling, or vote any assets for which the Investment Subcommittee has investment responsibility.           3.6     With respect to each Separate Account, the Investment Adviser thereof shall have the investment powers granted to the Trustee by ARTICLE FOUR, as limited by Section 5.1 through Section 5.3 of ARTICLE FIVE, as if all references therein to the Trustee referred to the Investment Adviser.           3.7      The Investment Subcommittee may also direct the Trustee as fiduciary to lend securities of the Trust Fund held by the Trustee by entering into a written agreement with the Trustee. The terms of the agreement between the Investment Subcommittee and the Trustee shall be consistent with Department of Labor Prohibited Transaction Exemption 81-6 or any successor exemption. The written agreement between the Investment Subcommittee and the Trustee shall direct the Trustee to enter into a loan agreement with a borrower or borrowers. The Trustee shall transfer securities to the borrower and invest or hold on behalf of the Trust Fund the collateral received in exchange for the securities. Notwithstanding anything in this Agreement to the contrary, the borrower shall have the authority and responsibility to vote securities it has borrowed. The Trustee shall maintain a record of the market value of the loaned securities and shall be paid reasonable compensation as agreed to by the Trustee and the Investment Subcommittee.           3.8     The Investment Subcommittee may direct the Trustee to: (i) enter into such agreements as are necessary to implement investment in futures contracts and options on futures contracts; (ii) transfer initial margin to a futures commission merchant or third party safekeeping bank pursuant to directions from an Investment Adviser and (iii) pay or demand variation margin in accordance with industry practice to or from such futures commission merchant based on daily marking to market calculations. The Trustee shall have no investment or custodial responsibility with respect to assets transferred to a futures commission merchant or third party safekeeping bank. ARTICLE FOUR: POWERS OF TRUSTEE           Except as otherwise provided in this Agreement, the Trustee shall hold, manage, care for and protect the assets of the Trust Fund and shall have until actual distribution thereof the following powers and, except to the extent inconsistent herewith, those now or hereafter conferred by law:           4.1     To retain any asset originally included in the Trust Fund or subsequently added thereto;           4.2     To invest and reinvest the assets without distinction between income and principal in property of any kind, without restriction, including options, futures contracts, and options on futures contracts.           4.3     To acquire and hold qualifying employer securities and qualifying employer real property, as such investments are defined in Section 407(d) of ERISA;           4.4     To deposit any part or all of the assets with the Trustee or its affiliate as trustee, or another person or entity acting as trustee of any collective or group trust fund which is now or hereafter maintained as a medium for the collective investment of funds of pension, profit sharing or other employee benefit plans, and which is qualified under Section 401(a) of the Code and exempt from taxation under Section 501(a) of the Code, and to withdraw any part or all of the assets so deposited; any assets deposited with the trustee of a collective or group trust fund shall be held and invested by the trustee thereunder pursuant to all the terms and conditions of the trust agreement or declaration of trust establishing the fund, which are hereby incorporated herein by reference and shall prevail over any contrary provision of this Agreement; provided, however, that the books and records of the Trustee shall at all times show that all such investments are part of the Trust Fund;           4.5     To deposit cash in any depository, including the banking department of the Trustee or its affiliate and any organization acting as a fiduciary with respect to the Trust Fund;           4.6     To hold any part of the assets in cash without liability for interest as the Trustee deems reasonable or necessary pending investment thereof or the payment of expenses or making of distributions therewith;           4.7     To cause any asset, real or personal, to be held in a corporate depository or federal book entry account system or registered in the Trustee's name or in the name of a nominee or in such other form as the Trustee deems best without disclosing the trust relationship; provided, however, that the books and records of the Trustee shall at all times show that all such investments are part of the Trust Fund;           4.8     Other than with respect to Company stock, to vote, either in person or by general or limited proxy, or refrain from voting, any corporate securities for any purpose; to exercise or sell any subscription or conversion rights; to consent to and join in or oppose any voting trusts, reorganizations, consolidations, mergers, foreclosures and liquidations and in connection therewith to deposit securities and accept and hold other property received therefor;           4.9     Subject to Section 5.5 of this Agreement, with respect to Company stock, to vote, either in person or by general or limited proxy, or refrain from voting any Company stock for any purpose; to exercise or sell any subscription or conversion rights; to consent to and join in or oppose any voting trusts, reorganizations, consolidations, mergers, foreclosures and liquidations and in connection therewith to deposit securities and accept and hold other property received therefor; to give general or special proxies or powers of attorney with or without the power of substitution; and to generally exercise any of the powers of an owner with respect to such Company stock;           4.10     At the direction of the Investment Subcommittee, to lease any assets for any period of time though commencing in the future or extending beyond the term of the trust;           4.11     To borrow money from any lender in order to complete transactions in cases where adequate funds may not otherwise be available to the Trust Fund, and, at the direction or with the consent of the Investment Subcommittee, to borrow money from any lender for any other purpose that as set forth above, to extend or renew any existing indebtedness and to mortgage or pledge any assets;           4.12     To sell at public or private sale, contract to sell, convey, exchange, transfer and otherwise deal with the assets in accordance with industry practice, and to sell put and covered call options from time to time for such price and upon such terms as the Trustee sees fit; the Company acknowledges that the Trustee may reverse any credits made to the Trust Fund by the Trustee prior to receipt of payment in the event that payment is not received;           4.13     To employ agents, attorneys-in-fact and proxies and to delegate to any one or more of them any power, discretionary or otherwise, granted to the Trustee at the Trustee's expense without any cost to the Company or the Trust Fund unless such expense is authorized under Section 9.6 hereof, or the Company agrees in writing to bear such expense;           4.14     Upon giving the Committee 30 days prior written notice, to compromise, contest, prosecute or abandon claims in favor of or against the Trust Fund;           4.15     To appoint foreign custodians as agent of the Trustee to custody foreign securities holdings of any Separate Account established by the Investment Subcommittee or of any Trustee Investment Account.           4.16     To lend securities held by the Trustee and to receive and invest collateral provided by the borrower, all pursuant to a written agreement between the Trustee and the Investment Subcommittee;           4.17     To utilize any tax refund claim procedures with respect to taxes withheld to which the Trust Fund may be entitled under applicable tax laws, treaties and regulations; any exercise of such power by the Trustee shall be on a best efforts basis; and           4.18     To perform other acts necessary or appropriate for the proper administration of the Trust Fund, execute and deliver necessary instruments and give full receipts and discharges. ARTICLE FIVE: LIMITATIONS ON POWERS           For purposes of this Agreement, the powers and responsibilities allocated to the Trustee shall be limited as follows:           5.1     The powers of the Trustee shall be exercisable for the exclusive purpose of providing benefits to the Participants and Beneficiaries under the Plan and in accordance with the standards of a prudent man under ERISA;           5.2     Subject to Section 5.1 and Section 5.3, the Trustee shall diversify the investments of that portion of the Trust Fund for which it has investment responsibility so as to minimize the risk of large losses;           5.3     Subject to Section 5.1, the Trustee shall, with respect to that portion of the Trust Fund for which it has investment responsibility, follow the investment guidelines established by the Investment Subcommittee;           5.4     Except as otherwise provided in Section 3.7, the Trustee shall not make any investment review of, consider the propriety of holding or selling, or vote other than as directed by the Investment Adviser, any assets of the Trust Fund allocated to a Separate Account in accordance with ARTICLE THREE, except that if the Trustee shall not have received contrary instructions from the Investment Adviser thereof, the Trustee shall invest for short term purposes any cash consisting of U. S. dollars of a Separate Account in its custody in bonds, notes and other evidences of indebtedness having a maturity date not beyond five years from the date of purchase, U.S. Treasury bills, commercial paper, bankers' acceptances and certificates of deposit, and undivided interests or participations therein and (if subject to withdrawal on a daily or weekly basis) participations in common or collective funds composed thereof and regulated investment companies (including those for which the Trustee or any of its affiliates acts as advisor). For currencies other than U. S. dollars, the Trustee shall invest cash of a Separate Account as directed by the Investment Adviser with respect to that Separate Account and such investments may include an interest bearing account of a foreign custodian;           5.5     The Investment Subcommittee shall have the sole investment responsibility with respect to the retention, sale, purchase or voting of any Company stock other than Company stock which has been allocated to a Separate Account over which the Investment Subcommittee has delegated investment responsibility to an Investment Adviser. The Trustee shall have custody of such Company stock and shall act with respect thereto as directed by an Investment Adviser of a Separate Account holding Company stock or the Investment Subcommittee with respect to Company stock in a Company Stock Account. The Trustee shall not make any investment review of, consider the propriety of holding or selling, or vote any such Company stock. With respect to such Company stock, the Investment Subcommittee shall have the investment powers granted to the Trustee by ARTICLE FOUR as limited by Section 5.1 and Section 5.2 of ARTICLE FIVE, as if all references therein to the Trustee referred to the Investment Subcommittee. No provision of this Section 5.5 shall prevent the Trustee from taking any action with respect to the voting or tender of such Company stock if the Trustee determines in its sole discretion that such action is necessary in order for the Trustee to fulfill its fiduciary responsibilities under ERISA;           5.6     The Investment Subcommittee shall have sole responsibility for the decision to maintain the custody of foreign investments abroad. Except as otherwise directed by the Investment Subcommittee, custody of foreign investments shall be maintained with foreign custodians selected by the Trustee. The Trustee shall have no responsibility for losses to the Trust Fund resulting from the acts or omissions of any foreign custodian appointed by the Trustee unless due to the foreign custodian's fraud, negligence or willful misconduct. The Trustee shall maintain custody of foreign investments in any jurisdiction where the Trustee has not selected a custodian solely as directed by the Investment Subcommittee. The Trustee shall have no responsibility for the financial condition, acts or omissions of any foreign custodian holding assets of the Trust Fund at the direction of the Investment Subcommittee. ARTICLE SIX: ACCOUNTS           6.1     The Trustee shall maintain accounts of all investments, receipts and disbursements, including contributions, distributions, purchases, sales and other transactions of the Trust Fund. The accounts, and the books and records relating thereto, shall be open to inspection and audit at all reasonable times by any person or persons designated by the Investment Subcommittee or entitled thereto under ERISA.           6.2     Within sixty (60) days after the close of each fiscal year of the Trust Fund and of any other period agreed upon by the Trustee and the Investment Subcommittee the Trustee shall render to the Investment Subcommittee a statement of account for the Trust Fund for the period commencing with the close of the last preceding period and a list showing each asset thereof as of the close of the current period and its cost and fair market value. In preparing the Trustee's written account, the Trustee shall be fully protected in relying, without duty of inquiry: (i) upon the determination of the issuing insurance company or other entity with respect to the value of each insurance or investment contract included in such written account, (ii) upon information provided by the general partner or other investment entity with respect to the value of each limited partnership or other investment interest included in such written account, and (iii) with respect to any assets of the Trust Fund managed by an Investment Adviser for which the Trustee deems not to have a readily ascertainable value, upon the fair market value of such assets as determined by the applicable Investment Adviser.           6.3     An account of the Trustee may be approved by the Investment Subcommittee by written notice delivered to the Trustee or by failure to object to the account by written notice delivered to the Trustee within six (6) months of the date upon which the account was delivered to the Investment Subcommittee. The approval of an account shall constitute a full and complete discharge to the Trustee as to all matters set forth in that account as if the account had been settled by a court of competent jurisdiction in an action or proceeding to which the Trustee, the Company and the Investment Subcommittee were parties. In no event shall the Trustee be precluded from having its accounts settled by a judicial proceeding. Nothing in this article shall relieve the Trustee of any responsibility, or liability for any responsibility, under ERISA. ARTICLE SEVEN: TRUSTEE SUCCESSION           7.1     The Trustee may resign at any time by written notice to the Investment Subcommittee, or the Investment Subcommittee may remove the Trustee by written notice to the Trustee. The resignation or removal shall be effective sixty (60) days after the date of the Trustee's resignation or receipt of the notice of removal or at such earlier date as the Trustee and the Investment Subcommittee may agree.           7.2     In case of the resignation or removal of the Trustee, the Investment Subcommittee shall appoint a successor trustee by delivery to the Trustee of a written instrument executed by the Investment Subcommittee appointing the successor trustee and a written instrument executed by the successor trustee accepting the appointment, whereupon the Trustee shall deliver the assets of the Trust Fund to the successor trustee but may reserve such reasonable amount as the Trustee may deem necessary to satisfy outstanding invoices for compensation for its services as Trustee and any other undisputed, outstanding and accrued expenses as described in Section 9.5 hereof, against the Trust Fund.           7.3     The successor trustee, and any successor to the trust business of the Trustee by merger, consolidation or otherwise, shall have all the powers given the originally named Trustee. No successor trustee shall be personally liable for any act or omission of any predecessor. Except as otherwise provided in this Agreement or under ERISA, the receipt of the successor trustee and the approval of the Trustee's final account by the Investment Subcommittee in the manner provided in ARTICLE SIX shall constitute a full and complete discharge to the Trustee. ARTICLE EIGHT: AMENDMENT AND TERMINATION           8.1     The Company may at any time or times with the consent of the Trustee amend this Agreement in whole or in part by instrument in writing delivered to the Trustee and effective upon the date therein provided.           8.2     This Agreement shall terminate by action of the Company. Upon termination, the Trustee shall distribute the Trust Fund in the manner directed by the Investment Subcommittee, in kind to the extent of identified assets and the balance in cash or in kind or partly in each as the Trustee and the Investment Subcommittee shall agree, except that the Trustee shall be entitled to prior receipt of such rulings and determinations from such administrative agencies as it may deem necessary or advisable to assure itself that the distribution directed is in accordance with law and will not subject the Trust Fund or the Trustee to liability, and except, further, that the Trustee may reserve such reasonable amount as the Trustee may deem necessary to satisfy outstanding invoices for compensation for its services as Trustee and any other undisputed, outstanding and accrued expenses as described in Section 9.5 hereof, against the Trust Fund.           8.3     This Agreement shall terminate in its entirety when there is no asset included in the Trust Fund. ARTICLE NINE: MISCELLANEOUS           9.1     Any action required to be taken by the Company shall be by resolution of its board of directors or by the written direction of one or more of its president, any vice president or treasurer or assistant treasurer, or by such other person or persons as shall be authorized by such officers or by resolution of its board of directors, which resolution shall be filed with the Trustee. The Trustee may take or omit to take any action in accordance with written direction purporting to be signed by such an officer of the Company or other authorized person, or in reliance upon a certified copy of a resolution of the board of directors which the Trustee believes to be genuine. The Trustee shall have no responsibility for any action taken by the Trustee in accordance with any such resolution or direction.           9.2     The Company shall certify to the Trustee in writing the names of the members of the Committee and Investment Subcommittee acting from time to time, and the Trustee shall not be charged with knowledge of a change in the membership of either such committee until so notified in writing by the Company. Any action required or permitted to be taken by the Committee or the Investment Subcommittee shall be by direction of (i) one or more of the members of the committee authorized to take such action hereunder, (ii) such committee's secretary or (iii) such other designee as shall be designated in writing by the Committee or the Investment Subcommittee to act for such committee. The Trustee may rely upon an instrument of designation received from the Committee or the Investment Subcommittee appointing a designee to act for such committee which it reasonably believes has been signed by a majority of the members (or by the secretary or chairman) of the appropriate committee and filed with the Trustee. The Trustee shall have no responsibility for any action taken by it in accordance with any direction it reasonably believes to have been given as provided above. Directions of the Committee or the Investment Subcommittee may be given to the Trustee by telephone, letter, telex, fax, SWIFT, other electronic or electro-mechanical means or by other methods the Trustee deems acceptable.           9.3     In no event shall the terms of the Plan, either expressly or by implication, be deemed to impose upon the Trustee any power or responsibility other than those set forth in this Agreement. The Trustee may assume until advised to the contrary that the Plan and the Trust Fund are qualified under Section 401(a) and exempt from taxation under Section 501(a) of the Code, or under corresponding provisions of subsequent federal tax laws. The Trustee shall be accountable for contributions made to the Plan and included among the assets of the Trust Fund but shall have no responsibility to determine whether the contributions comply with the provisions of the Plan or of ERISA.           9.4     In any judicial proceeding to settle the accounts of the Trustee, the Trustee, the Company and the Investment Subcommittee shall be the only necessary parties; in any other judicial proceeding with respect to the Trustee or the Trust Fund, the Trustee, the Company and each affected Subsidiary shall be the only necessary parties; and no Participant or Beneficiary shall be entitled to any notice of process. A final judgment in any such proceeding shall be binding upon the parties to the proceeding and all Participants and Beneficiaries.           9.5     The Trustee shall be reimbursed for all reasonable and direct expenses incurred in extraordinary and nonrecurring circumstances in the management and protection of the Trust Fund to the extent such expenses are not included in the compensation the Company pays the trustee for its services and shall receive such reasonable compensation for its services as the Trustee and the Company shall from time to time agree. Those items of expense and compensation shall be paid from the Trust Fund, subject to prior payment or reimbursement by the Company in its discretion.           9.6     Without limiting the rights of the Trustee as otherwise provided in this Agreement, pursuant to direction by the Committee, the Trustee shall pay from the Trust Fund expenses of the Plan or compensation to parties providing services to the Plan including but not by way of limitation, expenses or compensation related to actuarial, legal, accounting, office space, printing, computer, recordkeeping, investment, performance evaluation or any other material or service provided to the Plan.           9.7     The Company has allocated fiduciary responsibility among various persons and entities in accordance with the terms of the Plan and this Agreement. Except as provided herein, the Trustee shall have no responsibility for any error or loss that results by reason of the exercise or non-exercise of fiduciary responsibility which is not allocated to the Trustee hereunder and the Company (which has the authority to do so under the laws of the state of its incorporation) agrees to hold harmless and indemnify the Trustee from any liability, loss and expense, including reasonable attorneys fees, which it incurs to the extent the liability, loss or expense is a direct result of such exercise or non-exercise of fiduciary responsibility by the person or entity to which it is allocated; provided, however, the Trustee shall not be so indemnified to the extent such liability, loss or expense is a result of a breach by the Trustee of a duty specifically allocated to it by the terms of this Agreement or the Trustee's negligence in carrying out such a duty or to the extent the Trustee participated knowingly in a breach, or knowingly undertook to conceal an act or omission of another fiduciary, knowing such act or omission was a breach of fiduciary responsibility by such fiduciary. This Section 9.7 shall survive the termination of this Agreement.           9.8     The Trustee hereby agrees to hold harmless and indemnify the Company from and against any liability, loss or expense, including reasonable attorneys fees which it incurs to the extent the liability, loss or expense was a direct result of a breach by the Trustee of a duty specifically allocated to it by the terms of this Agreement or the Trustee's negligence in carrying out such a duty or to the extent the Trustee participated knowingly in a breach, or knowingly undertook to conceal an act or omission of another fiduciary, knowing such act or omission was a breach of fiduciary responsibility by such fiduciary. This Section 9.8 shall survive the termination of this Agreement.           9.9     For purposes of the foregoing, the Trustee shall not be deemed to have participated knowingly in a breach, or knowingly undertook to conceal an act or omission of another fiduciary, knowing such act or omission was a breach of fiduciary responsibility by such fiduciary, by merely complying with the authorized directions of an Investment Adviser or by its failure to act in the absence of such authorized direction or by reason of maintaining accounting records or solely as a result of the normal information received by the Trustee or its officers, employees, or agents in the normal course of performing any custodial, reporting, recording and bookkeeping functions with respect to any assets of the Trust Fund managed by an Investment Manager or the Investment Subcommittee. This Section 9.9 shall survive the termination of the Agreement.           9.10     Notwithstanding any other provision of this Agreement, in no event shall the Trustee or the Company be liable for any incidental or consequential damages of any nature.           9.11     Neither the Company, the Committee nor the Investment Subcommittee shall direct the Trustee to cause any part of the Trust Fund to be diverted to any purpose other than the exclusive benefit of the Participants and Beneficiaries and for defraying the reasonable expenses of administering the Plan or, except as otherwise permitted under the Plan and under ERISA, to be remitted to the Company or a Subsidiary.           9.12     Any person dealing with the Trustee shall not see to the application of any money paid or property delivered to the Trustee or inquire into the provisions of this Agreement or of the Plan or the Trustee's authority thereunder or compliance therewith, and may rely upon the statement of the Trustee that the Trustee is acting in accordance with this Agreement.           9.13     Except as otherwise directed by the Committee, which direction shall be in compliance with all applicable provisions of the 1984 Retirement Equity Act, the relevant Plan and Section 401(a)(13) of the Code, any interest of a Participant or Beneficiary in the Trust Fund or the Plan or in any distribution therefrom shall not be subject to the claim of any creditor, any spouse for alimony or support, or others, or to legal process, and may not be voluntarily or involuntarily alienated or encumbered.           9.14     The Trustee shall not be responsible for any delay in performance, or non-performance, of any obligation hereunder to the extent that the same is due to forces beyond its reasonable control, including but not limited to delays, errors or interruptions caused by the Company, the Committee, the Investment Subcommittee or third parties, any industrial, juridical, governmental, civil or military action, acts of terrorism, insurrection or revolution, nuclear fusion, fission or radiation, failure or fluctuation in electrical power, heat, light, air conditioning or telecommunications equipment, or acts of God .           9.15     In case any provision of this Agreement shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining provisions of this Agreement, but shall be fully severable, and the Agreement shall not be construed and enforced as if said illegal or invalid provisions had never been inserted herein. This Agreement supersedes and replaces any prior agreements with respect to the subject matter hereof.           9.16     This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, and the counterparts shall constitute one and the same instrument. ARTICLE TEN: GOVERNING LAW           The provisions of ERISA and the internal laws of Illinois shall govern the validity, interpretation and enforcement of this Agreement, and in case of conflict, the provisions of ERISA shall prevail.           IN WITNESS WHEREOF, the Company and the Trustee have executed this Agreement by their respective duly authorized officers effective as of the day and year first above written.     FMC CORPORATION       ATTEST: By:  /s/  Michael W. Murray --------------------------------------------------------------------------------     /s/ Lori A. Lenard -------------------------------------------------------------------------------- Its: Vice Pres. H.R. -------------------------------------------------------------------------------- Lori A. Lenard Assistant Secretary             The undersigned, Stephan F. Gates, does hereby certify that he is the duly elected, qualified and acting Secretary of FMC Corporation (the "Company") and further certifies that the person whose signature appears above is a duly elected, qualified and acting officer of the Company with full power and authority to execute this Trust Agreement on behalf of the Company and to take such other actions and execute such other documents as may be necessary to effectuate this Agreement. /s/ Stephen F. Gates -------------------------------------------------------------------------------- Senior Vice President, General Counsel Secretary FMC Corporation   THE NORTHERN TRUST COMPANY             ATTEST: By:  /s/ Curtis Pence -------------------------------------------------------------------------------- /s/ Ronald Szafranski -------------------------------------------------------------------------------- Its: Vice President -------------------------------------------------------------------------------- Assistant Secretary                      

EXHIBIT 10.3d TERMINATION PROTECTION AGREEMENT   AGREEMENT effective June 19, 2000 between Harcourt General, Inc. and Eric P. Geller (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 19, 2000 (the "Effective Date") and shall remain in effect until June 18, 2002 (the "Term"); provided, however, that commencing with June 19, 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 8.18% 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 19th day of June, 2000. HARCOURT GENERAL, INC. /s/ Richard A. Smith             By: Richard A. Smith Title: Chairman of the Board /s/ Eric P. Geller                   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

RIGHTS AGREEMENT This Rights Agreement ("Agreement"), dated as of June 1, 2000, between Walker Interactive Systems, Inc., a Delaware corporation (the "Company"), and Fleet National Bank, a National Banking Association ("Rights Agent"). The Board of Directors of the Company has authorized and declared a dividend of one preferred share purchase right (a "Right") for each Common Share (as such term is hereinafter defined) outstanding at the close of business on June 22, 2000 (the "Record Date"), each Right representing the right to purchase one one-hundredth of a Preferred Share (as such term is hereinafter defined), upon the terms and subject to the conditions herein set forth, and has further authorized and directed the issuance of one Right with respect to each Common Share that shall become outstanding between the Record Date and the earliest to occur of the Distribution Date, the Redemption Date and the Final Expiration Date (as such terms are hereinafter defined); provided, however, that Rights may be issued with respect to Common Shares that shall become outstanding after the Distribution Date and prior to the earlier of the Redemption Date and the Final Expiration Date in accordance with the provisions of Section 22 hereof. Accordingly, in consideration of the premises and the mutual agreements herein set forth, the parties hereby agree as follows: Certain Definitions . For purposes of this Agreement, the following terms have the meanings indicated: "Acquiring Person" shall mean any Person (as such term is hereinafter defined) who or which, together with all Affiliates and Associates (as such terms are hereinafter defined) of such Person, shall be the Beneficial Owner (as such term is hereinafter defined) of 15% or more of the Common Shares then outstanding. Notwithstanding the foregoing, (A) the term Acquiring Person shall not include (i) the Company, (ii) any Subsidiary (as such term is hereinafter defined) of the Company, (iii) any employee benefit or compensation plan of the Company or any Subsidiary of the Company or (iv) any entity holding Common Shares for or pursuant to the terms of any such employee benefit or compensation plan and (B) no Person shall become an "Acquiring Person" either (x) as the result of an acquisition of Common Shares by the Company which, by reducing the number of shares outstanding, increases the proportionate number of shares beneficially owned by such Person to 15% or more of the Common Shares then outstanding; provided, however, that if a Person shall become the Beneficial Owner of 15% or more of the Common Shares then outstanding by reason of share purchases by the Company and shall, following written notice from, or public disclosure by the Company of such share purchases by the Company, become the Beneficial Owner of any additional Common Shares without the prior consent of the Company and shall then Beneficially Own more than 15% of the Common Shares then outstanding, then such Person shall be deemed to be an "Acquiring Person," or (y) if the Board of Directors determines in good faith that a Person who would otherwise be an "Acquiring Person," as defined pursuant to the foregoing provisions of this paragraph (a), has become such inadvertently, and such Person divests, as promptly as practicable (as determined in good faith by the Board of Directors), but in any event within fifteen Business Days, following receipt of written notice from the Company of such event, of Beneficial Ownership of a sufficient number of Common Shares so that such Person would no longer be an Acquiring Person, as defined pursuant to the foregoing provisions of this paragraph (a), then such Person shall not be deemed to be an "Acquiring Person" for any purposes of this Agreement; provided, however, that if such Person shall again become the Beneficial Owner of 15% or more of the Common Shares then outstanding, such Person shall be deemed an "Acquiring Person," subject to the exceptions set forth in this Section 1(a). "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as in effect on the date of this Agreement. A Person shall be deemed the "Beneficial Owner" of and shall be deemed to "beneficially own" any securities: which such Person or any of such Person's Affiliates or Associates is deemed to beneficially own, within the meaning of Rule 13d-3 of the General Rules and Regulations under the Exchange Act as in effect on the date of this Rights Agreement; which such Person or any of such Person's Affiliates or Associates has (A) the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding (other than customary agreements with and between underwriters and selling group members with respect to a bona fide public offering of securities, or upon the exercise of conversion rights, exchange rights, rights (other than these Rights), warrants or options, or otherwise; provided, however, that a Person shall not be deemed the Beneficial Owner of, or to beneficially own, securities tendered pursuant to a tender or exchange offer made by or on behalf of such Person or any of such Person's Affiliates or Associates until such tendered securities are accepted for purchase or exchange; or (B) the right to vote pursuant to any agreement, arrangement or understanding; provided, however, that a Person shall not be deemed the Beneficial Owner of, or to beneficially own, any security if the agreement, arrangement or understanding to vote such security (1) arises solely from a revocable proxy or consent given to such Person in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable rules and regulations promulgated under the Exchange Act and (2) is not also then reportable on Schedule 13D under the Exchange Act (or any comparable or successor report); or which are beneficially owned, directly or indirectly, by any other Person with which such Person or any of such Person's Affiliates or Associates has any agreement, arrangement or understanding (other than customary agreements with and between underwriters and selling group members with respect to a bona fide public offering of securities) for the purpose of acquiring, holding, voting (except to the extent contemplated by the proviso to Section 1(c)(ii)(B) hereof) or disposing of any securities of the Company. Notwithstanding anything in this definition of Beneficial Ownership to the contrary, the phrase, "then outstanding," when used with reference to a Person's Beneficial Ownership of securities of the Company, shall mean the number of such securities then issued and outstanding together with the number of such securities not then actually issued and outstanding which such Person would be deemed to own beneficially hereunder. "Business Day" shall mean any day other than a Saturday, a Sunday, or a day on which banking institutions in the Commonwealth of Massachusetts are authorized or obligated by law or executive order to close. "Close of Business" on any given date shall mean 5:00 p.m., Eastern Time, on such date; provided, however, that if such date is not a Business Day it shall mean 5:00 p.m., Eastern Time, on the next succeeding Business Day. "Common Shares" shall mean the shares of common stock, par value $.001 per share, of the Company; provided, however, that, "Common Shares," when used in this Agreement in connection with a specific reference to any Person other than the Company, shall mean the capital stock (or equity interest) with the greatest voting power of such other Person or, if such other Person is a Subsidiary of another Person, the Person or Persons which ultimately control such first-mentioned Person. "Distribution Date" shall have the meaning set forth in Section 3 hereof. "Final Expiration Date" shall have the meaning set forth in Section 7 hereof. "Interested Stockholder" shall mean any Acquiring Person or any Affiliate or Associate of an Acquiring Person or any other Person in which any such Acquiring Person, Affiliate or Associate has an interest, or any other Person acting directly or indirectly on behalf of or in concert with any such Acquiring Person, Affiliate or Associate. "Person" shall mean any individual, firm, corporation or other entity, and shall include any successor (by merger or otherwise) of such entity. "Preferred Shares" shall mean shares of Series A Junior Participating Preferred Stock, par value $.001 per share, of the Company having the designations and the powers, preferences and rights, and the qualifications, limitations and restrictions set forth in the Form of Certificate of Designation attached to this Agreement as Exhibit A. "Purchase Price" shall have the meaning set forth in Section 7(b) hereof. "Redemption Date" shall have the meaning set forth in Section 7 hereof. "Shares Acquisition Date" shall mean the first date of public announcement by the Company or an Acquiring Person that an Acquiring Person has become such provided, however that, if such Person is determined not to have become an Acquiring Person pursuant to clause (y) of Subsection 1(a)(B) hereof, then no Shares Acquisition Date shall be deemed to have occurred. "Subsidiary" of any Person shall mean any corporation or other entity of which a majority of the voting power of the voting equity securities or equity interest is owned, directly or indirectly, by such Person. "Transaction" shall mean any merger, consolidation or sale of assets described in Section 13(a) hereof or any acquisition of Common Shares which would result in a Person becoming an Acquiring Person or a Principal Party (as such term is hereinafter defined). "Transaction Person" with respect to a Transaction shall mean (i) any Person who (x) is or will become an Acquiring Person or a Principal Party (as such term is hereinafter defined) if the Transaction were to be consummated and (y) directly or indirectly proposed or nominated a director of the Company which director is in office at the time of consideration of the Transaction, or (ii) an Affiliate or Associate of such a Person. Appointment of Rights Agent . The Company hereby appoints the Rights Agent to act as agent for the Company in accordance with the terms and conditions hereof, and the Rights Agent hereby accepts such appointment. The Company may from time to time appoint such co-Rights Agents as it may deem necessary or desirable, upon ten (10) days' prior written notice to the Rights Agent. The Rights Agent shall have no duty to supervise, and shall in no event be liable for, the acts or omissions of any such co-Rights Agent. Issue of Right Certificates . Until the earlier of (i) the tenth day after the Shares Acquisition Date or (ii) the tenth Business Day (or such later date as may be determined by action of the Board of Directors prior to such time as any Person becomes an Acquiring Person) after the date of the commencement (determined in accordance with Rule 14d-2 under the Exchange Act) by any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or of any Subsidiary of the Company or any entity holding Common Shares for or pursuant to the terms of any such plan) of, or of the first public announcement of the intention of any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or of any Subsidiary of the Company or any entity holding Common Shares for or pursuant to the terms of any such plan) to commence, a tender or exchange offer (which intention to commence remains in effect for five Business Days after such announcement), the consummation of which would result in any Person becoming an Acquiring Person (including any such date which is after the date of this Agreement and prior to the issuance of the Rights, the earlier of such dates being herein referred to as the "Distribution Date"), (x) the Rights will be evidenced by the certificates for Common Shares registered in the names of the holders thereof (which certificates shall also be deemed to be Right Certificates) and not by separate Right Certificates, and (y) the Rights (and the right to receive Right Certificates therefor) will be transferable only in connection with the transfer of Common Shares. As soon as practicable after the Distribution Date, the Company will prepare and execute, the Rights Agent will countersign, and the Company will send or cause to be sent (and the Rights Agent will, if requested, send) by first-class, insured, postage-prepaid mail, to each record holder of Common Shares as of the Close of Business on the Distribution Date, at the address of such holder shown on the records of the Company, a Right Certificate, in substantially the form of Exhibit B hereto (a "Right Certificate"), evidencing one Right for each Common Share so held, subject to the adjustment provisions of Section 11 of this Rights Agreement. As of the Distribution Date, the Rights will be evidenced solely by such Right Certificates. On the Record Date, or as soon as practicable thereafter, the Company will send (directly or through the Rights Agent or its transfer agent) a copy of a Summary of Rights to Purchase Preferred Shares, in substantially the form of Exhibit C hereto (the "Summary of Rights"), by first-class, postage-prepaid mail, to each record holder of Common Shares as of the Close of Business on the Record Date, at the address of such holder shown on the records of the Company. With respect to certificates for Common Shares outstanding as of the Record Date, until the Distribution Date, the Rights will be evidenced by such certificates registered in the names of the holders thereof. Until the Distribution Date (or the earlier of the Redemption Date and the Final Expiration Date), the surrender for transfer of any certificate for Common Shares outstanding on the Record Date shall also constitute the transfer of the Rights associated with the Common Shares represented thereby. Certificates for Common Shares which become outstanding (including, without limitation, reacquired Common Shares referred to in the last sentence of this paragraph (c)) after the Record Date but prior to the earliest of the Distribution Date, the Redemption Date or the Final Expiration Date shall have impressed on, printed on, written on or otherwise affixed to them the following legend: This certificate also evidences and entitles the holder hereof to certain rights as set forth in a Rights Agreement between Walker Interactive Systems, Inc. (the "Company") and Fleet National Bank, a National Banking Association, as Rights Agent (the "Rights Agent"), dated as of June 1, 2000, as amended from time to time (the "Rights Agreement"), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal executive offices of the Company. Under certain circumstances, as set forth in the Rights Agreement, such Rights will be evidenced by separate certificates and will no longer be evidenced by this certificate. The Company will mail to the holder of this certificate a copy of the Rights Agreement without charge after receipt of a written request therefor. As described in the Rights Agreement, Rights issued to any Person who becomes an Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights Agreement) and certain related persons, whether currently held by or on behalf of such Person or by any subsequent holder, shall become null and void. With respect to such certificates containing the foregoing legend, until the Distribution Date, the Rights associated with the Common Shares represented by such certificates shall be evidenced by such certificates alone, and the surrender for transfer of any such certificate shall also constitute the transfer of the Rights associated with the Common Shares represented thereby. In the event that the Company purchases or acquires any Common Shares after the Record Date but prior to the Distribution Date, any Rights associated with such Common Shares shall be deemed canceled and retired so that the Company shall not be entitled to exercise any Rights associated with the Common Shares which are no longer outstanding. Notwithstanding this Section 3(c), the omission of a legend shall not affect the enforceability of any part of this Rights Agreement or the rights of any holder of the Rights. Form of Right Certificates . The Right Certificates (and the form of election to purchase Preferred Shares, the form of assignment and the form of certification to be printed on the reverse thereof) shall be substantially the same as Exhibit B hereto and may have such marks of identification or designation and such legends, summaries or endorsements printed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any applicable law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange or quotation system on which the Rights may from time to time be listed, or to conform to usage. Subject to the provisions of Sections 7, 11 and 22 hereof, the Right Certificates shall entitle the holders thereof to purchase such number of one one-hundredths of a Preferred Share as shall be set forth therein at the price per one one-hundredth of a Preferred Share set forth therein (the "Purchase Price"), but the number of such one one-hundredths of a Preferred Share and the Purchase Price shall be subject to adjustment as provided herein. Any Right Certificate issued pursuant to Section 3(a) or Section 22 hereof that represents Rights which are null and void pursuant to Section 11(a)(ii) hereof and any Right Certificate issued pursuant to Section 6 or Section 11 hereof upon transfer, exchange, replacement or adjustment of any other Right Certificate referred to in this sentence, shall contain (to the extent feasible) the following legend: The Rights represented by this Right Certificate are or were beneficially owned by a Person who was or became an Acquiring Person or an Affiliate or Associate of an Acquiring Person (as such terms are defined in the Rights Agreement). Accordingly, this Right Certificate and the Rights represented hereby are null and void. The provisions of Section 11(a)(ii) hereof shall be operative whether or not the foregoing legend is contained on any such Right Certificate. Countersignature and Registration . The Right Certificates shall be executed on behalf of the Company by its Chairman of the Board, its Chief Executive Officer, its President, its Vice Chairman of the Board, its Chief Financial Officer, or any of its Vice Presidents, either manually or by facsimile signature, shall have affixed thereto the Company's seal or a facsimile thereof, and shall be attested by the Secretary or an Assistant Secretary of the Company, either manually or by facsimile signature. The Right Certificates shall be manually countersigned by the Rights Agent and shall not be valid for any purpose unless countersigned. In case any officer of the Company who shall have signed any of the Right Certificates shall cease to be such officer of the Company before countersignature by the Rights Agent and issuance and delivery by the Company, such Right Certificates, nevertheless, may be countersigned by the Rights Agent and issued and delivered by the Company with the same force and effect as though the person who signed such Right Certificates had not ceased to be such officer of the Company; and any Right Certificate may be signed on behalf of the Company by any person who, at the actual date of the execution of such Right Certificate, shall be a proper officer of the Company to sign such Right Certificate, although at the date of the execution of this Agreement any such person was not such an officer. Following the Distribution Date, the Rights Agent will keep or cause to be kept, at its office designated for such purpose, books for registration and transfer of the Right Certificates issued hereunder. Such books shall show the names and addresses of the respective holders of the Right Certificates, the number of Rights evidenced on its face by each of the Right Certificates and the date of each of the Right Certificates. Transfer, Split Up, Combination and Exchange of Right Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates . Subject to the provisions of Section 11(a)(ii), Section 14 and Section 24 hereof, at any time after the Close of Business on the Distribution Date, and at or prior to the Close of Business on the earlier of the Redemption Date or the Final Expiration Date, any Right Certificate or Right Certificates may be transferred, split up, combined or exchanged for another Right Certificate or Right Certificates, entitling the registered holder to purchase a like number of one one-hundredths of a Preferred Share as the Right Certificate or Right Certificates surrendered then entitled such holder to purchase. Any registered holder desiring to transfer, split up, combine or exchange any Right Certificate or Right Certificates shall make such request in writing delivered to the Rights Agent, and shall surrender the Right Certificate or Right Certificates to be transferred, split up, combined or exchanged at the office of the Rights Agent designated for such purpose. Neither the Rights Agent nor the Company shall be obligated to take any action whatsoever with respect to the transfer of any such surrendered Right Certificate until the registered holder shall have completed and signed the certificate contained in the form of assignment on the reverse side of such Right Certificate and shall have provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the Company shall reasonably request. Thereupon the Rights Agent shall, subject to Section 11(a)(ii), Section 14 and Section 24 hereof, countersign and deliver to the person entitled thereto a Right Certificate or Right Certificates, as the case may be, as so requested. The Company may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer, split up, combination or exchange of Right Certificates. Upon receipt by the Company and the Rights Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation of a Right Certificate, and, in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to them, and, at the Company's request, reimbursement to the Company and the Rights Agent of all reasonable expenses incidental thereto, and upon surrender to the Rights Agent and cancellation of the Right Certificate if mutilated, the Company will issue, execute and deliver a new Right Certificate of like tenor to the Rights Agent for countersignature and delivery to the registered holder in lieu of the Right Certificate so lost, stolen, destroyed or mutilated. Notwithstanding any other provisions hereof, the Company and the Rights Agent may amend this Rights Agreement to provide for uncertificated Rights in addition to or in place of Rights evidenced by Rights Certificates. Exercise of Rights; Purchase Price; Expiration Date of Rights . The registered holder of any Right Certificate may exercise the Rights evidenced thereby (except as otherwise provided herein) in whole or in part at any time after the Distribution Date upon surrender of the Right Certificate, with the form of election to purchase on the reverse side thereof duly executed, to the Rights Agent at the office of the Rights Agent designated for such purpose, together with payment of the Purchase Price for each one one-hundredth of a Preferred Share (or such other number of shares or other securities) as to which the Rights are exercised, at or prior to the earliest of (i) the Close of Business on May 31, 2010 (the "Final Expiration Date"), (ii) the time at which the Rights are redeemed as provided in Section 23 hereof (the "Redemption Date"), or (iii) the time at which such Rights are exchanged as provided in Section 24 hereof. The purchase price (the "Purchase Price") for each one one-hundredth of a Preferred Share pursuant to the exercise of a Right shall initially be $30.00 and shall be subject to adjustment from time to time as provided in Sections 11 and 13 hereof and shall be payable in lawful money of the United States of America in accordance with paragraph (c) below. Upon receipt of a Right Certificate representing exercisable Rights, with the form of election to purchase duly executed, accompanied by payment of the Purchase Price for the shares to be purchased and an amount equal to any applicable transfer tax required to be paid by the holder of such Right Certificate in accordance with Section 9 hereof by certified check, cashier's check, bank draft or money order payable to the order of the Company, the Rights Agent shall thereupon promptly (i) (A) requisition from any transfer agent for the Preferred Shares certificates for the number of Preferred Shares to be purchased and the Company hereby irrevocably authorizes its transfer agent to comply with all such requests, or (B) if the Company, in its sole discretion, shall have elected to deposit the Preferred Shares issuable upon exercise of the Rights hereunder into a depository, requisition from the depositary agent depositary receipts representing such number of one one-hundredths of a Preferred Share as are to be purchased (in which case certificates for the Preferred Shares represented by such receipts shall be deposited by the transfer agent with the depositary agent) and the Company hereby directs the depositary agent to comply with such request, (ii) when appropriate, requisition from the Company the amount of cash to be paid in lieu of issuance of fractional shares in accordance with Section 14 hereof, (iii) after receipt of such certificates or depositary receipts, cause the same to be delivered to or upon the order of the registered holder of such Right Certificate, registered in such name or names as may be designated by such holder and (iv) when appropriate, after receipt, deliver such cash to or upon the order of the registered holder of such Right Certificate. In the event that the Company is obligated to issue securities of the Company other than Preferred Shares (including Common Shares) of the Company pursuant to Section 11(a) hereof, the Company will make all arrangements necessary so that such other securities are available for distribution by the Rights Agent, if and when appropriate. In addition, in the case of an exercise of the Rights by a holder pursuant to Section 11(a)(ii) hereof, the Rights Agent shall return such Right Certificate to the registered holder thereof after imprinting, stamping or otherwise indicating thereon that the rights represented by such Right Certificate no longer include the rights provided by Section 11(a)(ii) hereof, and, if fewer than all the Rights represented by such Right Certificate were so exercised, the Rights Agent shall indicate on the Right Certificate the number of Rights represented thereby which continue to include the rights provided by Section 11(a)(ii) hereof. In case the registered holder of any Right Certificate shall exercise fewer than all the Rights evidenced thereby, a new Right Certificate evidencing Rights equivalent to the Rights remaining unexercised shall be issued by the Rights Agent to the registered holder of such Right Certificate or to his duly authorized assigns, subject to the provisions of Section 14 hereof. The Company covenants and agrees that it will cause to be reserved and kept available out of its authorized and unissued Preferred Shares or any Preferred Shares held in its treasury, the number of Preferred Shares that will be sufficient to permit the exercise in full of all outstanding Rights in accordance with this Section 7. Notwithstanding anything in this Agreement to the contrary, neither the Rights Agent nor the Company shall be obligated to undertake any action with respect to a registered holder upon the occurrence of any purported exercise as set forth in this Section 7 unless such registered holder shall have (i) completed and signed the certification following the form of election to purchase set forth on the reverse side of the Rights Certificate surrendered for such exercise and (ii) provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the Company shall reasonably request. Cancellation and Destruction of Right Certificates . All Right Certificates surrendered for the purpose of exercise, transfer, split up, combination or exchange shall, if surrendered to the Company or to any of its agents, be delivered to the Rights Agent for cancellation or in canceled form, or, if delivered or surrendered to the Rights Agent, shall be canceled by it, and no Right Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Agreement. The Company shall deliver to the Rights Agent for cancellation and retirement, and the Rights Agent shall so cancel and retire, any other Right Certificate purchased or acquired by the Company otherwise than upon the exercise thereof. The Rights Agent shall deliver all canceled Right Certificates to the Company approximately one and one-half years after the cancellation date, or shall, at the written request of the Company and after any Securities and Exchange Commission-required retention period, destroy such canceled Right Certificates, and in such case shall deliver a certificate of destruction thereof to the Company. Availability of Preferred Shares . The Company covenants and agrees that so long as the Preferred Shares (and, after the time a person becomes an Acquiring Person, Common Shares or any other securities) issuable upon the exercise of the Rights may be listed on any national securities exchange or quotation system, the Company shall use its best efforts to cause, from and after such time as the Rights become exercisable, all shares reserved for such issuance to be listed on such exchange or quotation system upon official notice of issuance upon such exercise. The Company covenants and agrees that it will take all such action as may be necessary to ensure that all Preferred Shares (or Common Shares and other securities, as the case may be) delivered upon exercise of Rights shall, at the time of delivery of the certificates for such Preferred Shares (subject to payment of the Purchase Price), be duly and validly authorized and issued and fully paid and nonassessable shares or other securities. The Company further covenants and agrees that it will pay when due and payable any and all federal and state transfer taxes and charges which may be payable in respect of the issuance or delivery of the Right Certificates or of any Preferred Shares upon the exercise of Rights. The Company shall not, however, be required to pay any transfer tax which may be payable in respect of any transfer or delivery of Right Certificates to a person other than, or the issuance or delivery of certificates or depositary receipts for the Preferred Shares in a name other than that of, the registered holder of the Right Certificate evidencing Rights surrendered for exercise or to issue or to deliver any certificates or depositary receipts for Preferred Shares upon the exercise of any Rights until any such tax shall have been paid (any such tax being payable by the holder of such Right Certificate at the time of surrender) or until it has been established to the Company's reasonable satisfaction that no such tax is due. As soon as practicable after the Distribution Date, the Company shall use its best efforts to: prepare and file a registration statement under the Securities Act of 1933, as amended (the "Act"), with respect to the Rights and the securities purchasable upon exercise of the Rights on an appropriate form, will use its best efforts to cause such registration statement to become effective as soon as practicable after such filing and will use its best efforts to cause such registration statement to remain effective (with a prospectus at all times meeting the requirements of the Act) until the Final Expiration Date; and use its best efforts to qualify or register the Rights and the securities purchasable upon exercise of the Rights under the blue sky laws of such jurisdictions as may be necessary or appropriate. Preferred Shares Record Date . Each person in whose name any certificate for Preferred Shares or other securities is issued upon the exercise of Rights shall for all purposes be deemed to have become the holder of record of the Preferred Shares or other securities represented thereby on, and such certificate shall be dated, the date upon which the Right Certificate evidencing such Rights was duly surrendered with the forms of election and certification duly executed and payment of the Purchase Price (and any applicable transfer taxes) was made; provided, however, that if the date of such surrender and payment is a date upon which the Preferred Shares or other securities transfer books of the Company are closed, such person shall be deemed to have become the record holder of such shares on, and such certificate shall be dated, the next succeeding Business Day on which the Preferred Shares or other securities transfer books of the Company are open. Prior to the exercise of the Rights evidenced thereby, the holder of a Right Certificate, as such, shall not be entitled to any rights of a holder of Preferred Shares for which the Rights shall be exercisable, including, without limitation, the right to vote, to receive dividends or other distributions or to exercise any preemptive rights, and shall not be entitled to receive any notice of any proceedings of the Company, except as provided herein. Adjustment of Purchase Price, Number of Shares or Number of Rights . The Purchase Price, the number of Preferred Shares covered by each Right and the number of Rights outstanding are subject to adjustment from time to time as provided in this Section 11. In the event the Company shall at any time after the date of this Agreement (A) declare a dividend on the Preferred Shares payable in Preferred Shares, (B) subdivide the outstanding Preferred Shares, (C) combine the outstanding Preferred Shares into a smaller number of Preferred Shares or (D) issue any shares of its capital stock in a reclassification of the Preferred Shares (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing or surviving corporation), except as otherwise provided in this Section 11(a), the Purchase Price in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination or reclassification, and the number and kind of shares of capital stock issuable on such date, shall be proportionately adjusted so that the holder of any Right exercised after such time shall be entitled to receive the aggregate number and kind of shares of capital stock which, if such Right had been exercised immediately prior to such date and at a time when the Preferred Shares transfer books of the Company were open, such holder would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision, combination or reclassification; provided, however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company issuable upon exercise of one Right. If an event occurs which would require an adjustment under both Section 11(a)(i) and Section 11(a)(ii) hereof, the adjustment provided for in this Section 11(a)(i) shall be in addition to, and shall be made prior to any adjustment required pursuant to Section 11(a)(ii) hereof. Subject to Section 24 hereof and the provisions of the next paragraph of this Section 11(a)(ii), in the event any Person shall become an Acquiring Person, each holder of a Right shall, at any time after the later of such time any Person becomes an Acquiring Person or the effective date of an appropriate registration statement under the Act pursuant to Section 9 hereof have a right to receive, upon exercise thereof at a price equal to the then current Purchase Price multiplied by the number of one one-hundredths of a Preferred Share for which a Right is then exercisable, in accordance with the terms of this Agreement and in lieu of Preferred Shares, such number of Common Shares as shall equal the result obtained by (A) multiplying the then current Purchase Price by the number of one one-hundredths of a Preferred Share for which a Right is then exercisable and dividing that product by (B) 50% of the then current per share market price of the Common Shares (determined pursuant to Section 11(d) hereof) on the date such Person became an Acquiring Person; provided, however, that if the transaction that would otherwise give rise to the foregoing adjustment is also subject to the provisions of Section 13 hereof, then only the provisions of Section 13 hereof shall apply and no adjustment shall be made pursuant to this Section 11(a)(ii). In the event that any Person shall become an Acquiring Person and the Rights shall then be outstanding, the Company shall not take any action which would eliminate or diminish the benefits intended to be afforded by the Rights. Notwithstanding anything in this Agreement to the contrary, from and after the time any Person becomes an Acquiring Person, any Rights beneficially owned by (i) such Acquiring Person or an Associate or Affiliate of such Acquiring Person, (ii) a transferee of such Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee after the Acquiring Person became such, or (iii) a transferee of such Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee prior to or concurrently with the Acquiring Person's becoming such and receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring Person to holders of equity interests in such Acquiring Person or to any Person with whom the Acquiring Person has any continuing agreement, arrangement or understanding regarding the transferred Rights or (B) a transfer which the Board of Directors of the Company has determined is part of a plan, arrangement or understanding which has as a primary purpose or effect the avoidance of this Section 11(a)(ii), shall become null and void without any further action and no holder of such Rights shall have any rights whatsoever with respect to such Rights, whether under any provision of this Agreement or otherwise. The Company shall use all reasonable efforts to insure that the provisions of this Section 11(a)(ii) and Section 4(b) hereof are complied with, but shall have no liability to any holder of Right Certificates or other Person as a result of its failure to make any determinations with respect to an Acquiring Person or its Affiliates, Associates or transferees hereunder. No Right Certificate shall be issued at any time upon the transfer of any Rights to an Acquiring Person whose Rights would be void pursuant to the preceding sentence or any Associate or Affiliate thereof or to any nominee of such Acquiring Person, Associate or Affiliate; and any Right Certificate delivered to the Rights Agent for transfer to an Acquiring Person whose Rights would be void pursuant to the preceding sentence shall be canceled. In lieu of issuing Common Shares in accordance with Section 11(a)(ii) hereof, the Company may, if a majority of the Board of Directors then in office determines that such action is necessary or appropriate and not contrary to the interests of holders of Rights, elect to (and, in the event that the Board of Directors has not exercised the exchange right contained in Section 24(c) hereof and there are not sufficient treasury shares and authorized but unissued Common Shares to permit the exercise in full of the Rights in accordance with the foregoing subparagraph (ii), the Company shall) take all such action as may be necessary to authorize, issue or pay, upon the exercise of the Rights, cash (including by way of a reduction of the Purchase Price), property, Common Shares, other securities or any combination thereof having an aggregate value equal to the value of the Common Shares which otherwise would have been issuable pursuant to Section 11(a)(ii) hereof, which aggregate value shall be determined by a nationally recognized investment banking firm selected by a majority of the Board of Directors then in office. For purposes of the preceding sentence, the value of the Common Shares shall be determined pursuant to Section 11(d) hereof. Any such election by the Board of Directors must be made within 60 days following the date on which the event described in Section 11(a)(ii) hereof shall have occurred. Following the occurrence of the event described in Section 11(a)(ii) hereof, a majority of the Board of Directors then in office may suspend the exercisability of the Rights for a period of up to 60 days following the date on which the event described in Section 11(a)(ii) hereof shall have occurred to the extent that such directors have not determined whether to exercise their rights of election under this Section 11(a)(iii). In the event of any such suspension, the Company shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended. In case the Company shall fix a record date for the issuance of rights, options or warrants to all holders of Preferred Shares entitling them (for a period expiring within 45 calendar days after such record date) to subscribe for or purchase Preferred Shares (or shares having the same designations and the powers, preferences and rights, and the qualifications, limitations and restrictions as the Preferred Shares ("equivalent preferred shares")) or securities convertible into Preferred Shares or equivalent preferred shares at a price per Preferred Share or equivalent preferred share (or having a conversion price per share, if a security convertible into Preferred Shares or equivalent preferred shares) less than the then current per share market price of the Preferred Shares (as such term is hereinafter defined) on such record date, the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the number of Preferred Shares outstanding on such record date plus the number of Preferred Shares which the aggregate offering price of the total number of Preferred Shares and/or equivalent preferred shares so to be offered (and/or the aggregate initial conversion price of the convertible securities so to be offered) would purchase at such current market price and the denominator of which shall be the number of Preferred Shares outstanding on such record date plus the number of additional Preferred Shares and/or equivalent preferred shares to be offered for subscription or purchase (or into which the convertible securities so to be offered are initially convertible); provided, however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company issuable upon exercise of one Right. In case such subscription price may be paid in a consideration part or all of which shall be in a form other than cash, the value of such consideration shall be as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent. Preferred Shares owned by or held for the account of the Company shall not be deemed outstanding for the purpose of any such computation. Such adjustment shall be made successively whenever such a record date is fixed; and in the event that such rights, options or warrants are not so issued, the Purchase Price shall be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed. In case the Company shall fix a record date for the making of a distribution to all holders of the Preferred Shares (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing or surviving corporation) of evidences of indebtedness or assets (other than a regular quarterly cash dividend or a dividend payable in Preferred Shares) or subscription rights or warrants (excluding those referred to in Section 11(b) hereof), the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the then current per share market price of the Preferred Shares (as such term is hereinafter defined) on such record date, less the fair market value (as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent) of the portion of the assets or evidences of indebtedness so to be distributed or of such subscription rights or warrants applicable to one Preferred Share and the denominator of which shall be such current per share market price of the Preferred Shares; provided, however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company to be issued upon exercise of one Right. Such adjustments shall be made successively whenever such a record date is fixed; and in the event that such distribution is not so made, the Purchase Price shall again be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed. For the purpose of any computation hereunder, the "current per share market price" of any security (a "Security" for the purpose of this Section 11(d)(i)) on any date shall be deemed to be the average of the daily closing prices per share of such Security for the 30 consecutive Trading Days (as such term is hereinafter defined) immediately prior to such date; provided, however, that in the event that the current per share market price of the Security is determined during a period following the announcement by the issuer of such Security of (A) a dividend or distribution on such Security payable in shares of such Security or securities convertible into such shares, or (B) any subdivision, combination or reclassification of such Security or securities convertible into such shares, or (C) any subdivision, combination or reclassification of such Security and prior to the expiration of 30 Trading Days after the ex-dividend date for such dividend or distribution, or the record date for such subdivision, combination or reclassification, then, and in each such case, the current per share market price shall be appropriately adjusted to reflect the current market price per share equivalent of such Security. The closing price for each day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the Security is not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Security is listed or admitted to trading or as reported on the Nasdaq National Market or, if the Security is not listed or admitted to trading on any national securities exchange or reported on the Nasdaq National Market, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotations System ("Nasdaq") or such other system then in use, or, if on any such date the Security is not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Security selected by the Board of Directors of the Company or, if on any such date no professional market maker is making a market in the Security, the price as determined in good faith by the Board of Directors. The term "Trading Day" shall mean a day on which the principal national securities exchange on which the Security is listed or admitted to trading is open for the transaction of business or, if the Security is not listed or admitted to trading on any national securities exchange, a Business Day. For the purpose of any computation hereunder, the "current per share market price" of the Preferred Shares shall be determined in accordance with the method set forth in Section 11(d)(i) hereof. If the Preferred Shares are not publicly traded, the "current per share market price" of the Preferred Shares shall be conclusively deemed to be the current per share market price of the Common Shares as determined pursuant to Section 11(d)(i) hereof (appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof) multiplied by one hundred. If neither the Common Shares nor the Preferred Shares are publicly held or so listed or traded, "current per share market price" shall mean the fair value per share as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent. No adjustment in the Purchase Price shall be required unless such adjustment would require an increase or decrease of at least 1% in the Purchase Price; provided, however, that any adjustments which by reason of this Section 11(e) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 11 shall be made to the nearest cent or to the nearest one one-hundredth of a Preferred Share or one ten-thousandth of any other share or security as the case may be. Notwithstanding the first sentence of this Section 11(e), any adjustment required by this Section 11 shall be made no later than the earlier of (i) three years from the date of the transaction which requires such adjustment or (ii) the date of the expiration of the right to exercise any Rights. If as a result of an adjustment made pursuant to Section 11(a) hereof, the holder of any Right thereafter exercised shall become entitled to receive any shares of capital stock of the Company other than Preferred Shares, thereafter the number of such other shares so receivable upon exercise of any Right shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Preferred Shares contained in Sections 11(a) through 11(c) hereof, inclusive, and the provisions of Sections 7, 9, 10, 13 and 14 hereof with respect to the Preferred Shares shall apply on like terms to any such other shares. All Rights originally issued by the Company subsequent to any adjustment made to the Purchase Price hereunder shall evidence the right to purchase, at the adjusted Purchase Price, the number of one one-hundredths of a Preferred Share purchasable from time to time hereunder upon exercise of the Rights, all subject to further adjustment as provided herein. Unless the Company shall have exercised its election as provided in Section 11(i) hereof, upon each adjustment of the Purchase Price as a result of the calculations made in Section 11(b) and Section 11(c) hereof, each Right outstanding immediately prior to the making of such adjustment shall thereafter evidence the right to purchase, at the adjusted Purchase Price, that number of one one-hundredths of a Preferred Share (calculated to the nearest one one-millionth of a Preferred Share) obtained by (i) multiplying (x) the number of one one-hundredths of a Preferred Share covered by a Right immediately prior to this adjustment by (y) the Purchase Price in effect immediately prior to such adjustment of the Purchase Price and (ii) dividing the product so obtained by the Purchase Price in effect immediately after such adjustment of the Purchase Price. The Company may elect on or after the date of any adjustment of the Purchase Price to adjust the number of Rights, in substitution for any adjustment in the number of one one-hundredths of a Preferred Share purchasable upon the exercise of a Right. Each of the Rights outstanding after such adjustment of the number of Rights shall be exercisable for the number of one one-hundredths of a Preferred Share for which a Right was exercisable immediately prior to such adjustment. Each Right held of record prior to such adjustment of the number of Rights shall become that number of Rights (calculated to the nearest one ten- thousandth) obtained by dividing the Purchase Price in effect immediately prior to adjustment of the Purchase Price by the Purchase Price in effect immediately after adjustment of the Purchase Price. The Company shall make a public announcement of its election to adjust the number of Rights, indicating the record date for the adjustment, and, if known at the time, the amount of the adjustment to be made. This record date may be the date on which the Purchase Price is adjusted or any day thereafter, but, if the Right Certificates have been issued, shall be at least 10 days later than the date of the public announcement. If Right Certificates have been issued, upon each adjustment of the number of Rights pursuant to this Section 11(i), the Company shall, as promptly as practicable, cause to be distributed to holders of record of Right Certificates on such record date Right Certificates evidencing, subject to Section 14 hereof, the additional Rights to which such holders shall be entitled as a result of such adjustment, or, at the option of the Company, shall cause to be distributed to such holders of record in substitution and replacement for the Right Certificates held by such holders prior to the date of adjustment, and upon surrender thereof, if required by the Company, new Right Certificates evidencing all the Rights to which such holders shall be entitled after such adjustment. Right Certificates so to be distributed shall be issued, executed and countersigned in the manner provided for herein and shall be registered in the names of the holders of record of Right Certificates on the record date specified in the public announcement. Irrespective of any adjustment or change in the Purchase Price or the number of one one-hundredths of a Preferred Share issuable upon the exercise of the Rights, the Right Certificates theretofore and thereafter issued may continue to express the Purchase Price and the number of one one-hundredths of a Preferred Share which were expressed in the initial Right Certificates issued hereunder. Before taking any action that would cause an adjustment reducing the Purchase Price below one one-hundredth of the then par value, if any, of the Preferred Shares issuable upon exercise of the Rights, the Company shall take any corporate action which may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue fully paid and nonassessable Preferred Shares at such adjusted Purchase Price. In any case in which this Section 11 shall require that an adjustment in the Purchase Price be made effective as of a record date for a specified event, the Company may elect to defer until the occurrence of such event the issuing to the holder of any Right exercised after such record date of the Preferred Shares and other capital stock or securities of the Company, if any, issuable upon such exercise on the basis of the Purchase Price in effect prior to such adjustment; provided, however, that the Company shall deliver to such holder a due bill or other appropriate instrument evidencing such holder's right to receive such additional shares upon the occurrence of the event requiring such adjustment. The Company covenants and agrees that, after the Distribution Date, it will not, except as permitted by Section 23 or Section 27 hereof, take (or permit any Subsidiary to take) any action the purpose of which is to, or if at the time such action is taken it is reasonably foreseeable that the effect of such action is to, materially diminish or eliminate the benefits intended to be afforded by the Rights. Any such action taken by the Company during any period after any Person becomes an Acquiring Person but prior to the Distribution Date shall be null and void unless such action could be taken under this Section 11(m) from and after the Distribution Date. Anything in this Section 11 to the contrary notwithstanding, the Company shall be entitled to make such reductions in the Purchase Price, in addition to those adjustments expressly required by this Section 11, as and to the extent that it in its sole discretion shall determine to be advisable in order that any consolidation or subdivision of the Preferred Shares, issuance wholly for cash of any Preferred Shares at less than the current market price, issuance wholly for cash of Preferred Shares or securities which by their terms are convertible into or exchangeable for Preferred Shares, dividends on Preferred Shares payable in Preferred Shares or issuance of rights, options or warrants referred to hereinabove in Section 11(b), hereafter made by the Company to holders of its Preferred Shares shall not be taxable to such stockholders. In the event that at any time after the date of this Agreement and prior to the Distribution Date, the Company shall (i) declare or pay any dividend on the Common Shares payable in Common Shares or (ii) effect a subdivision, combination or consolidation of the Common Shares (by reclassification or otherwise than by payment of dividends in Common Shares) into a greater or lesser number of Common Shares, then in any such case (A) the number of one one-hundredths of a Preferred Share purchasable after such event upon proper exercise of each Right shall be determined by multiplying the number of one one-hundredths of a Preferred Share so purchasable immediately prior to such event by a fraction, the numerator of which is the number of Common Shares outstanding immediately before such event and the denominator of which is the number of Common Shares outstanding immediately after such event, and (B) each Common Share outstanding immediately after such event shall have issued with respect to it that number of Rights which each Common Share outstanding immediately prior to such event had issued with respect to it. The adjustments provided for in this Section 11(o) shall be made successively whenever such a dividend is declared or paid or such a subdivision, combination or consolidation is effected. The exercise of Rights under Section 11(a)(ii) hereof shall only result in the loss of rights under Section 11(a)(ii) hereof to the extent so exercised and shall not otherwise affect the rights represented by the Rights under this Agreement, including the rights represented by Section 13 hereof. Certificate of Adjusted Purchase Price or Number of Shares . Whenever an adjustment is made as provided in Sections 11 and 13 hereof, the Company shall promptly (a) prepare a certificate setting forth such adjustment, and a brief statement of the facts accounting for such adjustment, (b) file with the Rights Agent and with each transfer agent for the Common Shares or the Preferred Shares a copy of such certificate and (c) mail a brief summary thereof to each holder of a Right Certificate in accordance with Section 25 hereof. The Rights Agent shall be fully protected in relying on any such certificate and on any adjustment therein contained and shall not be deemed to have knowledge of any adjustment unless and until it shall have received such certificate. Consolidation, Merger or Sale or Transfer of Assets or Earning Power . In the event that, following the Shares Acquisition Date or, if a Transaction is proposed, the Distribution Date, directly or indirectly (x) the Company shall consolidate with, or merge with and into, any Interested Stockholder, or if in such merger or consolidation all holders of Common Stock are not treated alike, any other Person, (y) any Interested Person, or if in such merger or consolidation all holders of Common Stock are not treated alike, any other Person shall consolidate with the Company, or merge with and into the Company, and the Company shall be the continuing or surviving corporation of such merger (other than, in the case of either transaction described in (x) or (y), a merger or consolidation which would result in all of the voting power represented by the securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into securities of the surviving entity) all of the voting power represented by the securities of the Company or such surviving entity outstanding immediately after such merger or consolidation and the holders of such securities not having changed as a result of such merger or consolidation), or (z) the Company shall sell, mortgage or otherwise transfer (or one or more of its subsidiaries shall sell, mortgage or otherwise transfer), in one or more transactions, assets or earning power aggregating more than 50% of the assets or earning power of the Company and its subsidiaries (taken as a whole) to any Interested Stockholder or Stockholders, or if in such transaction all holders of Common Stock are not treated alike, any other Person, (other than the Company or any Subsidiary of the Company in one or more transactions each of which individually and the aggregate does not violate Section 13(d) hereof) then, and in each such case, proper provision shall be made so that (i) each holder of a Right, subject to Section 11(a)(ii) hereof, shall have the right to receive, upon the exercise thereof at a price equal to the then current Purchase Price multiplied by the number of one one-hundredths of a Preferred Share for which a Right is then exercisable in accordance with the terms of this Agreement and in lieu of Preferred Shares, such number of freely tradeable Common Shares of the Principal Party (as such term is hereinafter defined), free and clear of liens, rights of call or first refusal, encumbrances or other adverse claims, as shall be equal to the result obtained by (A) multiplying the then current Purchase Price by the number of one one-hundredths of a Preferred Share for which a Right is then exercisable (without taking into account any adjustment previously made pursuant to Section 11(a)(ii) hereof) and dividing that product by (B) 50% of the then current per share market price of the Common Shares of such Principal Party (determined pursuant to Section 11(d) hereof) on the date of consummation of such consolidation, merger, sale or transfer; (ii) such Principal Party shall thereafter be liable for, and shall assume, by virtue of such consolidation, merger, sale or transfer, all the obligations and duties of the Company pursuant to this Agreement; (iii) the term "Company" shall thereafter be deemed to refer to such Principal Party, it being specifically intended that the provisions of Section 11 hereof shall apply to such Principal Party; and (iv) such Principal Party shall take such steps (including, but not limited to, the reservation of a sufficient number of shares of its Common Shares in accordance with Section 9 hereof) in connection with such consummation as may be necessary to assure that the provisions hereof shall thereafter be applicable, as nearly as reasonably may be, in relation to its Common Shares thereafter deliverable upon the exercise of the Rights. "Principal Party" shall mean: in the case of any transaction described in clause (x) or (y) of the first sentence of Section 13(a) hereof, the Person that is the issuer of any securities into which Common Shares are converted in such merger or consolidation, and if no securities are so issued, the Person that is the other party to the merger or consolidation (or, if applicable, the Company, if it is the surviving corporation); and in the case of any transaction described in (z) of the first sentence of Section 13(a) hereof, the Person that is the party receiving the greatest portion of the assets or earning power transferred pursuant to such transaction or transactions; provided, however, that in any case, (1) if the Common Shares of such Person are not at such time and have not been continuously over the preceding 12-month period registered under Section 12 of the Exchange Act, and such Person is a direct or indirect subsidiary or Affiliate of another Person the Common Shares of which are and have been so registered, "Principal Party" shall refer to such other Person; (2) if such Person is a subsidiary, directly or indirectly, or Affiliate of more than one Person, the Common Shares of two or more of which are and have been so registered, "Principal Party" shall refer to whichever of such Persons is the issuer of the Common Shares having the greatest aggregate market value; and (3) if such Person is owned, directly or indirectly, by a joint venture formed by two or more Persons that are not owned, directly or indirectly, by the same Person, the rules set forth in (1) and (2) above shall apply to each of the chains of ownership having an interest in such joint venture as if such party were a "subsidiary" of both or all of such joint venturers and the Principal Parties in each such chain shall bear the obligations set forth in this Section 13 in the same ratio as their direct or indirect interests in such Person bear to the total of such interests. The Company shall not consummate any such consolidation, merger, sale or transfer unless the Principal Party shall have a sufficient number of authorized Common Shares that have not been issued or reserved for issuance to permit the exercise in full of the Rights in accordance with this Section 13 and unless prior thereto the Company and each Principal Party and each other Person who may become a Principal Party as a result of such consolidation, merger, sale or transfer shall have (i) executed and delivered to the Rights Agent a supplemental agreement providing for the terms set forth in paragraphs (a) and (b) of this Section 13 and (ii) prepared, filed and had declared and remain effective a registration statement under the Act on the appropriate form with respect to the Rights and the securities exercisable upon exercise of the Rights and further providing that, as soon as practicable after the date of any consolidation, merger, sale or transfer of assets mentioned in paragraph (a) of this Section 13, the Principal Party at its own expense will: cause the registration statement under the Act with respect to the Rights and the securities purchasable upon exercise of the Rights on an appropriate form to remain effective (with a prospectus at all times meeting the requirements of the Act) until the Final Expiration Date; use its best efforts to qualify or register the Rights and the securities purchasable upon exercise of the Rights under the blue sky laws of such jurisdictions as may be necessary or appropriate; list the Rights and the securities purchasable upon exercise of the Rights on each national securities exchange on which the Common Shares were listed prior to the consummation of such consolidation, merger, sale or transfer of assets or on the Nasdaq National Market if the Common Shares were listed on the Nasdaq National Market or, if the Common Shares were not listed on a national securities exchange or the Nasdaq National Market prior to the consummation of such consolidation, merger, sale or transfer of assets, on a national securities exchange or the Nasdaq National Market; and deliver to holders of the Rights historical financial statements for the Principal Party and each of its Affiliates which comply in all material respects with the requirements for registration on Form 10 under the Exchange Act. The provisions of this Section 13 shall similarly apply to successive mergers or consolidations or sales or other transfers. After the Distribution Date, the Company covenants and agrees that it shall not (i) consolidate with, (ii) merge with or into, or (iii) sell or transfer to, in one or more transactions, assets or earning power aggregating more than 50% of the assets or earning power of the Company and its subsidiaries taken as a whole, any other Person (other than a Subsidiary of the Company in a transaction which does not violate Section 11(m) hereof), if (x) at the time of or after such consolidation, merger or sale there are any charter or bylaw provisions or any rights, warrants or other instruments or securities outstanding, agreements in effect or any other action taken which would diminish or otherwise eliminate the benefits intended to be afforded by the Rights or (y) prior to, simultaneously with or immediately after such consolidation, merger or sale, the stockholders of the Person who constitutes, or would constitute, the "Principal Party" for purposes of Section 13(a) hereof shall have received a distribution of Rights previously owned by such Person or any of its Affiliates and Associates. The Company shall not consummate any such consolidation, merger, sale or transfer unless prior thereto the Company and such other Person shall have executed and delivered to the Rights Agent a supplemental agreement evidencing compliance with this Section 13(d). Fractional Rights and Fractional Shares . The Company shall not be required to issue fractions of Rights or to distribute Right Certificates which evidence fractional Rights. In lieu of such fractional Rights, there shall be paid to the registered holders of the Right Certificates with regard to which such fractional Rights would otherwise be issuable, an amount in cash equal to the same fraction of the current market value of a whole Right. For the purposes of this Section 14(a), the current market value of a whole Right shall be the closing price of the Rights for the Trading Day immediately prior to the date on which such fractional Rights would have been otherwise issuable. The closing price for any day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the Rights are not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Rights are listed or admitted to trading or as reported on the Nasdaq National Market or, if the Rights are not listed or admitted to trading on any national securities exchange or reported on the Nasdaq National Market, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by Nasdaq or such other system then in use or, if on any such date the Rights are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Rights selected by the Board of Directors of the Company. If on any such date no such market maker is making a market in the Rights, the fair value of the Rights on such date as determined in good faith by the Board of Directors of the Company shall be used. The Company shall not be required to issue fractions of Preferred Shares (other than fractions which are integral multiples of one one-hundredth of a Preferred Share) upon exercise of the Rights or to distribute certificates which evidence fractional Preferred Shares (other than fractions which are integral multiples of one one-hundredth of a Preferred Share). Fractions of Preferred Shares in integral multiples of one one-hundredth of a Preferred Share may, at the election of the Company, be evidenced by depositary receipts; provided, however, that holders of such depositary receipts shall have all of the designations and the powers, preferences and rights, and the qualifications, limitations and restrictions to which they are entitled as beneficial owners of the Preferred Shares represented by such depositary receipts. In lieu of fractional Preferred Shares that are not integral multiples of one one-hundredth of a Preferred Share, the Company shall pay to the registered holders of Right Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the current market value of one Preferred Share. For the purposes of this Section 14(b), the current market value of a Preferred Share shall be the current per share market price of the Preferred Shares (as determined pursuant to the second sentence of Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of such exercise (or, if not publicly traded, in accordance with Section 11(d)(ii) hereof). Following the occurrence of one of the transactions or events specified in Section 11 hereof giving rise to the right to receive Common Shares, capital stock equivalents (other than Preferred Shares) or other securities upon the exercise of a Right, the Company shall not be required to issue fractions of Common Shares or units of such Common Shares, capital stock equivalents or other securities upon exercise of the Rights or to distribute certificates which evidence fractional Common Shares, capital stock equivalents or other securities. In lieu of fractional Common Shares, capital stock equivalents or other securities, the Company shall pay to the registered holders of Right Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the current market value of one Common Share or unit of such Common Shares, capital stock equivalents or other securities. For purposes of this Section 14(c), the current market value shall be the current per share market price (as determined pursuant to Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of such exercise and, if such capital stock equivalent is not traded, each such capital stock equivalent shall have the value of one one-hundredth of a Preferred Share. The holder of a Right by the acceptance of the Right expressly waives his right to receive any fractional Rights or any fractional shares upon exercise of a Right (except as provided above). Rights of Action . All rights of action in respect of this Agreement, excepting the rights of action given to the Rights Agent under Sections 18 and 20 hereof, are vested in the respective registered holders of the Right Certificates (and, prior to the Distribution Date, the registered holders of the Common Shares) and any registered holder of any Right Certificate (or, prior to the Distribution Date, of the Common Shares), without the consent of the Rights Agent or of the holder of any other Right Certificate (or, prior to the Distribution Date, of the Common Shares), may, in his own behalf and for his own benefit, enforce, and may institute and maintain any suit, action or proceeding against the Company to enforce, or otherwise act in respect of, his right to exercise the Rights evidenced by such Right Certificate in the manner provided in such Right Certificate and in this Agreement. Without limiting the foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holders of Rights would not have an adequate remedy at law for any breach of this Agreement and will be entitled to specific performance of the obligations under, and injunctive relief against actual or threatened violations of the obligations of any Person subject to, this Agreement. Holders of Rights shall be entitled to recover the reasonable costs and expenses, including attorneys fees, incurred by them in any action to enforce the provisions of this Agreement. Agreement of Right Holders . Every holder of a Right, by accepting the same, consents and agrees with the Company and the Rights Agent and with every other holder of a Right that: prior to the Distribution Date, the Rights will be transferable only in connection with the transfer of the Common Shares; after the Distribution Date, the Right Certificates are transferable (subject to the provisions of this Rights Agreement) only on the registry books of the Rights Agent if surrendered at the principal office of the Rights Agent, duly endorsed or accompanied by a proper instrument of transfer; and the Company and the Rights Agent may deem and treat the person in whose name the Right Certificate (or, prior to the Distribution Date, the associated Common Shares certificate) is registered as the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on the Right Certificates or the associated Common Shares certificate made by anyone other than the Company or the Rights Agent) for all purposes whatsoever, and neither the Company nor the Rights Agent shall be affected by any notice to the contrary. Right Certificate Holder Not Deemed a Stockholder . No holder, as such, of any Right Certificate shall be entitled to vote, receive dividends or be deemed for any purpose the holder of the Preferred Shares or any other securities of the Company which may at any time be issuable on the exercise of the Rights represented thereby, nor shall anything contained herein or in any Right Certificate be construed to confer upon the holder of any Right Certificate, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting stockholders (except as provided in Section 25 hereof), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by such Right Certificate shall have been exercised in accordance with the provisions hereof. Concerning the Rights Agent . The Company agrees to pay to the Rights Agent reasonable compensation for all services rendered by it hereunder and, from time to time, on demand of the Rights Agent, its reasonable expenses and counsel fees and other disbursements incurred in the administration and execution of this Agreement and the exercise and performance of its duties hereunder. The Company also agrees to indemnify the Rights Agent for, and to hold it harmless against, any loss, liability, or expense, incurred without negligence, bad faith or willful misconduct on the part of the Rights Agent, for anything done or omitted by the Rights Agent in connection with the acceptance and administration of this Agreement, including the costs and expenses of defending against any claim of liability in the premises. The indemnity provided herein shall survive the expiration of the Rights and the termination of this Agreement. The Rights Agent shall be protected and shall incur no liability for, or in respect of any action taken, suffered or omitted by it in connection with, its administration of this Agreement in reliance upon any Right Certificate or certificate for the Preferred Shares or Common Shares or for other securities of the Company, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, direction, consent, certificate, statement, or other paper or document believed by it to be genuine and to be signed, executed and, where necessary, verified or acknowledged, by the proper person or persons, or otherwise upon the advice of counsel as set forth in Section 20 hereof. In no case will the Rights Agent be liable for special, indirect, incidental or consequential or consequential loss or damage at any kind whatsoever (including but not limited to lost profits), even if the Rights Agent has been advised of such loss or damage. Merger or Consolidation or Change of Name of Rights Agent . Any corporation into which the Rights Agent or any successor Rights Agent may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Rights Agent or any successor Rights Agent shall be a party, or any corporation succeeding to the shareholder services or corporate trust business of the Rights Agent or any successor Rights Agent, shall be the successor to the Rights Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto, provided that such corporation would be eligible for appointment as a successor Rights Agent under the provisions of Section 21 hereof. In case at the time such successor Rights Agent shall succeed to the agency created by this Agreement any of the Right Certificates shall have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of the predecessor Rights Agent and deliver such Right Certificates so countersigned; and in case at that time any of the Right Certificates shall not have been countersigned, any successor Rights Agent may countersign such Right Certificates either in the name of the predecessor Rights Agent or in the name of the successor Rights Agent; and in all such cases such Right Certificates shall have the full force provided in the Right Certificates and in this Agreement. In case at any time the name of the Rights Agent shall be changed and at such time any of the Right Certificates shall have been countersigned but not delivered, the Rights Agent may adopt the countersignature under its prior name and deliver Right Certificates so countersigned; and in case at that time any of the Right Certificates shall not have been countersigned, the Rights Agent may countersign such Right Certificates either in its prior name or in its changed name; and in all such cases such Right Certificates shall have the full force provided in the Right Certificates and in this Agreement. Duties of Rights Agent . The Rights Agent undertakes the duties and obligations imposed by this Agreement upon the following terms and conditions, by all of which the Company and the holders of Right Certificates, by their acceptance thereof, shall be bound: The Rights Agent may consult with legal counsel of its choice (who may be legal counsel for the Company), and the opinion of such counsel shall be full and complete authorization and protection to the Rights Agent as to any action taken or omitted by it in good faith and in accordance with such opinion. Whenever in the performance of its duties under this Agreement the Rights Agent shall deem it necessary or desirable that any fact or matter be proved or established by the Company prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by any one of the Chairman of the Board, the Chief Executive Officer, the President, the Chief Financial Officer, any Vice President, the Treasurer or the Secretary of the Company and delivered to the Rights Agent; and such certificate shall be full authorization to the Rights Agent for any action taken or suffered in good faith by it under the provisions of this Agreement in reliance upon such certificate. The Rights Agent shall be liable hereunder to the Company and any other Person only for its own negligence, bad faith or willful misconduct. The Rights Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the Right Certificates (except its countersignature thereof) or be required to verify the same, but all such statements and recitals are and shall be deemed to have been made by the Company only. The Rights Agent shall not be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof (except the due execution hereof by the Rights Agent) or in respect of the validity or execution of any Right Certificate (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Right Certificate; nor shall it be responsible for any change in the exercisability of the Rights (including the Rights becoming void pursuant to Section 11(a)(ii) hereof) or any adjustment in the terms of the Rights (including the manner, method or amount thereof) provided for in Sections 3, 11, 13, 23 or 24 hereof, or the ascertaining of the existence of facts that would require any such change or adjustment (except with respect to the exercise of Rights evidenced by Right Certificates after receipt of a certificate pursuant to Section 12 hereof describing such change or adjustment); nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any Preferred Shares to be issued pursuant to this Agreement or any Right Certificate or as to whether any Preferred Shares will, when issued, be validly authorized and issued, fully paid and nonassessable. The Company agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required by the Rights Agent for the carrying out or performing by the Rights Agent of the provisions of this Agreement. The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder from any one of the Chairman of the Board, the Chief Executive Officer, the President, the Chief Financial Officer, any Vice President, the Secretary or the Treasurer of the Company, and to apply to such officers for advice or instructions in connection with its duties, and it shall not be liable for any action taken or suffered by it in good faith in accordance with instructions of any such officer or for any delay in acting while waiting for those instructions. Any application by the Rights Agent for written instructions from the Company may, at the option of the Rights Agent, set forth in writing any action proposed to be taken or omitted by the Rights Agent with respect to its duties or obligations under this Agreement and the date on and/or after which such action shall be taken or omitted and the Rights Agent shall not be liable for any action taken or omitted in accordance with a proposal included in any such application on or after the date specified therein (which date shall not be less than three Business Days after the date indicated in such application unless any such officer shall have consented in writing to an earlier date) unless, prior to taking or omitting any such action, the Rights Agent has received written instructions in response to such application specifying the action to be taken or omitted. The Rights Agent and any stockholder, director, officer or employee of the Rights Agent may buy, sell or deal in any of the Rights or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not Rights Agent under this Agreement. Nothing herein shall preclude the Rights Agent from acting in any other capacity for the Company or for any other legal entity. The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through its attorneys or agents, and the Rights Agent shall not be answerable or accountable for any act, default, neglect or misconduct of any such attorneys or agents or for any loss to the Company resulting from any such act, default, neglect or misconduct, provided reasonable care was exercised in the selection and continued employment thereof. No provision of this Agreement shall require the Rights Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of its rights if there shall be reasonable grounds for believing that repayment of such funds or adequate indemnification against such risk or liability is not reasonably assured to it. If, with respect to any Right Certificate surrendered to the Rights Agent for exercise or transfer, the certificate attached to the form of assignment or form of election to purchase, as the case may be, has not been executed, the Rights Agent shall not take any further action with respect to such requested exercise of transfer without first consulting with the Company. Change of Rights Agent . The Rights Agent or any successor Rights Agent may resign and be discharged from its duties under this Agreement upon 30 days' notice in writing mailed to the Company and to each transfer agent for the Common Shares or Preferred Shares by registered or certified mail, and to the holders of the Right Certificates by first-class mail. The Company may remove the Rights Agent or any successor Rights Agent upon 30 days' notice in writing, mailed to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent for the Common Shares or Preferred Shares by registered or certified mail, and to the holders of the Right Certificates by first-class mail. If the Rights Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor to the Rights Agent. If the Company shall fail to make such appointment within a period of 30 days after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of a Right Certificate (who shall, with such notice, submit his Right Certificate for inspection by the Company), then the registered holder of any Right Certificate may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Company or by such a court, shall be either (a) a corporation business trust or limited liability company organized and doing business under the laws of the United States or of any other state of the United States which is authorized under such laws to exercise corporate trust or stock transfer powers and is subject to supervision or examination by federal or state authority and which has at the time of its appointment as Rights Agent a combined capital and surplus of at least $50 million or (b) a direct or indirect wholly owned subsidiary of such an entity or its wholly-owning parent. After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent without further act or deed; but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Not later than the effective date of any such appointment the Company shall file notice thereof in writing with the predecessor Rights Agent and each transfer agent for the Common Shares or Preferred Shares, and mail a notice thereof in writing to the registered holders of the Right Certificates. Failure to give any notice provided for in this Section 21, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be. Issuance of New Right Certificates . Notwithstanding any of the provisions of this Agreement or of the Rights to the contrary, the Company may, at its option, issue new Right Certificates evidencing Rights in such form as may be approved by its Board of Directors to reflect any adjustment or change in the Purchase Price and the number or kind or class of shares or other securities or property purchasable under the Right Certificates made in accordance with the provisions of this Agreement. In addition, in connection with the issuance or sale of Common Shares following the Distribution Date and prior to the earlier of the Redemption Date and the Final Expiration Date, the Company (a) shall with respect to Common Shares so issued or sold pursuant to the exercise of stock options or under any employee plan or arrangement in existence prior to the Distribution Date, or upon the exercise, conversion or exchange of securities, notes or debentures issued by the Company and in existence prior to the Distribution Date, and (b) may, in any other case, if deemed necessary or appropriate by the Board of Directors of the Company, issue Right Certificates representing the appropriate number of Rights in connection with such issuance or sale; provided, however, that (i) the Company shall not be obligated to issue any such Right Certificates if, and to the extent that, the Company shall be advised by counsel that such issuance would create a significant risk of material adverse tax consequences to the Company or the Person to whom such Right Certificate would be issued, and (ii) no Right Certificate shall be issued if, and to the extent that, appropriate adjustment shall otherwise have been made in lieu of the issuance thereof. Redemption . The Rights may be redeemed by action of the Board of Directors pursuant to Section 23(b) hereof and shall not be redeemed in any other manner. The Board of Directors of the Company may, at its option, at any time prior to the earlier of such time as any Person becoming an Acquiring Person or the Final Expiration Date, redeem all but not less than all of the then outstanding Rights at a redemption price of $0.001 per Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof (such redemption price being hereinafter referred to as the "Redemption Price"), and the Company may, at its option, pay the Redemption Price in Common Shares (based on the "current per-share market price," as such term is defined in Section 11(d) hereof, of the Common Shares at the time of redemption), cash or any other form of consideration deemed appropriate by the Board of Directors. The redemption of the Rights by the Board of Directors may be made effective at such time, on such basis and subject to such conditions as the Board of Directors in its sole discretion may establish. Notwithstanding anything contained in this Agreement to the contrary, the Rights shall not be exercisable pursuant to Section 11(a)(ii) hereof prior to the expiration or termination of the Company's right of redemption under this Section 23(b)(i). In addition, the Board of Directors of the Company may, at its option, at any time after the time a Person becomes an Acquiring Person and the expiration of any period during which the holder of Rights may exercise the rights under Section 11(a)(ii) hereof but prior to any event described in clause (x), (y) or (z) of the first sentence of Section 13 hereof, redeem all but not less than all of the then outstanding Rights at the Redemption Price (x) in connection with any merger, consolidation or sale or other transfer (in one transaction or in a series of related transactions) of assets or earning power aggregating 50% or more of the assets or earning power of the Company and its subsidiaries (taken as a whole) in which all holders of Common Shares are treated alike and not involving (other than as a holder of Common Shares being treated like all other such holders) an Interested Stockholder or a Transaction Person or (y)(A) if and for so long as the Acquiring Person is not thereafter the Beneficial Owner of 15% or more of the then outstanding Common Shares, and (B) at the time of redemption no other Persons are Acquiring Persons. Immediately upon the action of the Board of Directors of the Company ordering the redemption of the Rights pursuant to Section 23(b) hereof, and without any further action and without any notice, the right to exercise the Rights will terminate and the only right thereafter of the holders of Rights shall be to receive the Redemption Price. The Company shall promptly give public notice of any such redemption; provided, however, that the failure to give, or any defect in, any such notice shall not affect the validity of such redemption. Within 10 days after such action of the Board of Directors ordering the redemption of the Rights pursuant to Section 23(b) hereof, the Company shall mail a notice of redemption to all the holders of the then outstanding Rights at their last addresses as they appear upon the registry books of the Rights Agent or, prior to the Distribution Date, on the registry books of the transfer agent for the Common Shares, provided, however, that failure to give, or any defect in, any such notice shall not affect the validity of such redemption. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of redemption will state the method by which the payment of the Redemption Price will be made. Neither the Company nor any of its Affiliates or Associates may redeem, acquire or purchase for value any Rights at any time in any manner other than that specifically set forth in this Section 23 or in Section 24 hereof, and other than in connection with the purchase of Common Shares prior to the Distribution Date. The Company may, at its option, discharge all of its obligations with respect to any redemption of the Rights by (i) issuing a press release announcing the manner of redemption of the Rights and (ii) mailing payment of the Redemption Price to the registered holders of the Rights at their last addresses as they appear on the registry books of the Rights Agent or, prior to the Distribution Date, on the registry books of the transfer agent for the Common Shares, and upon such action, all outstanding Right Certificates shall be null and void without any further action by the Company. Exchange . The Board of Directors of the Company may, at its option, at any time after any Person becomes an Acquiring Person, exchange all or part of the then outstanding and exercisable Rights (which shall not include Rights that have become void pursuant to the provisions of Section 11(a)(ii) hereof) for Common Shares at an exchange ratio of one Common Share per Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof (such exchange ratio being hereinafter referred to as the "Exchange Ratio"). Notwithstanding the foregoing, the Board of Directors shall not be empowered to effect such exchange at any time after any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or any such Subsidiary, or any entity holding Common Shares for or pursuant to the terms of any such plan), together with all Affiliates and Associates of such Person, becomes the Beneficial Owner of 50% or more of the Common Shares then outstanding. Immediately upon the action of the Board of Directors of the Company ordering the exchange of any Rights pursuant to Section 24(a) hereof and without any further action and without any notice, the right to exercise such Rights shall terminate and the only right thereafter of a holder of such Rights shall be to receive that number of Common Shares equal to the number of such Rights held by such holder multiplied by the Exchange Ratio. The Company shall promptly give public notice of any such exchange; provided, however, that the failure to give, or any defect in, such notice shall not affect the validity of such exchange. The Company promptly shall mail a notice of any such exchange to all of the holders of such Rights at their last addresses as they appear upon the registry books of the Rights Agent; provided, however, that the failure to give, or any defect in, such notice shall not affect the validity of such exchange. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of exchange will state the method by which the exchange of the Common Shares for Rights will be effected and, in the event of any partial exchange, the number of Rights which will be exchanged. Any partial exchange shall be effected pro rata based on the number of Rights (other than Rights which have become void pursuant to the provisions of Section 11(a)(ii) hereof) held by each holder of Rights. In lieu of issuing Common Shares in accordance with Section 24(a) hereof, the Company may, if a majority of the Board of Directors then in office determines that such action is necessary or appropriate and not contrary to the interests of the holders of Rights, elect to (and, in the event that there are not sufficient treasury shares and authorized but unissued Common Shares to permit any exchange of the Rights in accordance with Section 24(a) hereof, the Company shall) take all such action as may be necessary to authorize, issue or pay, upon the exchange of the Rights, cash (including by way of a reduction of the Purchase Price), property, Common Shares, other securities or any combination thereof having an aggregate value equal to the value of the Common Shares which otherwise would have been issuable pursuant to Section 24(a) hereof, which aggregate value shall be determined by a nationally recognized investment banking firm selected by a majority of the Board of Directors then in office. For purposes of the preceding sentence, the value of the Common Shares shall be determined pursuant to Section 11(d) hereof. Any election pursuant to this Section 24(c) by the Board of Directors must be made within 60 days following the date on which the event described in Section 11(a)(ii) hereof shall have occurred. Following the occurrence on the event described in Section 11(a)(ii) hereof, a majority of the Board of Directors then in office may suspend the exercisability of the Rights for a period of up to 60 days following the date on which the event described in Section 11(a)(ii) hereof shall have occurred to the extent that such directors have not determined whether to exercise their rights of election under this Section 24(c). In the event of any such suspension, the Company shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended. The Company shall not be required to issue fractions of Common Shares or to distribute certificates which evidence fractional Common Shares. In lieu of such fractional Common Shares, the Company shall pay to the registered holders of the Right Certificates with regard to which such fractional Common Shares would otherwise be issuable an amount in cash equal to the same fraction of the current market value of a whole Common Share. For the purposes of this Section 24(d), the current market value of a whole Common Share shall be the closing price of a Common Share (as determined pursuant to the second sentence of Section 11(d)(i) hereof) for the Trading Day immediately after the date of the first public announcement by the Company that an exchange is to be effected pursuant to this Section 24. The Company shall not be required to issue fractions of Preferred Shares (other than fractions which are integral multiples of one one-hundredth of a Preferred Share) upon exchange of the Rights or to distribute certificates which evidence fractional Preferred Shares (other than fractions which are integral multiples of one one-hundredth of a Preferred Share). Fractions of Preferred Shares in integral multiples of one one-hundredth of a Preferred Share may, at the election of the Company, be evidenced by depositary receipts; provided, however, that holders of such depositary receipts shall have all of the designations and the powers, preferences and rights, and the qualifications, limitations and restrictions to which they are entitled as beneficial owners of the Preferred Shares represented by such depositary receipts. In lieu of fractional Preferred Shares that are not integral multiples of one one-hundredth of a Preferred Share, the Company shall pay to the registered holders of Right Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the current market value of one Preferred Share. For the purposes of this Section 24(e), the current market value of a Preferred Share shall be one hundred (100) times the closing price of a Common Share (as determined pursuant to the second sentence of Section 11(d)(i) hereof) for the Trading Day immediately after the date of the first public announcement by the Company that an exchange is to be effected pursuant to this Section 24. Notice of Certain Events . In case the Company shall propose (i) to pay any dividend payable in stock of any class to the holders of its Preferred Shares or to make any other distribution to the holders of its Preferred Shares (other than a regular quarterly cash dividend), (ii) to offer to the holders of its Preferred Shares rights or warrants to subscribe for or to purchase any additional Preferred Shares or shares of stock of any class or any other securities, rights or options, (iii) to effect any reclassification of its Preferred Shares (other than a reclassification involving only the subdivision of outstanding Preferred Shares), (iv) to effect any consolidation or merger into or with, or to effect any sale or other transfer (or to permit one or more of its Subsidiaries to effect any sale or other transfer), in one or more transactions, of 50% or more of the assets or earning power of the Company and its Subsidiaries (taken as a whole), to any other Person, (v) to effect the liquidation, dissolution or winding up of the Company, or (vi) to declare or pay any dividend on the Common Shares payable in Common Shares or to effect a subdivision, combination or consolidation of the Common Shares (by reclassification or otherwise than by payment of dividends in Common Shares), then, in each such case, the Company shall give to each holder of a Right Certificate, in accordance with Section 26 hereof, a notice of such proposed action, which shall specify the record date for the purpose of such stock dividend, or distribution of rights or warrants, or the date on which such reclassification, consolidation, merger, sale, transfer, liquidation, dissolution, or winding up is to take place and the date of participation therein by the holders of the Common Shares and/or the Preferred Shares, if any such date is to be fixed, and such notice shall be so given in the case of any action covered by clause (i) or (ii) above at least 10 days prior to the record date for determining holders of the Preferred Shares for purposes of such action, and in the case of any such other action, at least 10 days prior to the date of the taking of such proposed action or the date of participation therein by the holders of the Common Shares and/or the Preferred Shares, whichever shall be the earlier. In case the event set forth in Section 11(a)(ii) hereof shall occur, then the Company shall as soon as practicable thereafter give to each holder of a Right Certificate, in accordance with Section 26 hereof, a notice of the occurrence of such event, which notice shall describe the event and the consequences of the event to holders of Rights under Section 11(a)(ii) hereof. (c) Prior to the Distribution Date, any notice required to be given to each holder of a Right Certificate may be delivered by the Company by making an appropriate filing with the Securities and Exchange Commission in accordance with the General Rules and Regulations under the Exchange Act. Notices . Notices or demands authorized by this Agreement to be given or made by the Rights Agent or by the holder of any Right Certificate to or on the Company shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Rights Agent) as follows: Walker Interactive Systems, Inc. Marathon Plaza, Three North 303 Second Street San Francisco, California 94107 Attention: Corporate Secretary Subject to the provisions of Section 21 hereof, any notice or demand authorized by this Agreement to be given or made by the Company or by the holder of any Right Certificate to or on the Rights Agent shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Company) as follows: Fleet National Bank, a National Banking Association c/o EquiServe Limited Partnership 150 Royall Street Canton, MA 02021 Attn: Client Administration Notices or demands authorized by this Agreement to be given or made by the Company or the Rights Agent to the holder of any Right Certificate shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed to such holder at the address of such holder as shown on the registry books of the Company. Supplements and Amendments . Prior to the Distribution Date and so long as the Rights are then redeemable, the Company and the Rights Agent shall, if the Company so directs, supplement or amend any provision of this Agreement without the approval of any holders of the Rights. From and after the Distribution Date, the Company and the Rights Agent shall, if the Company so directs, from time to time supplement or amend any provision of this Agreement without the approval of any holders of Right Certificates in order to (i) cure any ambiguity, (ii) correct or supplement any provision contained herein which may be defective or inconsistent with any other provisions herein, or (iii) change any other provisions with respect to the Rights which the Company may deem necessary or desirable; provided, however, that no such supplement or amendment shall be made which would adversely affect the interests of the holders of Rights (other than the interests of an Acquiring Person or its Affiliates or Associates). Any supplement or amendment adopted during any period after any Person has become an Acquiring Person but prior to the Distribution Date shall become null and void unless such supplement or amendment could have been adopted by the Company from and after the Distribution Date. Any such supplement or amendment shall be evidenced by a writing signed by the Company and the Rights Agent. Upon delivery of a certificate from an appropriate officer of the Company which states that the proposed supplement or amendment is in compliance with the terms of this Section 27, the Rights Agent shall execute such supplement or amendment unless the Rights Agent shall have determined in good faith that such supplement or amendment would adversely affect its interest under this Agreement. Prior to the Distribution Date and so long as the Rights are then redeemable, the interests of the holders of Rights shall be deemed coincident with the interests of the holders of Common Shares. Determination and Actions by the Board of Directors, Etc. For all purposes of this Agreement, any calculation of the number of Common Shares outstanding at any particular time, including for purposes of determining the particular percentage of such outstanding Common Shares or any other securities of which any Person is the Beneficial Owner, shall be made in accordance with the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange Act as in effect on the date of this Agreement. The Board of Directors of the Company shall have the exclusive power and authority to administer this Agreement and to exercise all rights and powers specifically granted to the Board, or the Company, or as may be necessary or advisable in the administration of this Agreement, including without limitation, the right and power to (i) interpret the provisions of this Agreement, and (ii) make all determinations deemed necessary or advisable for the administration of this Agreement (including a determination to redeem or not redeem the Rights or to amend the Agreement). All such actions, calculations, interpretations and determinations (including, for purposes of clause (y) below, all omissions with respect to the foregoing) which are done or made by the Board in good faith, shall (x) be final, conclusive and binding on the Rights Agent and the holders of the Rights, and (y) not subject the Board to any liability to the holders of the Rights. Successors . All the covenants and provisions of this Agreement by or for the benefit of the Company or the Rights Agent shall bind and inure to the benefit of their respective successors and assigns hereunder. Benefits of this Agreement . Nothing in this Agreement shall be construed to give to any person or corporation other than the Company, the Rights Agent and the registered holders of the Right Certificates (and, prior to the Distribution Date, the Common Shares) any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company, the Rights Agent and the registered holders of the Right Certificates (and, prior to the Distribution Date, the Common Shares). Severability . If any term, provision, covenant or restriction 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, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. Governing Law . This Agreement and each Right Certificate issued hereunder shall be deemed to be a contract made under the laws of the State of Delaware 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. Counterparts . This Agreement may be executed in any number of counterparts and 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. Descriptive Headings . Descriptive headings of the several Sections of this Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof. In Witness Whereof, parties whereto have caused this Agreement to be duly executed, all as of the day and year first above written. Attest: Walker Interactive Systems, Inc.   Alan C. Mendelson Frank M. Richardson Secretary Chief Executive Officer   Attest: Fleet National Bank, a National Banking Association   By: By: Title: Title:     SECTION 1. Certain Definitions 1 SECTION 2. Appointment of Rights Agent 4 SECTION 3. Issue of Right Certificates 4 SECTION 4. Form of Right Certificates 6 SECTION 5. Countersignature and Registration 6 SECTION 6. Transfer, Split Up, Combination and Exchange of Right Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates 7 SECTION 7. Exercise of Rights; Purchase Price; Expiration Date of Rights 7 SECTION 8. Cancellation and Destruction of Right Certificates 9 SECTION 9. Availability of Preferred Shares 9 SECTION 10. Preferred Shares Record Date 10 SECTION 11. Adjustment of Purchase Price, Number of Shares or Number of Rights 10 SECTION 12. Certificate of Adjusted Purchase Price or Number of Shares 17 SECTION 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power 17 SECTION 14. Fractional Rights and Fractional Shares 20 SECTION 15. Rights of Action 21 SECTION 16. Agreement of Right Holders 22 SECTION 17. Right Certificate Holder Not Deemed a Stockholder 22 SECTION 18. Concerning the Rights Agent 22 SECTION 19. Merger or Consolidation or Change of Name of Rights Agent 23 SECTION 20. Duties of Rights Agent 23 SECTION 21. Change of Rights Agent 25 SECTION 22. Issuance of New Right Certificates 26 SECTION 23. Redemption 27 SECTION 24. Exchange 28 SECTION 25. Notice of Certain Events 30 SECTION 26. Notices 30 SECTION 27. Supplements and Amendments 31 SECTION 28. Determination and Actions by the Board of Directors, Etc. 32 SECTION 29. Successors 32 SECTION 30. Benefits of this Agreement 32 SECTION 31. Severability 32 SECTION 32. Governing Law 32 SECTION 33. Counterparts 32 SECTION 34. Descriptive Headings 32 --------------------------------------------------------------------------------

EXHIBIT 10.28 NOTE Date of Note:                   August 23, 1999     Principal Amount of Note: One Hundred Thousand Dollars ($100,000.00)     Maker: Henry Fiallo 38 Depot Road Hampton Falls, NH 03844     Lender: Cabletron Systems, Inc. 35 Industrial Way Rochester, New Hampshire     Loan Term: Approximately Two (2) Years and Nine (9) Months     Payment Day: The 1st day of June, 2002     Note Party: The Maker and any guarantor, endorser, or surety of the Maker hereunder.     Place of Execution of Note: Rochester, New Hampshire For value received, the Maker does hereby promise to pay to the order of Lender at the office of the Lender set forth or at such other place or places or to such other party or parties as the holder of this Note may from time to time designate the Principal Amount of this Note, without interest, on the Payment Day. Notwithstanding anything herein contained to the contrary, all amounts outstanding hereunder shall become immediately due and payable to the Lender if either (i) the Maker's employment with the Lender, its affiliates, or their successors or assigns is terminated by the Maker; or (ii) if the Maker's employment is terminated by the Lender, its affiliates, or their successors or assigns for "cause". Cause, for the purposes hereof, shall mean (a) the commission by the Maker of any material breach of any of the provisions contained in any written agreement between the Lender or its affiliates and the Maker; or (b) the Maker being guilty of any misconduct or neglect in the discharge of his duties hereunder; or (c) the Maker being convicted of any criminal offense other than a routine motor vehicle offense; or (d) the Maker becoming disabled by illness, injury, accident or any other circumstances which prevent him from performing his duties for a period of six (6) months in any period of twenty four (24) consecutive calendar months or (e) the death of the Maker. In the case of any default continuing for five (5) days in the making of any payment provided for in this Note, interest shall be automatically payable as of such day at the lower of fifteen percent (15%) per annum or the highest rate allowed by law until such time as such default is cured. The Maker shall be liable for all costs incurred in the collection of this Note, including reasonable attorneys' fees. All payments made hereunder shall first be applied to interest and then to principal. Privilege is reserved by the Maker, and given by the Lender, of making additional payments in whole or in part prior to the Payment Day, without penalty, to the extent of prepayment in full. This Note may not be changed orally, but only by an agreement in writing. If there shall be more than one Note Party, the liability of the Note parties shall be joint and several. If the Maker shall consist of more than one person, the liability of the persons constituting the Maker shall be joint and several. Each Note Party agrees that it shall be bound by any agreement extending the time for payment or modifying the terms of payment of the Note made by the holder of this Note and the Maker with or without notice to such Note Party not party to such agreement of extension or modification. The liability of each Maker shall be unaffected by the release of any other Note Party or any modification, waiver, release or discharge of any security. Each Note Party hereby waives presentment for payment, notice of dishonor, protest, and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note, and agrees to pay all costs of collection when incurred, including reasonable attorneys' fees and to perform and comply with each of the covenants, conditions, provisions and agreements of any of the undersigned contained in every instrument evidencing or securing said indebtedness. No extension of the time for the payment of this Note or any installment hereof made by agreement with any person now or hereafter liable for the payment of this Note shall operate to release, discharge, modify, change or affect the liability of any Note Party. If any provision of this Note shall be determined to be invalid or unenforceable under law, such determination shall not affect the validity or enforcement of the remaining provisions of this Note. The waiver of any provision of this Note by the Lender shall not constitute any future waiver of that, or any other provision. This Note shall be construed under the laws of the State of New Hampshire. IN WITNESS WHEREOF, the Maker has hereunto set his hand and seal effective the date first above written. > WITNESS:     /s/Rachel M. Tanguay /s/Enrique P. Fiallo   Henry Fiallo

EXHIBIT 10.3l TERMINATION PROTECTION AGREEMENT   AGREEMENT effective June 28, 2000 between Harcourt General, Inc. and Paul J. Robershotte (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. (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 2.73% 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 28th day of June, 2000. HARCOURT GENERAL, INC. /s/ Richard A. Smith             By: Richard A. Smith Title: Chairman of the Board /s/ Paul J. Robershotte           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) 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 10.2 COVENTRY HEALTH CARE, INC. AMENDED AND RESTATED 1998 STOCK INCENTIVE PLAN (June 8, 2000) SECTION 1.     PURPOSE; DEFINITIONS.          The purpose of the 1998 Stock Incentive Plan (the "Plan") is to enable Coventry Health Care, Inc., a Delaware corporation (the "Company"), to attract, retain and reward key employees of and consultants to the Company and its Subsidiaries and Affiliates, and directors who are not also employees of the Company, and to strengthen the mutuality of interests between such key employees, consultants, and directors by awarding such key employees, consultants, and directors performance-based stock incentives and/or other equity interests or equity-based incentives in the Company, as well as performance-based incentives payable in cash. The creation of the Plan shall not diminish or prejudice other compensation programs approved from time to time by the Board. For purposes of the Plan, the following terms shall be defined as set forth below: 1. “Affiliate” means any entity other than the Company and its Subsidiaries that is designated by the Board as a participating employer under the Plan, provided that the Company directly or indirectly owns at least 20% of the combined voting power of all classes of stock of such entity or at least 20% of the ownership interests in such entity. 2. "Assumed Plans" has the meaning provided in Section 3(a) of the Plan. 3. "Assumption Time" means the time that the merger described in the Combination Agreement becomes effective as provided in Section 2.2 of the Combination Agreement. 4. "Board" means the Board of Directors of the Company. 5. "Cause" has the meaning provided in Section 5(j) of the Plan. 6. "Change in Control" has the meaning provided in Section 10(b) of the Plan. 7. "Change in Control Price" has the meaning provided in Section 10(d) of the Plan. 8. "Code" means the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto. 9. "Combination Agreement" has the meaning provided in Section 3(a) of the Plan. 10. "Common Stock" means the Company's Common Stock, par value $.01 per share. 11. "Committee" means the Committee referred to in Section 2 of the Plan. 12. "Company" means Coventry Health Care, Inc., a corporation organized under the laws of the State of Delaware or any successor corporation. 13. "Disability" means disability as determined under the Company's Group Long Term Disability Insurance Plan. 14. “Early Retirement” means retirement, for purposes of this Plan with the express consent of the Company at or before the time of such retirement, from active employment with the Company and any Subsidiary or Affiliate prior to age 65, in accordance with any applicable early retirement policy of the Company then in effect or as may be approved by the Committee. 15. "Effective Date" has the meaning provided in Section 14 of the Plan. 16. "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, and any successor thereto. 17. “Fair Market Value” means with respect to the Common Stock, as of any given date or dates, unless otherwise determined by the Committee in good faith, the reported closing price of a share of Common Stock on The Nasdaq National Market or such other market or exchange as is the principal trading market for the Common Stock, or, if no such sale of a share of Common Stock is reported on The Nasdaq National Market or other exchange or principal trading market on such date, the fair market value of a share of Common Stock as determined by the Committee in good faith. 18. "Incentive Stock Option" means any Stock Option intended to be and designated as an "Incentive Stock Option" within the meaning of Section 422 of the Code. 19. “Immediate Family” means any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, and shall include adoptive relationships. 20. "Non-Employee Director" means a member of the Board who is a Non-Employee Director within the meaning of Rule 16b-3(b)(3) promulgated under the Exchange Act and an outside director within the meaning of Treasury Regulation Sec. 162-27(e)(3) promulgated under the Code. 21. "Non-Qualified Stock Option" means any Stock Option that is not an Incentive Stock Option. 22. "Normal Retirement" means retirement from active employment with the Company and any Subsidiary or Affiliate on or after age 65. 23. "Other Stock-Based Award" means an award under Section 8 below that is valued in whole or in part by reference to, or is otherwise based on, the Common Stock. 24. “Outside Director” means a member of the Board who is not then (i) an officer or employee of the Company or any Subsidiary or Affiliate of the Company, or (ii) the direct or beneficial owner of five percent (5%) or more of the Common Stock of the Company. 25. "Outside Director Option" means an award to an Outside Director under Section 9 below. 26. "Plan" means this 1998 Stock Incentive Plan, as amended from time to time. 27. "Restricted Stock" means an award of shares of Common Stock that is subject to restrictions under Section 7 of the Plan. 28. "Restriction Period" has the meaning provided in Section 7 of the Plan. 29. "Retirement" means Normal or Early Retirement. 30. "Section 162(m) Maximum" has the meaning provided in Section 3(a) hereof. 31. “Stock Appreciation Right” means the right pursuant to an award granted under Section 6 below to surrender to the Company all (or a portion) of a Stock Option in exchange for an amount equal to the difference between (i) the Fair Market Value, as of the date such Stock Option (or such portion thereof) is surrendered, of the shares of Common Stock covered by such Stock Option (or such portion thereof), subject, where applicable, to the pricing provisions in Section 6(b)(ii), and (ii) the aggregate exercise price of such Stock Option (or such portion thereof). 32. "Stock Option" or "Option" means any option to purchase shares of Common Stock (including Restricted Stock, if the Committee so determines) granted pursuant to Section 5 below. 33. “Subsidiary” means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if each of the corporations (other than the last corporation in the unbroken chain) owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in the chain. SECTION 2. ADMINISTRATION.          The Plan shall be administered by a Committee of not less than two Non-Employee Directors, who shall be appointed by the Board and who shall serve at the pleasure of the Board. The functions of the Committee specified in the Plan may be exercised by an existing Committee of the Board composed exclusively of Non-Employee Directors. The initial Committee shall be the Compensation and Benefits Committee of the Board. In the event there are not at least two Non-Employee Directors on the Board, the Plan shall be administered by the Board and all references herein to the Committee shall refer to the Board.           The Committee shall have authority to grant, pursuant to the terms of the Plan, to officers, other key employees, Outside Directors and consultants eligible under Section 4: (i) Stock Options, (ii) Stock Appreciation Rights, (iii) Restricted Stock, and/or (iv) Other Stock-Based Awards; provided, however, that the power to grant and establish the terms and conditions of awards to Outside Directors under the Plan other than pursuant to Section 9 shall be reserved to the Board.           In particular, the Committee, or the Board, as the case may be, shall have the authority, consistent with the terms of the Plan:     (a) to select the officers, key employees and Outside Directors of and consultants to the Company and its Subsidiaries and Affiliates to whom Stock Options, Stock Appreciation Rights, Restricted Stock, and/or Other Stock-Based Awards may from time to time be granted hereunder;     (b) to determine whether and to what extent Incentive Stock Options, Non-Qualified Stock Options, Stock Appreciation Rights, Restricted Stock, and/or Other Stock-Based Awards, or any combination thereof, are to be granted hereunder to one or more eligible persons;     (c) to determine the number of shares to be covered by each such award granted hereunder;     (d) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any award granted hereunder (including, but not limited to, the share price and any restriction or limitation, or any vesting acceleration or waiver of forfeiture restrictions regarding any Stock Option or other award and/or the shares of Common Stock relating thereto, based in each case on such factors as the Committee shall determine, in its sole discretion); and to amend or waive any such terms and conditions to the extent permitted by Section 11 hereof;     (e) to determine whether and under what circumstances a Stock Option may be settled in cash or Restricted Stock under Section 5(m) or (n), as applicable, instead of Common Stock;     (f) to determine whether, to what extent, and under what circumstances Option grants and/or other awards under the Plan are to be made, and operate, on a tandem basis vis-a-vis other awards under the Plan and/or cash awards made outside of the Plan;     (g) to determine whether, to what extent, and under what circumstances shares of Common Stock and other amounts payable with respect to an award under this Plan shall be deferred either automatically or at the election of the participant (including providing for and determining the amount (if any) of any deemed earnings on any deferred amount during any deferral period);     (h) to determine whether to require payment of tax withholding requirements in shares of Common Stock subject to the award; and     (i) to impose any holding period required to satisfy Section 16 under the Exchange Act.           The Committee shall have the authority to adopt, alter, and repeal such rules, guidelines, and practices governing the Plan as it shall, from time to time, deem advisable; to interpret the terms and provisions of the Plan and any award issued under the Plan (and any agreements relating thereto); and to otherwise supervise the administration of the Plan.           All decisions made by the Committee pursuant to the provisions of the Plan shall be made in the Committee's sole discretion and shall be final and binding on all persons, including the Company and Plan participants. SECTION 3. SHARES OF COMMON STOCK SUBJECT TO PLAN.     (a) As of the Effective Date, an aggregate of 9,000,000 shares of Common Stock may be issued by the Company under the Plan and the other stock option and incentive plans assumed by the Company (the "Assumed Plans") under the Capital Contribution and Merger Agreement dated as of November 3, 1997 (the "Combination Agreement") by and among, inter alia, Coventry Corporation, the Company, Principal Health Care, Inc. and Principal Mutual Life Insurance Company. The Assumed Plans are the Principal Health Care, Inc. 1997 Non-Qualified Stock Option Plan, the Coventry Corporation 1997 Stock Incentive Plan, the Coventry Corporation 1993 Stock Option Plan (as amended), the Southern Health Management Corporation 1993 Stock Option Plan, the Coventry Corporation 1993 Outside Directors Stock Option Plan (as amended), the Coventry Corporation Third Amended and Restated 1989 Stock Option Plan, and the Coventry Corporation Amended and Restated 1987 Statutory-Nonstatutory Stock Option Plan. From and after the Assumption Time, no additional shares of Common Stock may be made subject to options or awards under the Assumed Plans.     (b) The shares of Common Stock issuable under the Plan may consist, in whole or in part, of authorized and unissued shares or treasury shares. No officer of the Company or other person whose compensation may be subject to the limitations on deductibility under Section 162(m) of the Code shall be eligible to receive awards pursuant to this Plan relating to in excess of 400,000 shares of Common Stock in any fiscal year (the "Section 162(m) Maximum").     (c) If any shares of Common Stock that have been optioned hereunder or under any of the Assumed Plans cease to be subject to such option, or if any shares of Common Stock that are subject to any Restricted Stock or Other Stock-Based Award granted hereunder or under any of the Assumed Plans are forfeited prior to the payment of any dividends, if applicable, with respect to such shares of Common Stock, or any such award otherwise terminates without a payment being made to the participant in the form of Common Stock, such shares shall again be available for distribution in connection with future awards under the Plan, so long as the total does not exceed the number specified in 3(a) above.     (d) In the event of any merger, reorganization, consolidation, recapitalization, extraordinary cash dividend, stock dividend, stock split or other change in corporate structure affecting the Common Stock, an appropriate substitution or adjustment shall be made in the maximum number of shares that may be awarded under the Plan, in the number and option price of shares subject to outstanding Options granted under the Plan, in the number of shares underlying Outside Director Options to be granted under Section 9 hereof, the Section 162(m) Maximum and in the number of shares subject to other outstanding awards granted under the Plan as may be determined to be appropriate by the Committee, in its sole discretion, provided that the number of shares subject to any award shall always be a whole number. An adjusted option price shall also be used to determine the amount payable by the Company upon the exercise of any Stock Appreciation Right associated with any Stock Option. SECTION 4. ELIGIBILITY.          Officers, other key employees and Outside Directors of and consultants to the Company and its Subsidiaries and Affiliates who are responsible for or contribute to the management, growth and/or profitability of the business of the Company and/or its Subsidiaries and Affiliates are eligible to be granted awards under the Plan. Outside Directors are eligible to receive awards pursuant to Section 9 and as otherwise determined by the Board. SECTION 5. STOCK OPTIONS.           Stock Options may be granted alone, in addition to, or in tandem with other awards granted under the Plan and/or cash awards made outside of the Plan. Any Stock Option granted under the Plan shall be in such form as the Committee may from time to time approve.          Stock Options granted under the Plan may be of two types: (i) Incentive Stock Options and (ii) Non-Qualified Stock Options. Incentive Stock Options may be granted only to individuals who are employees of the Company or any Subsidiary of the Company.          The Committee shall have the authority to grant to any optionee Incentive Stock Options, Non-Qualified Stock Options, or both types of Stock Options (in each case with or without Stock Appreciation Rights).          Options granted to officers, key employees, Outside Directors and consultants under the Plan shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Committee shall deem desirable.          (a)     Option Price. The option price per share of Common Stock purchasable under a Stock Option shall be determined by the Committee at the time of grant but shall be not less than 100% (or, in the case of any employee who owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or of any of its Subsidiaries, not less than 110%) of the Fair Market Value of the Common Stock at grant, in the case of Incentive Stock Options, and not less than 100% of the Fair Market Value of the Common Stock at grant, in the case of Non-Qualified Stock Options.          (b)     Option Term. The term of each Stock Option shall be fixed by the Committee, but no Incentive Stock Option shall be exercisable more than ten years (or, in the case of an employee who owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any of its Subsidiaries or parent corporations, more than five years) after the date the Option is granted.          (c)     Exercisability. Stock Options shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Committee at or after grant; provided, however, that except as provided in Section 5(g) and (h) and Section 10, unless otherwise determined by the Committee at or after grant, no Stock Option shall be exercisable prior to the first anniversary date of the granting of the Option. The Committee may provide that a Stock Option shall vest over a period of future service at a rate specified at the time of grant, or that the Stock Option is exercisable only in installments. If the Committee provides, in its sole discretion, that any Stock Option is exercisable only in installments, the Committee may waive such installment exercise provisions at any time at or after grant, in whole or in part, based on such factors as the Committee shall determine in its sole discretion.          (d)      Method of Exercise. Subject to whatever installment exercise restrictions apply under Section 5(c), Stock Options may be exercised in whole or in part at any time during the option period, by giving written notice of exercise to the Company specifying the number of shares to be purchased. Such notice shall be accompanied by payment in full of the purchase price, either by check, note, or such other instrument as the Committee may accept. As determined by the Committee, in its sole discretion, at or (except in the case of an Incentive Stock Option) after grant, payment in full or in part may also be made in the form of shares of Common Stock already owned by the optionee or, in the case of a Non-Qualified Stock Option, shares of Restricted Stock or shares subject to such Option or another award hereunder (in each case valued at the Fair Market Value of the Common Stock on the date the Option is exercised). If payment of the exercise price is made in part or in full with Common Stock, the Committee may award to the employee a new Stock Option to replace the Common Stock which was surrendered. If payment of the option exercise price of a Non-Qualified Stock Option is made in whole or in part in the form of Restricted Stock, such Restricted Stock (and any replacement shares relating thereto) shall remain (or be) restricted in accordance with the original terms of the Restricted Stock award in question, and any additional Common Stock received upon the exercise shall be subject to the same forfeiture restrictions, unless otherwise determined by the Committee, in its sole discretion, at or after grant. No shares of Common Stock shall be issued until full payment therefor has been made. An optionee shall generally have the rights to dividends or other rights of a shareholder with respect to shares subject to the Option when the optionee has given written notice of exercise, has paid in full for such shares, and, if requested, has given the representation described in Section 13(a).          (e)     Transferability of Options. No Non-Qualified Stock Option shall be transferable by the optionee without the prior written consent of the Committee other than (i) transfers by the optionee to a member of his or her Immediate Family or a trust for the benefit of the optionee or a member of his or her Immediate Family, or (ii) transfers by will or by the laws of descent and distribution. No Incentive Stock Option shall be transferable by the optionee otherwise than by will or by the laws of descent and distribution and all Incentive Stock Options shall be exercisable, during the optionee's lifetime, only by the optionee.          (f)     Bonus for Taxes. In the case of a Non-Qualified Stock Option or an optionee who elects to make a disqualifying disposition (as defined in Section 422(a)(1) of the Code) of Common Stock acquired pursuant to the exercise of an Incentive Stock Option, the Committee in its discretion may award at the time of grant or thereafter the right to receive upon exercise of such Stock Option a cash bonus calculated to pay part or all of the federal and state, if any, income tax incurred by the optionee upon such exercise.          (g)     Termination by Death. Subject to Section 5(k), if an optionee's employment by the Company and any Subsidiary or (except in the case of an Incentive Stock Option) Affiliate terminates by reason of death, any Stock Option held by such optionee may thereafter be exercised, to the extent such option was exercisable at the time of death or (except in the case of an Incentive Stock Option) on such accelerated basis as the Committee may determine at or after grant (or except in the case of an Incentive Stock Option, as may be determined in accordance with procedures established by the Committee) by the legal representative of the estate or by the legatee of the optionee under the will of the optionee, for a period of one year (or such other period as the Committee may specify at or after grant) from the date of such death or until the expiration of the stated term of such Stock Option, whichever period is the shorter.          (h)     Termination by Reason of Disability. Subject to Section 5(k), if an optionee's employment by the Company and any Subsidiary or (except in the case of an Incentive Stock Option) Affiliate terminates by reason of Disability, any Stock Option held by such optionee may thereafter be exercised by the optionee, to the extent it was exercisable at the time of termination or (except in the case of an Incentive Stock Option) on such accelerated basis as the Committee may determine at or after grant (or, except in the case of an Incentive Stock Option, as may be determined in accordance with procedures established by the Committee), for a period of (i) three years (or such other period as the Committee may specify at or after grant) from the date of such termination of employment or until the expiration of the stated term of such Stock Option, whichever period is the shorter, in the case of a Non-Qualified Stock Option and (ii) one year from the date of termination of employment or until the expiration of the stated term of such Stock Option, whichever period is shorter, in the case of an Incentive Stock Option; provided, however, that, if the optionee dies within the period specified in (i) above (or other such period as the Committee shall specify at or after grant), any unexercised Non-Qualified Stock Option held by such optionee shall thereafter be exercisable to the extent to which it was exercisable at the time of death for a period of twelve months from the date of such death or until the expiration of the stated term of such Stock Option, whichever period is shorter. In the event of termination of employment by reason of Disability, if an Incentive Stock Option is exercised after the expiration of the exercise period applicable to Incentive Stock Options, but before the expiration of any period that would apply if such Stock Option were a Non-Qualified Stock Option, such Stock Option will thereafter be treated as a Non-Qualified Stock Option.          (i)      Termination by Reason of Retirement. Subject to Section 5(k), if an optionee's employment by the Company and any Subsidiary or (except in the case of an Incentive Stock Option) Affiliate terminates by reason of Normal or Early Retirement, any Stock Option held by such optionee may thereafter be exercised by the optionee, to the extent it was exercisable at the time of such Retirement or (except in the case of an Incentive Stock Option) on such accelerated basis as the Committee may determine at or after grant (or, except in the case of an Incentive Stock Option, as may be determined in accordance with procedures established by the Committee), for a period of (i) three years (or such other period as the Committee may specify at or after grant) from the date of such termination of employment or the expiration of the stated term of such Stock Option, whichever period is the shorter, in the case of a Non-Qualified Stock Option and (ii) ninety (90) days from the date of such termination of employment or the expiration of the stated term of such Stock Option, whichever period is the shorter, in the event of an Incentive Stock Option; provided however, that, if the optionee dies within the period specified in (i) above (or other such period as the Committee shall specify at or after grant), any unexercised Non-Qualified Stock Option held by such optionee shall thereafter be exercisable to the extent to which it was exercisable at the time of death for a period of twelve months from the date of such death or until the expiration of the stated term of such Stock Option, whichever period is shorter. In the event of termination of employment by reason of Retirement, if an Incentive Stock Option is exercised after the expiration of the exercise period applicable to Incentive Stock Options, but before the expiration of the period that would apply if such Stock Option were a Non-Qualified Stock Option, the option will thereafter be treated as a Non-Qualified Stock Option.          (j)     Other Termination. Subject to Section 5(k), unless otherwise determined by the Committee (or pursuant to procedures established by the Committee) at or (except in the case of an Incentive Stock Option) after grant, if an optionee's employment by the Company and any Subsidiary or (except in the case of an Incentive Stock Option) Affiliate is involuntarily terminated for any reason other than death, Disability or Normal or Early Retirement, the Stock Option shall thereupon terminate, except that such Stock Option may be exercised, to the extent otherwise then exercisable, for the lesser of ninety (90) days or the balance of such Stock Option's term if the involuntary termination is without Cause. For purposes of this Plan, "Cause" means (i) a felony conviction of a participant or the failure of a participant to contest prosecution for a felony, or (ii) a participant's willful misconduct or dishonesty, which is directly and materially harmful to the business or reputation of the Company or any Subsidiary or Affiliate. If an optionee voluntarily terminates employment with the Company and any Subsidiary or (except in the case of an Incentive Stock Option) Affiliate (except for Disability, Normal or Early Retirement), the Stock Option shall thereupon terminate; provided, however, that the Committee at grant or (except in the case of an Incentive Stock Option) thereafter may extend the exercise period in this situation for the lesser of ninety (90) days or the balance of such Stock Option's term.          (k)     Incentive Stock Options. Anything in the Plan to the contrary notwithstanding, no term of this Plan relating to Incentive Stock Options shall be interpreted, amended, or altered, nor shall any discretion or authority granted under the Plan be so exercised, so as to disqualify the Plan under Section 422 of the Code, or, without the consent of the optionee(s) affected, to disqualify any Incentive Stock Option under such Section 422. No Incentive Stock Option shall be granted to any participant under the Plan if such grant would cause the aggregate Fair Market Value (as of the date the Incentive Stock Option is granted) of the Common Stock with respect to which all Incentive Stock Options are exercisable for the first time by such participant during any calendar year (under all such plans of the Company and any Subsidiary) to exceed $100,000. To the extent permitted under Section 422 of the Code or the applicable regulations thereunder or any applicable Internal Revenue Service pronouncement:           (i) if (x) a participant’s employment is terminated by reason of death, Disability, or Retirement and (y) the portion of any Incentive Stock Option that is otherwise exercisable during the post-termination period specified under Section 5(g), (h) or (i), applied without regard to the $100,000 limitation contained in Section 422(d) of the Code, is greater than the portion of such Option that is immediately exercisable as an “Incentive Stock Option” during such post-termination period under Section 422, such excess shall be treated as a Non-Qualified Stock Option; and           (ii) if the exercise of an Incentive Stock Option is accelerated by reason of a Change in Control, any portion of such Option that is not exercisable as an Incentive Stock Option by reason of the $100,000 limitation contained in Section 422(d) of the Code shall be treated as a Non-Qualified Stock Option.          (l)     Buyout Provisions. The Committee may at any time offer to buy out for a payment in cash, Common Stock, or Restricted Stock an Option previously granted, based on such terms and conditions as the Committee shall establish and communicate to the optionee at the time that such offer is made.          (m)     Settlement Provisions. If the option agreement so provides at grant or (except in the case of an Incentive Stock Option) is amended after grant and prior to exercise to so provide (with the optionee's consent), the Committee may require that all or part of the shares to be issued with respect to the spread value of an exercised Option take the form of Restricted Stock, which shall be valued on the date of exercise on the basis of the Fair Market Value (as determined by the Committee) of such Restricted Stock determined without regards to the forfeiture restrictions involved.          (n)     Performance and Other Conditions. The Committee may condition the exercise of any Option upon the attainment of specified performance goals or other factors as the Committee may determine, in its sole discretion. Unless specifically provided in the option agreement, any such conditional Option shall vest immediately prior to its expiration if the conditions to exercise have not theretofore been satisfied. SECTION 6. STOCK APPRECIATION RIGHTS.          (a)     Grant and Exercise. Stock Appreciation Rights may be granted in conjunction with all or part of any Stock Option granted under the Plan. In the case of a Non-Qualified Stock Option, such rights may be granted either at or after the time of the grant of such Stock Option. In the case of an Incentive Stock Option, such rights may be granted only at the time of the grant of such Stock Option. A Stock Appreciation Right or applicable portion thereof granted with respect to a given Stock Option shall terminate and no longer be exercisable upon the termination or exercise of the related Stock Option, subject to such provisions as the Committee may specify at grant where a Stock Appreciation Right is granted with respect to less than the full number of shares covered by a related Stock Option. A Stock Appreciation Right may be exercised by an optionee, subject to Section 6(b), in accordance with the procedures established by the Committee for such purpose. Upon such exercise, the optionee shall be entitled to receive an amount determined in the manner prescribed in Section 6(b). Stock Options relating to exercised Stock Appreciation Rights shall no longer be exercisable to the extent that the related Stock Appreciation Rights have been exercised.          (b)     Terms and Conditions. Stock Appreciation Rights shall be subject to such terms and conditions, not inconsistent with the provisions of the Plan, as shall be determined from time to time by the Committee, including the following:           (i) Stock Appreciation Rights shall be exercisable only at such time or times and to the extent that the Stock Options to which they relate shall be exercisable in accordance with the provisions of Section 5 and this Section 6 of the Plan.           (ii) Upon the exercise of a Stock Appreciation Right, an optionee shall be entitled to receive an amount in cash and/or shares of Common Stock equal in value to the excess of the Fair Market Value of one share of Common Stock over the option price per share specified in the related Stock Option multiplied by the number of shares in respect of which the Stock Appreciation Right shall have been exercised, with the Committee having the right to determine the form of payment. When payment is to be made in shares, the number of shares to be paid shall be calculated on the basis of the Fair Market Value of the shares on the date of exercise. When payment is to be made in cash, such amount shall be calculated on the basis of the Fair Market Value of the Common Stock on the date of exercise.           (iii) Stock Appreciation Rights shall be transferable only when and to the extent that the underlying Stock Option would be transferable under Section 5(e) of the Plan.           (iv) Upon the exercise of a Stock Appreciation Right, the Stock Option or part thereof to which such Stock Appreciation Right is related shall be deemed to have been exercised for the purpose of the limitation set forth in Section 3 of the Plan on the number of shares of Common Stock to be issued under the Plan.           (v) The Committee, in its sole discretion, may also provide that, in the event of a Change in Control and/or a Potential Change in Control, the amount to be paid upon the exercise of a Stock Appreciation Right shall be based on the Change in Control Price, subject to such terms and conditions as the Committee may specify at grant.           (vi) The Committee may condition the exercise of any Stock Appreciation Right upon the attainment of specified performance goals or other factors as the Committee may determine, in its sole discretion. SECTION 7. RESTRICTED STOCK.          (a)     Administration. Shares of Restricted Stock may be issued either alone, in addition to, or in tandem with other awards granted under the Plan and/or cash awards made outside the Plan. The Committee shall determine the eligible persons to whom, and the time or times at which, grants of Restricted Stock will be made, the number of shares of Restricted Stock to be awarded to any person, the price (if any) to be paid by the recipient of Restricted Stock (subject to Section 7(b)), the time or times within which such awards may be subject to forfeiture, and the other terms, restrictions and conditions of the awards in addition to those set forth in Section 7(c). The Committee may condition the grant of Restricted Stock upon the attainment of specified performance goals or such other factors as the Committee may determine, in its sole discretion. The provisions of Restricted Stock awards need not be the same with respect to each recipient.          (b)     Awards and Certificates. The prospective recipient of a Restricted Stock award shall not have any rights with respect to such award, unless and until such recipient has executed an agreement evidencing the award and has delivered a fully executed copy thereof to the Company, and has otherwise complied with the applicable terms and conditions of such award.           (i)The purchase price for shares of Restricted Stock shall be established by the Committee and may be zero.           (ii) Awards of Restricted Stock must be accepted within a period of 60 days (or such shorter period as the Committee may specify at grant) after the award date, by executing a Restricted Stock Award Agreement and paying whatever price (if any) is required under Section 7(b)(i).           (iii) Each participant receiving a Restricted Stock award shall be issued a stock certificate in respect of such shares of Restricted Stock. Such certificate shall be registered in the name of such participant, and shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such award.           (iv) The Committee shall require that the stock certificates evidencing such shares be held in custody by the Company until the restrictions thereon shall have lapsed, and that, as a condition of any Restricted Stock award, the participant shall have delivered a stock power, endorsed in blank, relating to the shares of Common Stock covered by such award.          (c)     Restrictions and Conditions. The shares of Restricted Stock awarded pursuant to this Section 7 shall be subject to the following restrictions and conditions:           (i) In accordance with the provisions of this Plan and the award agreement, during a period set by the Committee commencing with the date of such award (the “Restriction Period”), the participant shall not be permitted to sell, transfer, pledge, assign, or otherwise encumber shares of Restricted Stock awarded under the Plan. Within these limits, the Committee, in its sole discretion, may provide for the lapse of such restrictions in installments and may accelerate or waive such restrictions, in whole or in part, based on service, performance, such other factors or criteria as the Committee may determine in its sole discretion.           (ii) Except as provided in this paragraph (ii) and Section 7(c)(i), the participant shall have, with respect to the shares of Restricted Stock, all of the rights of a shareholder of the Company, including the right to vote the shares, and the right to receive any cash dividends. The Committee, in its sole discretion, as determined at the time of award, may permit or require the payment of cash dividends to be deferred and, if the Committee so determines, reinvested, subject to Section 13(e), in additional Restricted Stock to the extent shares are available under Section 3, or otherwise reinvested. Pursuant to Section 3 above, stock dividends issued with respect to Restricted Stock shall be treated as additional shares of Restricted Stock that are subject to the same restrictions and other terms and conditions that apply to the shares with respect to which such dividends are issued. If the Committee so determines, the award agreement may also impose restrictions on the right to vote and the right to receive dividends.           (iii) Subject to the applicable provisions of the award agreement and this Section 7, upon termination of a participant’s employment with the Company and any Subsidiary or Affiliate for any reason during the Restriction Period, all shares still subject to restriction will vest, or be forfeited, in accordance with the terms and conditions established by the Committee at or after grant.           (iv) If and when the Restriction Period expires without a prior forfeiture of the Restricted Stock subject to such Restriction Period, certificates for an appropriate number of unrestricted shares shall be delivered to the participant promptly.          (d)     Minimum Value Provisions. In order to better ensure that award payments actually reflect the performance of the Company and service of the participant, the Committee may provide, in its sole discretion, for a tandem performance-based or other award designed to guarantee a minimum value, payable in cash or Common Stock to the recipient of a restricted stock award, subject to such performance, future service, deferral, and other terms and conditions as may be specified by the Committee.          (e)      Limitation on Number of Shares of Restricted Stock. No more than three percent (3%) of the total number of shares of Common Stock outstanding may be issued as Shares of Restricted Stock under this Plan. SECTION 8. OTHER STOCK-BASED AWARDS.          (a)     Administration. Other Stock-Based Awards, including, without limitation, performance shares, convertible preferred stock, convertible debentures, exchangeable securities and Common Stock awards or options valued by reference to earnings per share or Subsidiary performance, may be granted either alone, in addition to, or in tandem with Stock Options, Stock Appreciation Rights, or Restricted Stock granted under the Plan and cash awards made outside of the Plan; provided that no such Other Stock-Based Awards may be granted in tandem with Incentive Stock Options if that would cause such Stock Options not to qualify as Incentive Stock Options pursuant to Section 422 of the Code. Subject to the provisions of the Plan, the Committee shall have authority to determine the persons to whom and the time or times at which such awards shall be made, the number of shares of Common Stock to be awarded pursuant to such awards, and all other conditions of the awards. The Committee may also provide for the grant of Common Stock upon the completion of a specified performance period. The provisions of Other Stock-Based Awards need not be the same with respect to each recipient.          (b)     Terms and Conditions. Other Stock-Based Awards made pursuant to this Section 8 shall be subject to the following terms and conditions:           (i) Subject to the provisions of this Plan and the award agreement and unless otherwise determined by the Committee at grant, the recipient of an award under this Section 8 shall be entitled to receive, currently or on a deferred basis, interest or dividends or interest or dividend equivalents with respect to the number of shares covered by the award, as determined at the time of the award by the Committee, in its sole discretion, and the Committee may provide that such amounts (if any) shall be deemed to have been reinvested in additional shares of Common Stock or otherwise reinvested.           (ii) Any award under Section 8 and any shares of Common Stock covered by any such award shall vest or be forfeited to the extent so provided in the award agreement, as determined by the Committee in its sole discretion.           (iii) In the event of the participant’s Retirement, Disability, or death, or in cases of special circumstances, the Committee may, in its sole discretion, waive in whole or in part any or all of the remaining limitations imposed hereunder (if any) with respect to any or all of an award under this Section 8.           (iv) Each award under this Section 8 shall be confirmed by, and subject to the terms of, an agreement or other instrument by the Company and the participant. SECTION 9. AWARDS TO OUTSIDE DIRECTORS.          (a)    Applicability and Administration. The provisions of this Section 9 shall apply only to awards to Outside Directors in accordance with this Section 9. The Committee shall have no authority to determine the timing of or the terms or conditions of any award under this Section 9. Instead, the Board shall have the authority to interpret its provisions and supervise its administration, subject to the provisions provided herein. All decisions made by the Board under this Section 9 shall be made by the affirmative vote of a majority of its members then in office.          (b)     Current Directors. On the date of each Annual Meeting of Shareholders of the Company beginning with the year 2000, unless this Plan has been previously terminated, each person who is an Outside Director following such meeting will receive an automatic grant of a non-qualified stock option (an "Outside Director Option") to purchase 2,000 shares of Common Stock. An Outside Director who is also the Chairman of the Board at such time will instead receive an automatic grant of an Outside Director Option to purchase 6,000 shares of Common Stock. The exercise price of each Outside Director Option granted pursuant to this Section 9(b) shall equal the Fair Market Value of such Common Stock on such option's date of grant. No Outside Director Option granted pursuant to this Section 9 shall qualify as an Incentive Stock Option.          (c)     Exercisability and Method of Exercise. Each Outside Director Option shall become exercisable on the date that is six months after the date of grant. Outside Director Options may be exercised, in whole or in part, only by notice in writing to the Company (i) stating the number of shares as to which such option is to be exercised and the address to which the certificates for such shares are to be sent, accompanied by cash, certified check or bank draft payable to the order of the Company, in an amount equal to such option's purchase price per share multiplied by the number of shares of the Common Stock as to which such option is then being exercised or (ii) instructing the Company to deliver the shares being purchased to a broker, subject to the broker's delivery of cash to the Company equal to such option purchase price per share multiplied by the number of shares as to which such Option is then being exercised, or (iii) delivering shares of Common Stock or Restricted Stock already owned by the Outside Director as partial or full payment of the Option in accordance with the terms and restrictions set forth under Section 5(d).          (d)     Transferability of Options. Outside Director Options shall not be transferable without the prior written consent of the Board other than (i) transfers by the optionee to a member of his or her Immediate Family or a trust for the benefit of optionee or a member of his or her Immediate Family, or (ii) transfers by will or by the laws of descent and distribution.          (e)     Option Agreement. Grantees of Outside Director Options shall enter into a stock option agreement in a form approved by the Board, which shall be subject to the terms and conditions of this Plan. Any agreement may contain such other terms, provisions and conditions not inconsistent with the Plan as may be determined by the Board.           (f)     Termination. The termination of Outside Director Options shall be governed by the provisions of Sections 5(g), 5(i) and 5(j) hereof as if Outside Directors were employees of the Company, except that any determination to accelerate the vesting of an Outside Director Option will be made by the Board and not by the Committee.          (g)     Certain Changes. Outside Director Options shall be subject to Section 10. The number of shares and the exercise price per share of each Outside Director Option shall be adjusted automatically in the same manner as the number of shares and the exercise price for Stock Options under Section 3 hereof at any time that Stock Options are adjusted as provided in Section 3.          (h)     Taxes. The Company may make such provision as it deems appropriate for the withholding of any taxes which the Company determines are required in connection with the grant or exercise of any Outside Director Option. SECTION 10. CHANGE IN CONTROL PROVISIONS.          (a)     Impact of Event. In the event of: (1) a "Change in Control" as defined in Section 10(b); or (2) a "Potential Change in Control" as defined in Section 10(c), but only if and to the extent so determined by the Committee or the Board at or after grant (subject to any right of approval expressly reserved by the Committee or the Board at the time of such determination),           (i) Subject to the limitations set forth below in this Section 10(a), the following acceleration provisions shall apply:           (a) Any Stock Appreciation Rights, any Stock Option or Outside Director Option awarded under the Plan not previously exercisable and vested shall become fully exercisable and vested.           (b) The restrictions applicable to any Restricted Stock and Other Stock-Based Awards, in each case to the extent not already vested under the Plan, shall lapse and such shares and awards shall be deemed fully vested.           (ii) Subject to the limitations set forth below in this Section 10(a), the value of all outstanding Stock Options, Stock Appreciation Rights, Restricted Stock, Outside Director Options and Other Stock-Based Awards, in each case to the extent vested, shall, unless otherwise determined by the Board or by the Committee in its sole discretion prior to any Change in Control, be cashed out on the basis of the “Change in Control Price” as defined in Section 10(d) as of the date such Change in Control or such Potential Change in Control is determined to have occurred or such other date as the Board or Committee may determine prior to the Change in Control.           (iii) The Board or the Committee may impose additional conditions on the acceleration or valuation of any award in the award agreement.          (b)     Definition of Change in Control. For purposes of Section 10(a), a "Change in Control" means the happening of any of the following:           (i) any person or entity, including a “group” as defined in Section 13(d)(3) of the Exchange Act, other than the Company or a wholly-owned subsidiary thereof or any employee benefit plan of the Company or any of its Subsidiaries, becomes the beneficial owner of the Company’s securities having 35% or more of the combined voting power of the then outstanding securities of the Company that may be cast for the election of directors of the Company (other than as a result of an issuance of securities initiated by the Company in the ordinary course of business or other than transactions which are approved by a majority of the Board); or           (ii) as the result of, or in connection with, any cash tender or exchange offer, merger or other business combination, sales 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 the Company or any successor corporation or entity entitled to vote generally in the election of the directors of the Company or such other corporation or entity after such transactions are held in the aggregate by the holders of the Company’s securities entitled to vote generally in the election of directors of the Company immediately prior to such transaction; or           (iii) during any period of two consecutive years, individuals who at the beginning of any such period constitute the Board cease for any reason to constitute at least a majority thereof, unless the election, or the nomination for election by the Company’s shareholders, of each director of the Company first elected during such period was approved by a vote of at least two-thirds of the directors of the Company then still in office who were directors of the Company at the beginning of any such period.          (c)      Definition of Potential Change in Control. For purposes of Section 10(a), a "Potential Change in Control" means the happening of any one of the following:           (i)The approval by shareholders of an agreement by the Company, the consummation of which would result in a Change in Control of the Company as defined in Section 10(b); or           (ii) The acquisition of beneficial ownership, directly or indirectly, by any entity, person or group (other than the Company or a Subsidiary or any Company employee benefit plan (including any trustee of such plan acting as such trustee)) of securities of the Company representing 5% or more of the combined voting power of the Company’s outstanding securities and the adoption by the Committee of a resolution to the effect that a Potential Change in Control of the Company has occurred for purposes of this Plan.          (d)     Change in Control Price. For purposes of this Section 10, "Change in Control Price" means the highest price per share paid in any transaction reported on The Nasdaq National Market or such other exchange or market as is the principal trading market for the Common Stock, or paid or offered in any bona fide transaction related to a Potential or actual Change in Control of the Company at any time during the 60 day period immediately preceding the occurrence of the Change in Control (or, where applicable, the occurrence of the Potential Change in Control event), in each case as determined by the Committee except that, in the case of Incentive Stock Options and Stock Appreciation Rights relating to Incentive Stock Options, such price shall be based only on transactions reported for the date on which the optionee exercises such Stock Appreciation Rights or, where applicable, the date on which a cash out occurs under Section 10(a)(ii). SECTION 11. AMENDMENTS AND TERMINATION.          The Board may at any time amend, alter or discontinue the Plan; provided, however, that, without the approval of the Company's shareholders, no amendment or alteration may be made which would (a) except as a result of the provisions of Section 3 (d) of the Plan, increase the maximum number of shares that may be issued under the Plan or increase the Section 162(m) Maximum, (b) change the provisions governing Incentive Stock Options except as required or permitted under the provisions governing incentive stock options under the Code, or (c) make any change for which applicable law or regulatory authority (including the regulatory authority of The Nasdaq National Market or any other market or exchange on which the Common Stock is traded) would require shareholder approval or for which shareholder approval would be required to secure full deductibility of compensation received under the Plan under Section 162(m) of the Code. No amendment, alteration, or discontinuation shall be made which would impair the rights of an optionee or participant under a Stock Option, Stock Appreciation Right, Restricted Stock, Other Stock-Based Award or Outside Director Option theretofore granted, without the participant's consent.          The Committee may amend the terms of any Stock Option or other award theretofore granted, prospectively or retroactively, but subject to Section 3 above, no such amendment shall impair the rights of any holder without the holder's consent. The Committee may also substitute new Stock Options for previously granted Stock Options (on a one for one or other basis), including previously granted Stock Options having higher option exercise prices. Solely for purposes of computing the Section 162(m) Maximum, if any Stock Options or other awards previously granted to a participant are canceled and new Stock Options or other awards having a lower exercise price or other more favorable terms for the participant are substituted in their place, both the initial Stock Options or other awards and the replacement Stock Options or other awards will be deemed to be outstanding (although the canceled Stock Options or other awards will not be exercisable or deemed outstanding for any other purposes). SECTION 12. UNFUNDED STATUS OF PLAN.          The Plan is intended to constitute an "unfunded" plan for incentive and deferred compensation. With respect to any payments not yet made to a participant or optionee by the Company, nothing contained herein shall give any such participant or optionee any rights that are greater than those of a general creditor of the Company. In its sole discretion, the Committee may authorize the creation of trusts or other arrangements to meet the obligations created under the Plan to deliver Common Stock or payments in lieu of or with respect to awards hereunder; provided, however, that, unless the Committee otherwise determines with the consent of the affected participant, the existence of such trusts or other arrangements is consistent with the "unfunded" status of the Plan. SECTION 13. GENERAL PROVISIONS.          (a)    The Committee may require each person purchasing shares pursuant to a Stock Option or other award under the Plan to represent to and agree with the Company in writing that the optionee or participant is acquiring the shares without a view to distribution thereof. The certificates for such shares may include any legend, which the Committee deems appropriate to reflect any restrictions on transfer. All certificates for shares of Common Stock or other securities delivered under the Plan shall be subject to such stock-transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations, and other requirements of the Commission, any stock exchange upon which the Common Stock is then listed, and any applicable Federal or state securities law, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.          (b)     Nothing contained in this Plan shall prevent the Board from adopting other or additional compensation arrangements, subject to shareholder approval if such approval is required; and such arrangements may be either generally applicable or applicable only in specific cases.          (c)     The adoption of the Plan shall not confer upon any employee of the Company or any Subsidiary or Affiliate any right to continued employment with the Company or a Subsidiary or Affiliate, as the case may be, nor shall it interfere in any way with the right of the Company or a Subsidiary or Affiliate to terminate the employment of any of its employees at any time.          (d)     No later than the date as of which an amount first becomes includible in the gross income of the participant for Federal income tax purposes with respect to any award under the Plan, the participant shall pay to the Company, or make arrangements satisfactory to the Committee regarding the payment of, any Federal, state, or local taxes of any kind required by law to be withheld with respect to such amount. The Committee may require withholding obligations to be settled with Common Stock, including Common Stock that is part of the award that gives rise to the withholding requirement. The obligations of the Company under the Plan shall be conditional on such payment or arrangements and the Company and its Subsidiaries or Affiliates shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the participant.          (e)     The actual or deemed reinvestment of dividends or dividend equivalents in additional Restricted Stock (or other types of Plan awards) at the time of any dividend payment shall only be permissible if sufficient shares of Common Stock are available under Section 3 for such reinvestment (taking into account then outstanding Stock Options and other Plan awards).          (f)     The Plan and all awards made and actions taken thereunder shall be governed by and construed in accordance with the laws of the State of Delaware.          (g)      The members of the Committee and the Board shall not be liable to any employee or other person with respect to any determination made hereunder in a manner that is not inconsistent with their legal obligations as members of the Board. In addition to such other rights of indemnification as they may have as directors or as members of the Committee, the members of the Committee shall be indemnified by the Company against the reasonable expenses, including attorneys' fees actually and necessarily incurred in connection with the defense of any action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan or any option granted thereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by independent legal counsel selected by the Company) or paid by them in satisfaction of a judgment in any such action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that such Committee member is liable for negligence or misconduct in the performance of his duties; provided that within 60 days after institution of any such action, suit or proceeding, the Committee member shall in writing offer the Company the opportunity, at its own expense, to handle and defend the same.          (h)     In addition to any other restrictions on transfer that may be applicable under the terms of this Plan or the applicable award agreement, no Stock Option, Stock Appreciation Right, Restricted Stock award, or Other Stock-Based Award or other right issued under this Plan is transferable by the participant without the prior written consent of the Committee, or, in the case of an Outside Director, the Board, other than (i) transfers by an optionee to a member of his or her Immediate Family or a trust for the benefit of the optionee or a member of his or her Immediate Family or (ii) transfers by will or by the laws of descent and distribution. The designation of a beneficiary will not constitute a transfer.          (i)     The Committee may, at or after grant, condition the receipt of any payment in respect of any award or the transfer of any shares subject to an award on the satisfaction of a six-month holding period, if such holding period is required for compliance with Section 16 under the Exchange Act. SECTION 14. EFFECTIVE DATE OF PLAN.          The Plan shall be effective upon approval by the Board of the Company and by a majority of the votes cast by the holders of the Company's Common Stock. SECTION 15. TERM OF PLAN.           No Stock Option, Stock Appreciation Right, Restricted Stock award, Other Stock-Based Award or Outside Director Option award shall be granted pursuant to the Plan on or after the tenth anniversary of the Effective Date of the Plan, but awards granted prior to such tenth anniversary may be extended beyond that date.

EXHIBIT 10.26 PROMISSORY NOTE For value received on January 1, 2000, Earle S. Humphreys (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 $125,000 Dollars (the "Loan Amount"). The outstanding principal amount of this Note 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 principal (taking into account any forgiveness that has occurred pursuant to the following paragraph), whichever is less. Upon completion one year of continuous employment by the Executive from the date of this Promissory Note, Cabletron shall forgive the lesser of (i) 25 percent of the Loan Amount; and (ii) the remaining unpaid principal. Upon completion of two years of continuous employment by the Executive from the date of this Promissory Note, Cabletron shall forgive the lesser of (i) 75 percent of the Loan Amount; and (ii) the remaining unpaid principal. Any amount of this Note forgiven by the Company will be reported to the Executive as taxable wages. 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/Earle S. Humphreys               /s/Piyush Patel Earle S. Humphreys   Piyush Patel   CEO and President ________________________________ ________________________________ Date Date   >                                                                        >                                  > >                                                                      > >                                                                        >                  

EXHIBIT 10.18 TAX I.D. No 38-1983228 PROMISSORY NOTE $5,000,000.00 Detroit, Michigan April 20, 2000           On or before November 1, 2001 (herein called the "Maturity Date"), FOR VALUE RECEIVED, the undersigned, Manatron, Inc., a Michigan corporation (herein called the "Borrower"), promises to pay to the order of Comerica Bank, a Michigan banking corporation (herein called "Bank"), at any office of Bank located in the State of Michigan, in lawful currency of the United States of America, the principal sum of Five Million Dollars ($5,000,000.00), or so much of said sum as has been advanced and is then outstanding hereunder, together with interest thereon as hereinafter set forth.           This Note is a note under which Advances, repayments and new Advances may be made from time to time, provided that Bank shall not be obligated to make any Advance hereunder (notwithstanding anything expressed or implied herein or elsewhere to the contrary) in the event that any Default (as hereinafter defined) or any condition or event which, with the giving of notice or the passage of time, or both, would constitute a Default, shall have occurred and be continuing or exist, and provided, further, that in no event shall Bank be obligated to make any Quoted Rate Advance hereunder, whether or not any Default, or any such condition or event, shall have occurred and be continuing or exist. Advances hereunder may be requested in Borrower's discretion by telephonic notice to Bank or by submission to Bank of a Request for Advance in form annexed hereto as Exhibit "A". Any Advance requested by telephonic notice shall be confirmed by Borrower that same day by submission to Bank, either by first class mail or telefax, of the written Request for Advance aforementioned. Borrower acknowledges that if Bank makes an Advance based an a telephonic request, it shall be for Borrower's convenience and all risks involved in the use of such procedure shall be borne by Borrower, and Borrower expressly agrees to indemnify and hold Bank harmless therefor. Bank shall have no duty to confirm the authority of anyone requesting an Advance by telephone.           Each Quoted Rate Advance hereunder shall be in a minimum principal amount of Two Hundred Fifty Thousand Dollars ($250,000,00).           Each Prime-based Advance outstanding under this Note shall bear interest at the Prime-based Rate, and each Quoted Rate Advance outstanding under this Note shall bear interest at the applicable Quoted Rate. Each Advance hereunder shall be payable upon the respective Repayment Date therefor (unless sooner accelerated in accordance with the terms of this Note), unless Bank, in its sole and absolute discretion, and subject to all other terms and conditions of this Note, agrees to allow the continuation of an outstanding Advance as the same type of Advance or the conversion of an outstanding Advance to another type of Advance, in which case, that portion of such Advance which is not so continued or converted, as the case may be, shall be repaid on such Repayment Date. Interest shall be computed on a daily basis using a year of 360 days and shall be assessed for the actual number of days elapsed, and in such computations, effect shall be given to any change in the interest rate as a result of any change in the Prime-based Rate on the date of each such change in the Prime-based Rate. Unless sooner accelerated in accordance with the terms of this Note, accrued and unpaid interest on each Advance hereunder shall be payable monthly, in arrears, on the first (1st) Business Day of each month, and on the Maturity Date, and, in the case of Quoted Rate Advance, also on the respective Repayment Date therefor. --------------------------------------------------------------------------------           The amount, applicable interest rate, and Repayment Date of each Advance shall be noted on Bank's books and records, which books and records will be conclusive evidence thereof; provided, however, any failure on the part of Bank to make any such notation shall not relieve Borrower of its obligations to repay Bank all amounts owing under this Note when due in accordance with the terms hereof.           If Borrower makes any payment of principal with respect to any Quoted Rate Advance on any day other than the applicable Repayment Date therefor (whether voluntarily, by acceleration, or otherwise), or if Borrower fails to borrow a Quoted Rate Advance after notice has been given by Borrower to Bank in accordance with the terms of this Note requesting such Advance and Bank has agreed to make such Quoted Rate Advance, or if Borrower fails to make any payment of principal or interest in respect of any Quoted Rate Advance when due, Borrower shall reimburse Bank, on demand, for any resulting loss, cost or expense incurred by Bank as a result thereof, including, without limitation any such loss, cost or expense incurred in obtaining, liquidating, employing or redeploying deposits from third parties. Calculation of any amounts payable to Bank under this paragraph shall be made as though Bank shall have actually funded or committed to fund the relevant Quoted Rate Advance through the purchase of an underlying deposit in an amount equal to the amount of such Advance and having a maturity date comparable to the applicable repayment date of such Quoted Rate Advance; provided, however, Bank may fund any Quoted Rate Advance in any manner it deems fit and the foregoing assumption shall be utilized only for the purpose of the calculation of amounts payable under this paragraph. Prime-based Advances may be prepaid at any time without penalty or premium.           This Note and any other indebtedness and liabilities of any kind of Borrower to Bank, and any and all modification, renewals or extensions thereof, whether joint or several, contingent or absolute, direct or indirect, now existing or later arising, and however evidenced (collectively the "Indebtedness"), are secured by and Bank is granted a security interest in all items at any time deposited in any account of Borrower with Bank and by all proceeds of these items (cash or otherwise), all account balances of Borrower from time to time with Bank, and by all property of Borrower from time to time in the possession of Bank.           If (a) Borrower or any guarantor under a guaranty of all or part of the Indebtedness (a "guarantor") fail(s) to pay this Note, or any part thereof, or any of the Indebtedness when due, by maturity, acceleration or otherwise, or fail(s) to pay any Indebtedness owing on a demand basis upon demand; or (b) Borrower or any guarantor fail(s) to comply with any of the terms or provisions of any agreement between Borrower or any guarantor and Bank; or (c) Borrower or any guarantor become(s) insolvent or the subject of a voluntary or involuntary proceeding in bankruptcy, or a reorganization, arrangement or creditor composition proceeding, (if a business entity) cease(s) doing business as a going concern, (if a natural person) die(s) or become(s) incompetent, (if a partnership) dissolve(s) or any general partner of it dies, becomes incompetent or becomes the subject of a bankruptcy proceeding, or (if a corporation) is the subject of a dissolution, merger or consolidation; or (d) any warranty or representation made by Borrower or any guarantor in connection with this Note or any of the Indebtedness shall be discovered to be untrue or incomplete; or (e) there is any termination, notice of termination, or breach of any guaranty, pledge, collateral assignment or subordination agreement relating to all or any part of the Indebtedness; or (f) there is any failure by Borrower or any guarantor to pay when due any of its indebtedness (other than to Bank) or in the observance or performance of any term, covenant or condition in any document evidencing, securing or relating to such indebtedness; or (g) Bank deems itself insecure, believing in good faith that the prospect of payment or performance of this Note or any of the Indebtedness is impaired or shall fear deterioration, removal or waste of any of the Collateral; or (h) there is filed or issued a levy or writ of attachment or garnishment or other like judicial process upon Borrower or any guarantor including, without limit, any accounts of Borrower or any Guarantor with Bank, then Bank, upon the occurrence or existence of any of these conditions or events (each a 2 -------------------------------------------------------------------------------- "Default"), may at its option and without prior notice to Borrower, declare any or all of the Indebtedness to be immediately due and payable (notwithstanding any provisions contained in the evidence of it to the contrary), sell or liquidate all or any portion of the Collateral, set off against the Indebtedness any amounts owing by Bank to Borrower, and exercise any one or more of the rights and remedies granted to Bank by any agreement with Borrower or given to it under applicable law, or otherwise.           Upon the occurrence and during the continuance of any Default hereunder, (a) interest on all outstanding Prime-based Advances shall be payable at a per annum rate of three percent (3%) above the Prime-based Rate, and (b) interest on any outstanding Quoted Rate Advances shall be payable until the respective Repayment Date for each such Advance at a per annum rate equal to the greater of three percent (3%) above (i) the applicable Quoted Rate, or (ii) the Prime-based Rate, and after such Repayment Date, at a per annum rate equal to three percent (3%) above the Prime-based Rate, which interest, in any case, shall be payable upon demand.           All payments under this Note shall be in immediately available United States funds, without setoff or counterclaim.           Borrower waives presentment, demand, protest, notice of dishonor, notice of demand or intent to demand, notice of acceleration or intent to accelerate, and all other notices, and agrees that no extension or indulgence to Borrower, or release, substitution or nonenforcement of any security, or release or substitution of any of Borrower, any guarantor or any other party, whether with or without notice, shall affect the obligations of Borrower. Borrower waives all defenses or right to discharge available under Section 3-605 of the Uniform Commercial Code and waives all other suretyship defenses or right to discharge. Borrower agrees that Bank has the right to sell, assign, or grant participations, or any interest, in any or all of the Indebtedness, and that, in connection with such right, but without limiting its ability to make other disclosures to the full extent allowable, Bank may disclose all documents and information which Bank now or later has relating to Borrower and the Indebtedness.           Borrower agrees to reimburse Bank, or any other holder or owner of this Note, for any and all costs and expenses (including, without limit, court costs, legal expenses and reasonable attorneys' fees, whether inside or outside counsel is used, whether or not suit is instituted, and, if suit is instituted, whether at the trial court level, appellate level, in a bankruptcy, probate or administrative proceeding or otherwise) incurred in collecting or attempting to collect this Note or the Indebtedness or incurred in any other matter or proceeding relating to this Note or the Indebtedness.           Borrower acknowledges and agrees that there are no contrary agreements, oral or written, establishing a term of this Note and agree that the terms and conditions of this Note may not be amended, waived or modified except in a writing signed by a duly authorized officer of Bank expressly stating that the writing constitutes an amendment, waiver or modification of the terms of this Note. If any provision of this Note is unenforceable in whole or part for any reason, the remaining provisions shall continue to be effective. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MICHIGAN.           This Note shall bind Borrower and Borrower's respective successors and assigns.           For purposes of this Note, the following terms will have the following meanings:           "Advance" means a borrowing requested by Borrower and made by Bank under this Note in accordance with the terms hereof, including, without limitation, the continuation of an outstanding Advance as the same type of Advance or the conversion of an outstanding Advance to another type of Advance, and shall include a Prime-based Advance and a Quoted Rate Advance. 3 --------------------------------------------------------------------------------           "Business Day" means any day, other than a Saturday, Sunday or holiday, on which Bank is open for all or substantially all of its commercial banking business in Detroit, Michigan.           "Prime-based Advance" means an Advance which bears interest at the Prime-based Rate.           "Prime-based Rate" means a per annum interest rate which is equal to the greater of (a) the Prime Rate, minus one-quarter of one percent (.25%), or (b) the rate of interest equal to the sum of one-percent (1%) plus the rate of interest equal to the average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers (the "Overnight Rates"), as published by the Federal Reserve Bank of New York, or, if the Overnight Rates are not so published for any day, the average of the quotations for the Overnight Rates received by Bank from three (3) Federal funds brokers of recognized standing selected by Bank, as the same may be changed from time to time.           "Prime Rate" means the per annum rate of interest established by Bank from time to time as its prime rate, which rate may not necessarily be Bank's lowest rate for loans.           "Quoted Rate" means a per annum rate of interest, other than the Prime-based Rate, which is quoted by Bank and accepted by Borrower as the applicable interest rate with respect to a Quoted Rate Advance hereunder.           "Quoted Rate Advance" means an Advance which bears interest at a Quoted Rate.           "Repayment Date" means, (a) in respect of an outstanding Prime-based Advance, the Maturity Date (unless sooner accelerated in accordance with the terms of this Note), and (b) in respect of an outstanding Quoted Rate Advance, a date which is acceptable to and offered by Bank, in its sole and absolute discretion, as the Repayment Date for such Quoted Rate Advance and which is accepted by Borrower as the Repayment Date for such Advance, subject to and in accordance with the terms and conditions of this Note; provided, however, in the case of Quoted Rate Advances, in no event shall the Repayment Date in respect thereof be less than thirty (30) days from the date of the respective Advance, and in no event shall any Repayment Date extend beyond the Maturity Date, and in the event that any Repayment Date occurs on any day which is not a Business Day, such Repayment Date shall be extended to the next succeeding Business Day, except that, as to any outstanding Quoted Rate Advances, if the next succeeding Business Day falls in another calendar month, the Repayment Date applicable thereto shall occur on the next preceding Business Day, and, to the extend applicable, interest shall continue to accrue and be payable during any such extensions of any Repayment Date.           This Note amends, restates, supersedes and replaces that certain Promissory Note dated October 9, 1998, made in the principal amount of Three Million Dollars ($3,000,000.00) by Borrower payable to Bank, and the initial Advance(s) under this Note shall be deemed to be first applied, to the extent necessary, to repay the existing indebtedness of Borrower to Bank under said Promissory Note; provided, however, the execution and delivery by Borrower of this Note unto Bank shall not, in any manner or circumstance, be deemed to be a novation of or to have terminated, extinguished or discharged any of Borrower's indebtedness evidenced by said Promissory Note, all of which indebtedness shall continue under and shall hereinafter be evidenced and governed by this Note.           BORROWER AND BANK ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY, AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT, 4 -------------------------------------------------------------------------------- WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE OR ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS NOTE OR THE INDEBTEDNESS.           Nothing herein shall limit any right granted Bank by other instrument or by law.           In addition to the other amounts payable by Borrower to Bank under this Note, Borrower shall, (i) on November 1, 2000, pay to the Bank a fee based on the average amount outstanding each day under this Note (and it's predecessor) for the period from November 1, 1999 through October 31, 2000 in accordance with the following schedule, and (ii) on November 1, 2001, pay to the Bank a fee based on the average amount outstanding each day under this Note for the period from November 1, 2000 through October 31, 2001 in accordance with the following schedule:   Average Daily Amount Outstanding   Fee                          $0.00 to $99,999.00   $20,000.00     $100,000.00 to $199,999.00   $17,500.00     $200,000.00 to $299,999.00   $15,000.00     $300,000.00 to $399,999.00   $12,500.00     $400,000.00 to $499,999.00   $10,000.00     $500,000.00 to $599,999.00   $ 7,500.00     $600,000.00 to $699,999.00   $ 5,000.00     $700,000.00 to $999,999.00   $ 2,500.00     $1,000,000 and above   $ 0.00     MANATRON, INC. By: /s/ Paul R. Sylvester --------------------------------------------------------------------------------      Paul R. Sylvester Its: President 5 -------------------------------------------------------------------------------- EXHIBIT "A" REQUEST FOR ADVANCE TO:          COMERICA BANK (the "Bank")           The undersigned hereby requests a *_____________________ Advance, or confirms such a request made by telephone, under the Promissory Note dated April 20, 2000, in the principal amount of Five Million Dollars ($5,000,000.00) (the "Note") made by the undersigned to the Bank, pursuant to the following terms: Advance Amount: $_________________ Quoted Rate (if applicable): _________% per annum Advance Date: _________________, ________ Repayment Date: __________________, _______           The proceeds of this Advance shall be or have been deposited to Account No. ___________ of the undersigned with the Bank or as follows: -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- --------------------------------------------------------------------------------           The undersigned warrants that no condition exists or event has occurred which constitutes or, with the passage of time or the giving of notice, or both, would constitute a Default under the Note.           Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Note.           Dated this ______ day of _________________________, ________.   MANATRON, INC. By: -------------------------------------------------------------------------------- Its: -------------------------------------------------------------------------------- *Insert as applicable: "Prime-based" or "Quoted Rate".

QuickLinks -- Click here to rapidly navigate through this document EXHIBIT 10.2 PROMISSORY NOTE $175,000 Cupertino, California October 11, 2000     For value received, the undersigned promises to pay Preview Systems, Inc., a Delaware corporation (the "Company"), at its principal office the principal sum of $175,000 with interest from the date hereof at a rate of 11.00% per annum, compounded annually, on the unpaid balance of such principal sum. Such principal and interest shall be due and payable on October 11, 2001.     If the undersigned's employment or consulting relationship with the Company is terminated prior to payment in full of this Note, this Note shall be immediately due and payable.     Principal and interest are payable in lawful money of the United States of America. AMOUNTS DUE UNDER THIS NOTE MAY BE PREPAID AT ANY TIME WITHOUT PREMIUM OR PENALTY. Any such prepaid amounts shall be applied to accrued interest before application to any principal amount due.     Should suit be commenced to collect any sums due under this Note, such sum as the Court may deem reasonable shall be added hereto as attorneys' fees. The makers and endorsers have severally waived presentment for payment, protest, notice of protest, and notice of nonpayment of this Note.     --------------------------------------------------------------------------------     Vincent Pluvinage -------------------------------------------------------------------------------- QUICKLINKS EXHIBIT 10.2 PROMISSORY NOTE

Exhibit (10) (j) SEVERANCE AGREEMENT             SEVERANCE AGREEMENT (the "Agreement") dated October 5, 2000 ("Effective Date") between David H. Schwartz ("Employee") and Brown Shoe Company, Inc., a New York corporation (as further defined in Section 13, the "Company").             WHEREAS, in order to accomplish its objectives, the Company believes it is essential that members of its Operating Committee, such as Employee, be encouraged to remain with the Company during management transition and thereafter and in the event there is any change in corporate structure which results in a Change in Control.             WHEREAS, Employee wishes to have the protection provided for in this Agreement and, in exchange for such protection, is willing to give to the Company, under certain circumstances, his covenant not to compete.             WHEREAS, the Company and Employee desire to amend and restate the Severance Agreement dated July 27, 1998.             NOW, THEREFORE, the parties amend and restate the Severance Agreement dated July 27, 1998, hereto agree as follows:             1. Definitions.         a. "Cause" means (i) engaging by Employee in willful misconduct which is materially injurious to the Company; (ii) conviction of the Employee of a felony; (iii) engaging by Employee in fraud, material dishonesty or gross misconduct in connection with the business of the Company; (iv) engaging by Employee in any act of moral turpitude reasonably likely to materially and adversely affect the Company or its business; or (v) habitual use by Employee of narcotics or alcohol.         b. "Change of Control" means (i) any person other than the Company acquiring more than 25 percent of the Company's Common Stock through a tender offer, exchange offer or otherwise; (ii) the liquidation or dissolution of the Company following the sale of all or substantially all of its assets; or (iii) the Company 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 10.         e. "Customer" shall mean any wholesale customer of the Company which either purchased from the Company during the one (1) year immediately preceding the Termination Date, or is reasonably expected by the Company to purchase from the Company 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 Employee of his employment with the Company, shall mean (i) a reduction in Employee'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 Employee'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 (6) 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 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 Employee's employment.             2. Termination During Term -- Change in Control Severance Inapplicable.         a. Employee's employment may be terminated by the Company for Cause at any time, effective upon the giving to Employee of a written notice of termination specifying in detail the particulars of the conduct of Employee deemed by the Company to justify such termination for Cause.         b. Employee's employment may be terminated by the Company without Cause at any time, effective upon the giving to Employee of a written notice of termination specifying that such termination is without Cause.         c. Employee may terminate his employment with the Company at any time.   2 --------------------------------------------------------------------------------           d. Upon a termination by the Company of Employee's employment for Cause during the Term, but prior to a Change in Control or more than 24 months after a Change in Control, Employee shall be entitled only to the payments specified in Section 3.a. below. Upon a termination by the Company of Employee's employment without Cause during the Term, but prior to a Change in Control or more than 24 months after a Change in Control, Employee shall be entitled to all of the payments and benefits specified in Section 3 below.         e. If Employee 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 Employer in writing if he believes the termination is for Good Reason. Employee shall set forth in reasonable detail why Employee believes there is Good Reason. If such termination is for Good Reason, Employee shall be entitled to all of the payments and benefits specified in Section 3 below. If such voluntary termination is for other than Good Reason, then Employee shall be entitled only to the payments specified in Section 3.a. below.             3. Payments and Benefits Upon Termination During Term -- Change in Control Severance Inapplicable. To the extent provided in Section 2 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, Employee shall receive the following payments and benefits:         a. The Company shall pay to Employee on the Termination Date (i) the full base salary earned by employee through the Termination Date and unpaid at the Termination Date, plus (ii) credit for any vacation earned by Employee but not taken at the Termination Date, plus (iii) all other amounts earned by Employee and unpaid as of the Termination Date.         b. The Company shall continue to pay to Employee 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 twelve months succeeding his Termination Date. Such amounts shall be paid in accordance with the Company's regular pay period policy for its employees.         c. The Company, at its expense, shall provide to Employee for a period of twelve months after the Termination Date medical and/or dental coverage under the medical and dental plans maintained by the Company. Upon Employee's re-employment during such period, to the extent covered by the new Employer's Plan, coverage under the Company's plan shall lapse. Additionally, the Company shall make a cash lump sum payment in an amount equal to the sum of (i) and (ii) below:   3 --------------------------------------------------------------------------------             (i) The fair market value (determined as of the Termination Date) of that number of shares of non-vested restricted stock of the Company held by the Employee which would have vested within the twelve-month period following the Employee's Termination Date had the Employee remained employed with the Company; plus             (ii) With respect to each non-vested option to purchase Company stock held by the Employee which would have vested within the twelve-month period following the Employee's Termination Date had the Employee remained employed with the Company, the excess, if any, of the fair market value (determined as of the Termination Date) of the Company stock subject to such option over the exercise price of such option..   Employee's participation in and/or coverage under all other employee benefit plans, programs or arrangements sponsored or maintained by the Company shall cease effective as of the Termination Date.         d. The Company shall pay the reasonable costs of outplacement services selected by the Company.         e. For purposes of determining Employee's benefit under the Brown Group, Inc. Supplemental Employment Retirement Plan, an additional one year of Credited Service shall be credited to the Employee's actual or deemed Credited Service.             4. Termination Within 24 Months After a Change in Control Which Occurs During the Term.         a. Employee's employment may be terminated by the Company for Cause at any time, effective upon the giving to Employee of written notice of termination specifying in detail the particulars of the conduct of Employee deemed by the Company to justify such termination for Cause.         b. Employee's employment may be terminated by the Company without Cause at any time, effective upon the giving to Employee of a written notice of termination specifying that such termination is without Cause.         c. Employee may terminate his employment with the Company at any time.         d. Upon a termination by the Company of Employee's employment for Cause within 24 months after a Change in Control which occurs during the Term, Employee shall be entitled only to the payments specified in Section 5.a. below. Upon a termination by the Company of Employee's employment without   4 -------------------------------------------------------------------------------- Cause within 24 months after a Change in Control which occurs during the Term, Employee shall be entitled to all of the payments and benefits specified in Section 5 below.         e. If Employee voluntarily terminates his employment within 24 months after a Change in Control which occurs during the Term, he shall notify the Company in writing if he believes the termination is for Good Reason. Employee shall set forth in reasonable detail why Employee believes there is Good Reason. If such termination is for Good Reason, Employee shall be entitled to all of the payments and benefits specified in Section 5 below. If such voluntary termination is for other than Good Reason, then Employee shall be entitled only to the payments specified in Section 5.a. below.             5. Payments and Benefits Upon Termination Within 24 Months after a Change in Control Which Occurs During Term. To the extent provided in 4 above, upon termination of his employment within 24 months after a Change in Control which occurs during the Term, Employee shall receive the following payments and benefits:         a. The Company shall pay to Employee on the Termination Date (i) the full base salary earned by employee through the Termination Date and unpaid at the Termination Date, plus (ii) credit for any vacation earned by Employee but not taken at the Termination Date, plus (iii) all other amounts earned by Employee and unpaid as of the Termination Date.         b. The Company shall pay to Employee in a lump sum not later than 30 days after his Termination Date an amount equal to 300 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, the Company shall pay to Employee his targeted bonus payment for the year of termination prorated to the Termination Date.         c. The Company, at its expense, shall provide to Employee for a period of thirty-six months after the Termination Date medical and/or dental coverage under the medical and dental plans maintained by the Company. Upon Employee's re-employment during such period, to the extent covered by the new employer's plan, coverage under the Company's plan shall lapse. Employee's participation in and/or coverage under all other employee benefit plans, programs or arrangements sponsored or maintained by the Company shall cease effective as of the Termination Date.         d. The Company shall pay the reasonable costs of outplacement services selected by the Company.         e. For purposes of determining Employee's benefit under the Brown Group, Inc. Supplemental Employment Retirement Plan, an additional three years   5 -------------------------------------------------------------------------------- of Credited Service shall be credited to the Employee's actual or deemed Credited Service.             6. Mitigation or Reduction of Benefits. Employee shall not be required to mitigate the amount of any payment provided for in Section 3 or Section 5 by seeking other employment or otherwise. Except as otherwise specifically set forth herein, the amount of any payment or benefits provided in Section 3 or Section 5 shall not be reduced by any compensation or benefits or other amounts paid to or earned by Employee as the result of employment by another employer after the Termination Date or otherwise.             7. Employee Expenses After Change in Control. If Employee's employment is terminated by the Company 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 Employee's costs and expenses (including reasonable legal and accounting fees) incurred by Employee (a) to defend the validity of this Agreement, (b) if Employee's employment has been terminated for Cause, to contest such termination, (c) to contest any determinations by the Company concerning the amounts payable by the Company under this Agreement, or (d) to otherwise obtain or enforce any right or benefit provided to Employee by this Agreement, shall be paid by the Company if Employee is the prevailing party.             8. Release. Notwithstanding anything to the contrary stated in this Agreement, no benefits will be paid pursuant to Sections 3 and 5 except under Sections 3.a. and 5.a. prior to execution by Employee of a release to the Company in the form attached as Exhibit A.             9. Covenant Not to Compete. Benefits payable pursuant to Sections 3.b, 3.c, and 3.e are subject to the following restrictions.                     a. Post-Termination Restrictions.             i. Employee acknowledges that (i) the Company 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; (ii) under this Agreement, the Company is agreeing to provide Employee with certain benefits based upon Employee's assurances and promises contained herein not to divert the Company's customers' goodwill or to put himself in a position following his employment with Company in which the confidentiality of Company's Confidential Information might somehow be compromised.             ii. Accordingly, Employee agrees that, for twelve (12) months after a Termination Date described in the second sentence of Section 2.d, Employee will not, directly or indirectly, on Employee's own behalf or on behalf   6 -------------------------------------------------------------------------------- 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 the Company, 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 the Company;         E. cause or attempt to cause any shoe supplier or manufacturer of the Company to divert, terminate, limit, modify or fail to enter into any existing or potential relationship with the Company; and         F. solicit, entice, employ or seek to employ, in the shoe industry, any executive- or managerial-level employee of, or any consultant or advisor to, the Company.           b. Acknowledgment Regarding Restrictions. Employee recognizes and agrees that the restraints contained in Section 9.a. (both separately and in total) are reasonable and should be fully enforceable in view of the high-level positions Employee has had with the Company, the national and international nature of both the Company's business and competition in the shoe industry, and the Company's legitimate interests in protecting its Confidential Information and its customer goodwill and relationships. Employee specifically hereby acknowledges and confirms that he is willing and intends to, and will, abide fully by the terms of Section 9.a. of this Agreement. Employee further agrees that the Company would not have adequate protection if Employee were permitted to work for its competitors in violation of the terms of this Agreement since the Company would be unable to verify whether (i) its Confidential Information was being disclosed and/or misused, and (ii) Employee was involved in diverting or helping to divert the Company's customers and/or its customer goodwill.         c. Company's Right to Injunctive Relief. In the event of a breach or threatened breach of any of Employee's duties and obligations under the terms and provisions of Section 9.a. of this Agreement, the Company shall be entitled,   7 -------------------------------------------------------------------------------- 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. Employee hereby expressly acknowledges that the harm which might result to Company's business as a result of noncompliance by Employee with any of the provisions of Section 9.a. would be largely irreparable. Employee specifically agrees that if there is a question as to the enforceability of any of the provisions of Section 9.a. hereof, Employee 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. Employee undertakes and agrees that if Employee breaches or threatens to breach the Agreement, Employee shall be liable for any attorneys' fees and costs incurred by Company in enforcing its rights hereunder.         d. Employee Agreement to Disclose this Agreement. Employee agrees to disclose, during the twelve-month period following a Termination Date described in the second sentence of Section 2.d, the terms of this Section 9 to any potential future employer.             10. Confidential Information. The Employee 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 Employment Agreement) and which was obtained from the Company, or obtained by the Employee for or on behalf of the Company, and which is identified herein is the secret, confidential property of the Company (the "Confidential Information"). This Confidential Information includes, but is not limited to:         a. lists or other identification of customers or prospective customers of the Company (and key individuals employed or engaged by such parties);         b. lists or other identification of sources or prospective sources of the Company'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 the Company's products;         d. financial, sales and marketing data relating to the Company or to the industry or other areas pertaining to the Company'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 the Company's products and services;         f. the Company'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. the Company's relations with its employees (including, without limitation, salaries, job classifications and skill levels); and         h. any other information designated by the Company to be confidential, secret and/or proprietary (including without limitation, information provided by customers or suppliers of the Company). 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 the Employee in violation of this Employment Agreement.             11. Certain Additional Payments by the Company.         a. Anything in this Agreement to the contrary notwithstanding and except as set forth below, in the event it shall be determined that any payment or distribution by the Company to or for the benefit of the Employee (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 the Employee with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Employee shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Employee of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Employee retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing provisions of this Section 11.a., if it shall be determined that the Employee 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 the Employee such that the receipt of Payments would not give rise to any Excise Tax, then no Gross-Up Payment shall be made 9 -------------------------------------------------------------------------------- to the Employee, and the Payments, in the aggregate, shall be reduced to the Reduced Amount.         b. Subject to the provisions of Section 11.c., all determinations required to be made under this Section 11, 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 Ernst & Young or such other certified public accounting firm as may be designated by the Employee (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and the Employee within 15 business days of the receipt of notice from the Employee that there has been a Payment, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change of Control, the Employee shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 11, shall be paid by the Company to the Employee within five days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon the Company and the Employee. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 11.c. and the Employee thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Employee.         c. The Employee shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after the Employee is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Employee shall not pay such claim prior to the expiration of the 30-day period following the date on which the Employee gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Employee in writing prior to the expiration of such period that it desires to contest such claim, the Employee shall:           i. give the Company any information reasonably requested by the Company relating to such claim,   10 --------------------------------------------------------------------------------         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 the Employee harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 11.c., the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Employee to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Employee agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Employee to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Employee, on an interest-free basis and shall indemnify and hold Employee harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Employee with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Employee shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.         d. If, after the receipt by the Employee of an amount advanced by the Company pursuant to Section 11.c., the Employee becomes entitled to receive any refund with respect to such claim, the Employee shall (subject to the Company's complying with the requirements of Section 11.c.) promptly pay to the Company the amount of such refund (together with any interest paid or   11 -------------------------------------------------------------------------------- credited thereon after taxes applicable thereto). If, after the receipt by the Employee of an amount advanced by the Company pursuant to Section 11.c., a determination is made that the Employee shall not be entitled to any refund with respect to such claim and the Company does not notify the Employee in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid.             12. 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:                 a. If to the Company:                     Brown Shoe Company, Inc.                     8300 Maryland Avenue                     St. Louis, Missouri 63166-0029                     Attention: Chief Executive Officer                 b. If to Employee:                     David H. Schwartz                     731 The Hamptons                     Town and Country, MO 63017-5901 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.             13. Successors; Binding Agreement.         a. 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, 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 the Company 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 Employee promptly after its execution by the successor. Failure of the Company to obtain such agreement upon or prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle Employee to benefits from the Company in the same amounts and on the same terms as Employee would be entitled hereunder if Employee 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   12 -------------------------------------------------------------------------------- Date. 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 executes and delivers the agreement provided for in this Section 13.a. or which otherwise becomes bound by the terms and provisions of this Agreement by operation of law.         b. This Agreement is personal to Employee and Employee 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 Employee's legal representatives, executors, administrators, heirs and beneficiaries.             14. 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.             15. 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.             16. 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.             17. 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, Employee's continued employment without objection shall not constitute Employee's consent to, or a waiver of Employee'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 the Company, by its duly authorized officer.             18. Entire Agreement. This instrument constitutes the entire agreement of the parties in this matter and shall supersede any other agreement (including, but not limited to, the Severance Agreement dated July 27, 1998) between the parties, oral or written, concerning the same subject matter.             19. 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 Employee and by a duly authorized officer of the Company.   13 --------------------------------------------------------------------------------             20. Governing Law. In light of Company's and Employee's substantial contacts with the State of Missouri, the facts that the Company is headquartered in Missouri and Employee resides in and/or reports to Company 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 Company'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.             IN WITNESS WHEREOF, Employee and the Company have executed this Agreement as of the day and year first above written.                                                                          BROWN SHOE COMPANY, INC.                                                                            By: /s/ Jeffery E. Struve                                                                              EMPLOYEE                                                                            By: /s/ David H. Schwartz David H. Schwartz   14 --------------------------------------------------------------------------------

QuickLinks -- Click here to rapidly navigate through this document Exhibit 10.9 CORILLIAN CORPORATION NONQUALIFIED STOCK OPTION LETTER AGREEMENT [INCLUDES ACCELERATED VESTING PROVISIONS] TO:     We are pleased to inform you that you have been selected by the Company to receive a stock option (the "Option") to purchase shares (the "Option Shares") of the Company's Common Stock under the Company's 2000 Stock Incentive Compensation Plan (the "Plan").     The terms of the Option are as set forth in this Agreement and in the Plan, a copy of which is attached. The Plan is incorporated by reference into this Agreement, which means that this Agreement is limited by and subject to the express terms and provisions of the Plan. Capitalized terms that are not defined in this Agreement have the meanings given to them in the Plan.     The most important terms of the Option are summarized as follows: Grant Date:   [date of Board approval of grant] Number of Shares:     Exercise Price:   $     per share Expiration Date:     Vesting Base Date:   [typically grant date or date of hire] Type of Option:   Nonqualified Stock Option ("NSO")     Vesting and Exercisability:  The Option will vest and become exercisable according to the following schedule: Period of Continuous Service From Vesting Base Date --------------------------------------------------------------------------------   Portion of Total Option Which Is Vested and Exercisable -------------------------------------------------------------------------------- One year from Vesting Base Date    1/4th Each three-month period completed thereafter   An additional 1/16th Four years from Vesting Base Date   100%     Corporate Transactions:  For purposes of this section, the following terms shall be defined as follows:     "Good Reason" means the occurrence of any of the following events or conditions and the failure of the Successor Corporation to cure such event or condition within 30 days after receipt of written notice from the Participant:     (a) a change in the Participant's status, title, position or responsibilities (including reporting responsibilities) that, in the Participant's reasonable judgment, represents a substantial reduction in the status, title, position or responsibilities as in effect immediately prior thereto; the assignment to the Participant of any duties or responsibilities that, in the Participant's reasonable judgment, are materially inconsistent with such status, title, position or responsibilities; or any removal of the Participant from or failure to reappoint or reelect the Participant to any of such positions, except in connection with the termination of the Participant's employment for Cause, for Disability or as a result of his or her death, or by the Participant other than for Good Reason;     (b) a reduction in the Participant's annual base salary;     (c) the Successor Corporation's requiring the Participant (without the Participant's consent) to be based at any place outside a 35-mile radius of his or her place of employment prior to a Corporate Transaction, except for reasonably required travel on the Successor Corporation's business that is not materially greater than such travel requirements prior to the Corporate Transaction; --------------------------------------------------------------------------------     (d) the Successor Corporation's failure to (i) continue in effect any material compensation or benefit plan (or the substantial equivalent thereof) in which the Participant was participating at the time of a Corporate Transaction, including, but not limited to, the Plan, or (ii) provide the Participant with compensation and benefits substantially equivalent (in terms of benefit levels and/or reward opportunities) to those provided for under each material employee benefit plan, program and practice as in effect immediately prior to the Corporate Transaction;     (e) any material breach by the Successor Corporation of its obligations to the Participant under the Plan or any substantially equivalent plan of the Successor Corporation; or     (f)  any purported termination of the Participant's employment or service relationship for Cause by the Successor Corporation that is not in accordance with the definition of Cause under the Plan.     "Related Party Transaction" means (a) a merger of the Company in which the holders of shares of Common Stock immediately prior to the merger hold at least a majority of the shares of Common Stock in the surviving corporation immediately after the merger, (b) a mere reincorporation of the Company or (c) a transaction undertaken for the sole purpose of creating a holding company.     Acceleration of vesting of options that are not assumed.  In the event of a Corporate Transaction in which this Option is not assumed or continued or an equivalent option or right substituted by the surviving corporation, the successor corporation or its parent corporation, as applicable (the "Successor Corporation"), you shall fully vest in and have the right to exercise this Option as to all of the shares of Common Stock subject thereto, including shares as to which this Option would not otherwise be vested or exercisable provided that, such acceleration will not occur if, in the opinion of the Company's accountants, it would render unavailable "pooling of interest" accounting for a Corporate Transaction that would otherwise qualify for such treatment. If this Option becomes fully vested and exercisable in lieu of assumption or substitution in the event of a Corporate Transaction, the Plan Administrator shall notify you in writing or electronically that this Option shall be fully vested and exercisable for a specified time period after the date of such notice, and this Option shall terminate upon the expiration of such period, in each case conditioned on the consummation of the Corporate Transaction. This Option shall be considered assumed if, following the Corporate Transaction, the option or right confers the right to purchase or receive, for each share of Common Stock subject to this Option, immediately prior to the Corporate Transaction, the consideration (whether stock, cash, or other securities or property) received in the Corporate Transaction by holders of Common Stock for each share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares); provided, however, that if such consideration received in the Corporate Transaction is not solely common stock of the Successor Corporation, the Plan Administrator may, with the consent of the Successor Corporation, provide for the consideration to be received upon the exercise of this Option, for each share of Common Stock subject thereto, to be solely common stock of the Successor Corporation equal in fair market value to the per share consideration received by holders of Common Stock in the Corporate Transaction. This Option shall terminate and cease to remain outstanding immediately following the consummation of the Corporate Transaction, except to the extent assumed by the Successor Corporation.     Acceleration upon termination of employment by Successor Corporation.  If this Option is assumed or replaced in the Corporate Transaction, other than a Related Party Transaction, and does not otherwise accelerate at that time, it shall be accelerated in the event that your employment or service relationship should subsequently terminate within one year following such Corporate Transaction, unless such employment or service relationship is terminated by the Successor Corporation for Cause or by you voluntarily without Good Reason; provided, that such acceleration shall not occur if, in the opinion of the Company's outside accountants, such acceleration would render unavailable "pooling of interests" accounting treatment for any Corporate Transaction for which pooling of interests accounting treatment is sought by the Company. 2 --------------------------------------------------------------------------------     Termination of Option:  The unvested portion of the Option will terminate automatically and without further notice immediately upon termination (voluntary or involuntary) of your employment or service relationship with the Company or a Related Corporation. The vested portion of the Option will terminate automatically and without further notice on the earliest of the following dates:     (a) three months after termination of your employment or service relationship with the Company or a Related Corporation for any reason other than Cause, Retirement, Disability or death;     (b) one year after termination of your employment or service relationship with the Company or a Related Corporation by reason of Retirement, Disability or death; and     (c) the Expiration Date; except, that if the Company or a Related Corporation terminates your services for Cause you will forfeit the unexercised portion of the Option, including vested and unvested shares, on the date you are notified of your termination. If you die while the Option is exercisable, the Option may be exercised until one year after the date of death or the Expiration Date, whichever is earlier. It is your responsibility to be aware of the date your Option terminates.     Method of Exercise:  You may exercise the Option by giving written notice to the Company, in form and substance satisfactory to the Company, which will state the election to exercise the Option and the number of shares of Common Stock for which you are exercising the Option. The written notice must be accompanied by full payment of the exercise price for the number of shares of Common Stock you are purchasing.     Form of Payment:  You may pay the Option exercise price, in whole or in part, in cash, by check or, unless the Plan Administrator determines otherwise, by (a) tendering (either actually or by attestation) mature shares of Common Stock (generally, shares you have held for a period of at least six months) having a fair market value on the day prior to the date of exercise equal to the exercise price (you should consult your tax advisor before exercising the Option with stock you received upon the exercise of an incentive stock option); (b) if and so long as the Common Stock is registered under the Securities Exchange Act of 1934, as amended, delivery of a properly executed exercise notice together with irrevocable instructions to a broker to deliver promptly to the Company the amount of sale or loan proceeds necessary to pay the exercise price all in accordance with the regulations of the Federal Reserve Board; or (c) such other consideration as the Plan Administrator may permit.     Withholding Taxes:  As a condition to the exercise of any portion of the Option that is treated as a nonqualified stock option, you must make such arrangements as the Company may require for the satisfaction of any federal, state or local withholding tax obligations that may arise in connection with such exercise. The Company has the right to retain without notice sufficient shares of stock to satisfy the withholding obligation. Unless the Plan Administrator determines otherwise, you may satisfy the withholding obligation by electing to have the Company withhold from the shares to be issued upon exercise that number of shares having a fair market value equal to the amount required to be withheld (up to the minimum required federal tax withholding rate). The Company may also deduct from the shares to be issued upon exercise any other amounts due from you to the Company.     Limited Transferability:  During your lifetime only you can exercise the Option. The Option is not transferable except by will or by the applicable laws of descent and distribution, except that nonqualified stock options may be transferred to the extent permitted by the Plan Administrator. The Plan provides for exercise of the Option by a designated beneficiary or the personal representative of your estate.     Registration:  The Company has filed and maintains an effective registration statement with respect to the Option Shares. The Company intends to maintain this registration but has no obligation 3 -------------------------------------------------------------------------------- to do so. In the event that such registration ceases to be effective, you will not be able to exercise the Option unless exemptions from registration under federal and state securities laws are available; such exemptions from registration are very limited and might be unavailable. By accepting the Option, you hereby acknowledge that you have read and understand Section 15.3 of the Plan.     Binding Effect:  This Agreement will inure to the benefit of the successors and assigns of the Company and be binding upon you and your heirs, executors, administrators, successors and assigns.     Limitation on Rights; No Right to Future Grants; Extraordinary Item of Compensation:  By entering into this Agreement and accepting the grant of the Option evidenced hereby, you acknowledge: (a) that the Plan is discretionary in nature and may be suspended or terminated by the Company at any time; (b) that the grant of the Option is a one-time benefit which does not create any contractual or other right to receive future grants of options, or benefits in lieu of options; (c) that all determinations with respect to any such future grants, including, but not limited to, the times when options will be granted, the number of shares subject to each option, the option price, and the time or times when each option will be exercisable, will be at the sole discretion of the Company; (d) that your participation in the Plan is voluntary; (e) that the value of the Option is an extraordinary item of compensation which is outside the scope of your employment contract, if any; (f) that the Option is not part of normal or expected compensation for purposes of calculating any severance, resignation, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments; (g) that the vesting of the Option ceases upon termination of employment or service relationship with the Company for any reason except as may otherwise be explicitly provided in the Plan or this Agreement or otherwise permitted by the Plan Administrator; (h) that the future value of the underlying Option Shares is unknown and cannot be predicted with certainty; and (i) that if the underlying Option Shares do not increase in value, the Option will have no value. 4 --------------------------------------------------------------------------------     Please execute the following Acceptance and Acknowledgment and return it to the undersigned.     Very truly yours,           Corillian Corporation           By  --------------------------------------------------------------------------------     Its  -------------------------------------------------------------------------------- ACCEPTANCE AND ACKNOWLEDGMENT     I, a resident of the State of      , accept the Option described in this Agreement and in the Plan, and acknowledge receipt of a copy of this Agreement and a copy of the Plan. I have read and understand the Plan. Dated:  --------------------------------------------------------------------------------   --------------------------------------------------------------------------------           --------------------------------------------------------------------------------           Address  --------------------------------------------------------------------------------   --------------------------------------------------------------------------------       -------------------------------------------------------------------------------- Taxpayer I.D. Number   --------------------------------------------------------------------------------           --------------------------------------------------------------------------------   -------------------------------------------------------------------------------- 5 -------------------------------------------------------------------------------- NOTICE OF EXERCISE OF STOCK OPTION To: Corillian Corporation     I, a resident of the State of      , hereby exercise my Nonqualified Stock Option (check one box) granted by Corillian Corporation (the "Company") on      ,      , subject to all the terms and provisions thereof and of the 2000 Stock Incentive Compensation Plan referred to therein, and notify the Company of my desire to purchase      shares of Common Stock of the Company (the "Securities") at the exercise price of $         per share. I hereby represent and warrant that I have been furnished with a copy of the Plan and Plan Summary. Dated:  --------------------------------------------------------------------------------   --------------------------------------------------------------------------------           --------------------------------------------------------------------------------           Address  --------------------------------------------------------------------------------   --------------------------------------------------------------------------------       -------------------------------------------------------------------------------- Taxpayer I.D. Number   --------------------------------------------------------------------------------   -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- RECEIPT     Corillian Corporation hereby acknowledges receipt from      in payment for      shares of Common Stock of Corillian Corporation, an Oregon corporation, of $         in the form of //  Cash //  Check (personal, cashier's or bank certified) //        shares of the Company's Common Stock, fair market value $         per share, held by the optionee for a period of at least six months //  Copy of irrevocable instructions to Broker Date:  --------------------------------------------------------------------------------   By:  --------------------------------------------------------------------------------   FMV on such date: $                For: Corillian Corporation 2 -------------------------------------------------------------------------------- QUICKLINKS CORILLIAN CORPORATION NONQUALIFIED STOCK OPTION LETTER AGREEMENT [INCLUDES ACCELERATED VESTING PROVISIONS] ACCEPTANCE AND ACKNOWLEDGMENT NOTICE OF EXERCISE OF STOCK OPTION RECEIPT

PREFERRED STOCK EXCHANGE AGREEMENT         THIS AGREEMENT dated effective November 1, 2000, is by and between PEASE OIL AND GAS COMPANY, a Nevada corporation (“Company”) and the undersigned, each of which is a holder of the Company’s Series B 5% PIK Cumulative Convertible Preferred Stock (each holder is referred to herein as a “Holder” and all the holders are referred together as the “Holders”).         This Agreement is made with reference to the following agreed facts:         A. The names of the Holders and the number of shares of the Company’s Series B 5% PIK Cumulative Convertible Preferred Stock (the “Series B Preferred”) owned by each is set forth on Schedule 1 attached hereto.         B. Pursuant to an "Agreement Not to Sell or Convert Securities," dated effective May 24, 1999 (the "Lock-Up Agreement"), the Company and the Holders agreed, among other things, that no Holder would convert Series B Preferred into Company common stock and that the dividends on the Series B Preferred shall be deferred during the time when the Company sought to complete a merger with Carpatsky Petroleum Inc. ("CPI").         C. Under an “Exchange Agreement and Irrevocable Proxy,” dated on various dates in August 1999, each Holder of Series B Preferred agreed, among other things, to: (i) exchange all outstanding Series B Preferred for common stock of the Company on or before the date of completion of the merger with CPI, (ii) to vote to approve the merger with CPI and related matters, and (iii) that the Lock-Up Agreement was to remain in full force and effect until the later of closing or termination of the merger with CPI, or November 15, 1999. The Company has not paid or accrued dividends on the Series B Preferred since September 1, 1999.         D. The Company and the Holders believe that it is in the best interest of the Company to terminate the Merger Agreement with CPI, subject to the matters set forth in this Agreement.         E. The Company and each of the Holders have agreed that until this Agreement is signed by the parties, the Holders shall be precluded from converting or transferring any of their Series B Preferred.         NOW, THEREFORE, in consideration of the foregoing and the respective covenants and agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and confirmed, the Company and the Holders hereto agree as follows:          1. Create Series C Redeemable Preferred Stock. The Company shall promptly prepare, adopt and file with the Secretary of State of Nevada a Certification of Designation of the Company’s Series C Redeemable 5% Preferred Stock having the terms and provisions set forth in Exhibit A attached hereto and incorporated herein by reference (the “Series C Designation”). The Company’s Series C Preferred Stock shall have the rights, privileges and preferences described in Exhibit A and shall be referred in this Agreement as the “Series C Preferred.”          2. Exchange Series B Preferred. On the first business day after the Company’s designation of Series C Preferred is accepted for filing with the Secretary of State of Nevada (the “Closing Date”), each Holder shall surrender all certificates representing its Series B Preferred, together with all other dividend rights, conversion rights, voting rights or other rights which may be applicable to the Series B Preferred, to the Company. In exchange for surrender of the Series B Preferred, the Company shall, on the Closing Date, issue and deliver to each Holder, a like number of shares of the Company’s Series C Preferred and a warrant to purchase that number of shares of the Company’s common stock set forth on Schedule 1 (the “Warrants”) to this Agreement.          3. Company Warrants. Each Warrant issued to a Holder shall be in a form, and shall represent the rights, terms and conditions applicable to the purchase of Company common stock as the form of Warrant attached hereto as Exhibit B and incorporated herein by reference.          4. Termination of Certain Rights. Upon completion of the exchange on the Closing Date, the rights and privileges of the Holders, as described in the Preferred Stock Purchase Agreement dated effective December 31, 1997 and the Certificate of Designation of Series B 5% PIK Cumulative Convertible Preferred Stock, as amended, as filed with the Secretary of State of Nevada December 31, 1997, which designated a total of 145,300 shares of the Company’s Series B Preferred and set forth the rights and privileges applicable thereto (the “Series B Preferred Designation”) shall be terminated and the Series B preferred Designation shall be terminated. Following the exchange, Holders’ rights as security holders of the Company shall be as holders of Series C Preferred stock of the Company and as holders of the Warrants.          5. Agreement Not to Sell or Convert Series B Preferred. Each Holder agrees that pending the Closing Date, as described above, the Holder shall not convert or seek to convert the Series B Preferred held by Holder into Company common stock. Further, pending the Closing Date, each Holder agrees that Holder will not sell or transfer, including making any short sale or similar transaction, any shares of the Company’s Series B Preferred or the Company’s common stock, either publicly or privately. If the Closing Date has not occurred by December 15, 2000, then any Holder may, upon 15 days prior written notice delivered to the Company, sell or transfer Series B Preferred stock held by it, or seek to convert Holder’s Series B Preferred in accordance with the conversion rights applicable to Series B Preferred.          6. No Further Dividends on Series B Preferred. Provided that the Closing Date occurs on or before December 15, 2000, then all unpaid dividends on the Series B Preferred shall be waived by all of the Holders and the Company shall have no obligation to pay any Holder any unpaid dividends on the Series B Preferred. If the Closing Date has not occurred by December 15, 2000, then the Company shall be obligated to the Holders only to pay dividends on the Series B Preferred, at the rate described in the Series B Designation, from October 31, 2000 through the earlier of the date on which the Series B Preferred is (i) exchanged for Series C Preferred, (ii) converted into Company common stock, or (iii) redeemed by the Company. All other unpaid dividends on the Series B Preferred, whether or not accrued or declared, are hereby waived by the Holders.          7. Representations and Warranties and the Company. The Company represents and warrants to the Holders as follows:         7.1. Organization, Qualifications and Corporate Power.           (a) The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the state of Nevada and is duly licensed or qualified to transact business as a foreign corporation and is in good standing in each jurisdiction in which the nature of the business transacted by it or the character of the properties owned or leased by it requires such licensing or qualification except where the failure to be licensed or qualified would not have a material adverse effect on the financial condition, results of operations, business or properties of the Company and its subsidiaries taken as a whole. The Company has the corporate power and authority to own and hold its properties and to carry on its business as now conducted and as proposed to be conducted, to execute, deliver and perform this Agreement, and to issue, sell and deliver the Series C Preferred and the Warrants.           (b) Except for wholly-owned subsidiaries of the Company, the identify of which has been disclosed to the Purchasers and except for agreements to participate in the acquisition, exploration, drilling and/or development of various oil and gas properties, the Company does not (i) own of record or beneficially, directly or indirectly, (A) any shares of capital stock or securities convertible into capital stock of any other corporation or (B) any participating interest in any partnership, joint venture or other noncorporate business enterprise or (ii) control, directly or indirectly, any other entity. Each of the subsidiaries is a corporation duly incorporated, validly existing and in good standing under the laws of its respective jurisdiction of incorporation and is duly licensed or qualified to transact business as a foreign corporation and is in good standing in each jurisdiction in which the nature of the business transacted by it or the character of the properties owned or leased by it requires such licensing or qualification except where the failure to be licensed or qualified would not have a material adverse effect on the Company and its subsidiaries taken as a whole. Each of the subsidiaries has the corporate power and authority to own and hold its properties and to carry on its business as now conducted and as proposed to be conducted. All of the outstanding shares of capital stock of each of the subsidiaries are owned beneficially and of record by the Company, one of its other subsidiaries, or any combination of the Company and/or one or more of its other subsidiaries, in each case free and clear of any liens, charges, restrictions, claims or encumbrances of any nature whatsoever; and there are no outstanding subscriptions, warrants, options, convertible securities, or other rights (contingent or other) pursuant to which any of the subsidiaries is or may become obligated to issue any shares of its capital stock to any person other than the Company or one of the other subsidiaries.         7.2. Authorization of Agreements, Etc.           (a) The execution and delivery by the Company of this Agreement, the performance by the Company of its obligations hereunder, and the issuance, sale and delivery of the Series C Preferred and the Warrants have been duly authorized by all requisite corporate action and will not violate any provision of applicable law, any order of any court or other agency of government, the Articles of Incorporation of the Company, as amended (the “Charter”), or the Bylaws of the Company, as amended, or any provision of any indenture, agreement or other instrument to which the Company, any of its subsidiaries or any of their respective properties or assets is bound, or conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any such indenture, agreement or other instrument, or result in the creation or imposition of any lien, charge, restriction, claim or encumbrance of any nature whatsoever upon any of the properties or assets of the Company or any of its subsidiaries except for such violations or conflicts which would not have a material adverse effect on the Company and its subsidiaries taken as a whole.           (b) The Series C Preferred have been duly authorized and, when issued in accordance with this Agreement, will be validly issued, fully paid and nonassessable shares of preferred stock with the rights and preferences described in the Series C Designation and will be free and clear of all liens, charges, restrictions, claims and encumbrances imposed by or through the Company. The Warrants have been duly authorized and, when exercised in accordance with the terms of the Warrants, the common stock to be issued upon exercise will be validly issued, fully paid and nonassessable shares of common stock of the Company and will be free and clear of all liens, charges, restrictions, claims and encumbrances imposed by or through the Company. The issuance, sale and delivery of the Series C Preferred and the Warrants is not subject to any preemptive right of stockholders of the Company or to any right of first refusal or other right in favor of any person.         7.3. Validity. This Agreement has been duly executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company, enforceable in accordance with its terms (subject, as to enforcement of remedies, to the discretion of courts in awarding equitable relief and to applicable bankruptcy, reorganization, Insolvency, moratorium and similar laws affecting the rights of creditors generally). The obligations of the Company set forth in the Warrants, when the Warrants are executed and delivered in accordance with this Agreement, will constitute the legal, valid and binding obligations of the Company, enforceable in accordance with its respective terms (subject, as to enforcement of remedies, to the discretion of courts in awarding equitable relief and to applicable bankruptcy, reorganization, insolvency, moratorium and similar laws affecting the rights of creditors generally).         7.4. SEC Documents. The Company has filed all registration statements, proxy statements, reports and other documents required to be filed by it under the Securities Act of 1933, as amended (“Securities Act”), or the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (collectively, the “SEC Documents”). Each SEC Document complied as to form when filed in all material respects with the rules and regulations of the SEC and did not on the date of filing contain any untrue statement of a material tact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.         7.5. Authorized Capital Stock. The authorized capital stock of the Company consists of 4,000,000 shares of $0.10 par value common stock, and 2,000,000 shares of $0.01 par value preferred stock, of which 595,000 are undesignated, 145,000 shares have been designated as Series B Preferred and the balance have been retired. The designations, powers, preferences, rights, qualifications, limitations and restrictions in respect of each class and series of authorized capital stock of the Company are as set forth in the Charter, and all such designations, powers, preferences, rights, qualifications, limitations and restrictions are valid, binding and enforceable and in accordance with all applicable laws (subject, as to enforcement of remedies, to the discretion of courts in awarding equitable relief and to applicable bankruptcy, reorganization, insolvency, moratorium and similar laws affecting the rights of creditors generally). Except for option plans pursuant to which the Company is authorized to grant stock purchase options to employees, officers, directors and consultants, of which options to purchase 42,514 shares of common stock at exercise prices ranging from $5.00 to $29.70 (average price: $17.04), are currently outstanding, and except for warrants pursuant to which other persons may purchase or otherwise acquire up to 203,532 shares common stock of the Company at exercise prices ranging from $5.00 to $37.50 (average exercise price: $15.17), as described in the SEC Documents, and except for the intention by the Board of Directors of the Company to authorize the issuance to Patrick J. Duncan, President, at or before the Closing: (a) 150,000 shares of the Company&#146;s common stock, and (b) a Warrant to purchase up to 600,000 shares of the Company&#146;s common stock at an exercise price of $0.50 per share, exercisable only as follows: (i) as to 300,000 shares, if the Company&#146;s reported closing sales price for its common stock is at least $1.50 for at least 80% of the trading days in a one month period, and (ii) as to 300,000 shares, only if the Company&#146;s reported closing sales price for its common stock is at least $2.00 for at least 80% of the trading days in a three month period, there is no other subscription, warrant, option, convertible security, or other right (contingent or other) to purchase or otherwise acquire equity securities of the Company authorized or outstanding and there is no commitment by the Company to issue shares, subscriptions, warrants, options, convertible securities, or other such rights or to distribute to holders of any of its equity securities any evidence of indebtedness or asset, except pursuant to this Agreement or other similar agreements with other holders of Series B Preferred and except for conversion rights of holders of the Company&#146;s outstanding 10% Convertible Debentures, due April 15, 2001. Except as provided for in the Charter, or as disclosed in the SEC Documents, the Company has no obligation (contingent or other) to purchase, redeem or otherwise acquire any of its equity securities or any interest therein, to make any payment in satisfaction of any appraisal rights properly perfected, or to pay any dividend or make any other distribution in respect thereof. To the Company&#146;s knowledge, there are no voting trusts or agreements, stockholders agreements, pledge agreements, buy-sell agreements, rights of first refusal or preemptive rights relating to any securities of the Company or any of its subsidiaries (whether or not the Company or any of its subsidiaries is a party thereto), except for rights of holders of Series B Preferred. All of the outstanding securities of the Company were issued in compliance with all applicable federal and state securities laws.         7.6. Financial Statements. All of the financial statements included in the SEC Documents have been prepared with generally accepted accounting principles consistently applied and fairly present the consolidated financial position of the Company and its subsidiaries, as of the dates of such reports and the consolidated results of their operations and cash flows for the periods upon which the reports are based. Since June 30, 2000, (i) there has been no change in the assets, liabilities or financial condition of the Company and its subsidiaries (on a consolidated basis) from that reflected in the Form 10-QSB for the quarter ending June 30, 2000, except for changes in the ordinary course of business which in the aggregate have not been materially adverse and (ii) none of the business, prospects, financial condition, operations, property or affairs of the Company and its subsidiaries (on a consolidated basis) has been materially adversely affected by any occurrence or development, individually or in the aggregate, whether or not insured against.         7.7. Subsequent Events. Since June 30, 2000, the Company has not (i) issued any stock, bond or other corporate security, (ii) borrowed any amount or incurred or become subject to any liability (absolute, accrued or contingent), except current liabilities incurred and liabilities under contracts entered into in the ordinary course of business, (iii) discharged or satisfied any lien or encumbrance or incurred or paid any obligation or liability (absolute, accrued or contingent) other than current liabilities shown since June 30, 2000 and current liabilities incurred since June 30, 2000, in the ordinary course of business, (iv) declared or made any payment or distribution to stockholders or purchased or redeemed any share of its capital stock or other security, (v) mortgaged, pledged or subjected to lien any of its assets, tangible or intangible, other than liens for current real property taxes not yet due and payable, (vi) sold, assigned or transferred any of its tangible assets except in the ordinary course of business, or canceled any debt or claim, (vii) suffered any loss of property or waived any right of substantial value whether or not in the ordinary course of business, (viii) made any material change in the manner of business or operations of the Company, (ix) entered into any transaction except in the ordinary course of business or as otherwise contemplated hereby, or (x) entered into any commitment (contingent or otherwise) to do any of the foregoing.         7.8. Litigation; Compliance With Law. There is no material (i) action, suit, claim, proceeding or investigation pending or, to the Company’s knowledge, threatened against or affecting the Company, at law or in equity, or before or by any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, (ii) arbitration proceeding relating to the Company pending or (iii) governmental inquiry pending or, to the Company’s knowledge, threatened against or affecting the Company (including without limitation any inquiry as to the qualification of the Company to hold or receive any license or permit). The Company is not in default with respect to any order, writ, injunction or decree known to or served upon the Company of any court or of any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign. The Company has complied with all laws, rules, regulations and orders applicable to its business, operations, properties, assets, products and services, and the Company has all necessary permits, licenses and other authorizations required to conduct its business as conducted and as proposed to be conducted except where the failure to comply or to have a license, permit or other authorization would not have, a material adverse effect on the Company and its subsidiaries taken as a whole.         7.9. Oil and Gas Properties. Each of the Company and its subsidiaries has good and defensible title to all of its respective interests in oil and gas leases, free and clear of any encumbrances, subject only to liens for taxes or charges of mechanics or materialmen not yet due and to encumbrances under gas sales contracts, operating agreements, unitization and pooling agreements and other similar agreements as are customarily found in connection with comparable exploration, drilling and producing operations and to title defects and other encumbrances that are, singularly und in the aggregate, not material in amount and do not interfere with its use or enjoyment of its oil and gas properties. Each of the Company and its subsidiaries has complied in all material respects with its obligations under the terms of the oil and gas leases in which it purports to own an interest, and all of such leases are in full force and effect (except where the failure so to comply or to be in full force and effect will not have a Material adverse effect) upon the Company and its subsidiaries taken as a whole.         7.10. Taxes. The Company has filed all tax returns, federal, state, county and local, required to be filed by it, and the Company has paid all taxes shown to be due by such returns as well as all other taxes, assessments and governmental charges which have become due or payable including, without limitation, all taxes which the Company is obligated to withhold from amounts owing to employees, creditors and third parties. All such taxes with respect to which the Company has become obligated pursuant to elections made by the Company in accordance with generally accepted practice have been paid and adequate reserves have been established for all taxes accrued but not yet payable. The federal income tax returns of the Company have never been audited by the Internal Revenue Service. No deficiency assessment with respect to or proposed adjustment of the Company’s federal, state, county or local taxes is pending or, to the Company’s knowledge, threatened. There is no tax lien, whether imposed by any federal, state, county or local taxing authority, outstanding against the assets, properties or business of the Company.         7.11. Other Agreements. The Company is not a party to or otherwise bound by any written or oral contract or instrument or other restriction which individually or in the aggregate could have a Material adverse effect on the Company and its subsidiaries taken as a whole.         7.12. Government Approvals. Subject to the accuracy of the representations and warranties of the Holders set forth in Section 4, no registration or filing with, or consent or approval of or other action by, any federal, state or other governmental agency or instrumentality is or will be necessary for the valid execution, delivery and performance by the Company of this Agreement, the issuance, sale and delivery of the Series C Preferred and the Warrants or, other than filings pursuant to state securities laws.          8. Representation and Warrants of the Holders. Each Holder severally represents and warrants to the Company that:           (a) it is a corporation, limited partnership, limited liability company, or insurance company separate account duly organized, validly existing and in good standing under the laws of its jurisdiction of organization or a trust duly formed under the laws of the state of its formation.           (b) it has full power and authority and has taken all required action necessary to permit it to execute, deliver and perform this Agreement, which constitute the legal, valid and binding obligations of each such Holder, enforceable against each such Holder in accordance with its terms (subject, as to enforcement of remedies, to the discretion of courts in awarding equitable relief and to applicable bankruptcy, reorganization, insolvency, moratorium and similar laws affecting the rights of creditors generally).           (c) neither the execution or delivery of this Agreement nor the consummation of the transactions contemplated hereby will result in a breach or violation of, or constitute a default under, the governing documents of the Holders, or any agreement, indenture or other instrument to which the Holders are a party or by which any of them are bound or to which any of their properties are subject, nor will the performance by the Holders of their obligations hereunder violate any applicable law or result in the creation or imposition of any lion, charge, claim or encumbrance upon any property or assets of the Holders. No permit, consent, approval, authorization or order of any Governmental Authority or other Person is required in connection with the consummation by the Holders of the transactions contemplated by this Agreement, except such as have been obtained and as otherwise contemplated by this Agreement.           (d) it is an “accredited investor’ within the meaning of Rule 501 under the Securities Act and was not organized for the specific purpose of acquiring the Series C Preferred and Warrants.           (e) it or its investment adviser has had an opportunity to discuss, ask questions and receive answers concerning the Company’s business, management and financial affairs with the Company’s management sand has been permitted to have access to all information which it has requested in order to evaluate the merits and risks of the purchase of the Series C Preferred and Warrants.           (f) the Series C Preferred and Warrants being purchased by it are being acquired for its own account for the purpose of investment and not with a view to or for sale in connection with any distribution thereof.           (g) it understands that (1) the Series C Preferred and Warrants have not been registered under the Securities Act or the securities laws of any state by reason of their issuance in a transaction exempt from the registration requirements of the Securities Act pursuant to Section 4(2) thereof and/or Rule 506 promulgated under the Securities Act, (2) the Series C Preferred and the shares of common stock issued upon exercise of the Warrants must be held indefinitely unless a subsequent disposition thereof is registered under the Securities Act or is exempt from such registration and (3) the certificates representing the Series C Preferred and the Warrants will bear the following legend:   The securities represented by this certificate may not be offered for sale, sold or otherwise transferred except pursuant to an effective registration statement under the Securities Act of 1933 (the “Act”), or pursuant to an exemption from registration under the Act, the availability of which is to be established to the satisfaction of the company.          9. Conditions to the Obligations of the Holders and the Company.         9.1. Conditions to the Obligations of the Holders. The obligation of each Holder to exchange its Series B Preferred for Series C Preferred and Warrants on the Closing Date is subject to the satisfaction, on or before the Closing Date, of the following conditions:           (a) All Proceedings to be Satisfactory. All corporate and other proceedings to be taken by the Company in connection with the transactions contemplated hereby shall be satisfactory in form and substance to the Holders and the Holders shall have received all such counterpart originals or certified or other copies of such documents as they reasonably may request.           (b) Exchange of Series B Preferred. Holders of all outstanding Series B Preferred of the Company shall have agreed to surrender all outstanding Series B Preferred at or prior to the Closing Date.         9.2. Conditions to the Obligations of the Company. The obligation of the Company to issue and deliver the Series C Preferred and the Warrants on the Closing Date is subject to the following conditions:           (a) Surrender of Series B Preferred. The holders of all outstanding Series B Preferred (consisting of the Holders and four other holders who will surrender all 6,325 shares of Series B Preferred in exchange for cash and Warrants) shall have surrendered all Series B Preferred for cancellation or exchange pursuant to this Agreement or other similar agreements on or before the Closing Date.           (b) Series C Designation.The Series C Designation shall have been filed with, and accepted by, the Secretary of State of Nevada.          10. Covenants of the Company. The Company covenants and agrees with each of the Holders that so long as a majority of the Series C Preferred issued by the Company pursuant to the terms of this Agreement are held by the Holders as a group:         10.1. Financial Statements, Reports, Etc. The Company shall furnish to each Holder promptly upon sending, making available or filing the same, all press releases, reports and financial statements that the Company sends or makes available to its stockholders or directors or files with the SEC.         10.2. Reserve for Additional Shares. The Company shall at all times reserve and keep available out of its authorized but unissued shares of common stock, for the purpose of issuing shares of common stock upon exercise of all of the Warrants, such number of its duly authorized shares of its common stock as shall be sufficient to permit all the Warrants to be exercised. If at any time the number of authorized but unissued shares of common stock shall not be sufficient to comply with the terms of this Agreement or to permit exercise of all of the, Warrants, the Company will forthwith take such corporate action as may be necessary, including holding a special meeting of its stockholders to approve an Amendment to the Company’s Charter, to increase its authorized but unissued shares of common stock to such number of shares as shall be sufficient for such purposes. The Company will obtain any authorization, consent, approval or other action by or make any filing with any court or administrative body that may be required under applicable state corporate and securities laws in connection with the issuance of shares of common stock.         10.3. Keeping of Records and Books of Account. The Company shall keep, and cause each subsidiary to keep, adequate records and books of account, in which complete entries will be made in accordance with generally accepted accounting principles consistently applied, reflecting all financial transactions of the Company and such subsidiary, and in which, for each fiscal year, all proper reserves for depreciation, depletion, obsolescence, amortization, taxes, bad debts and other purposes in connection with its business shall be made.         10.4. Comply With Registration Obligations. The Company shall satisfy its obligations to register the shares underlying the Warrants as set forth in the form of Warrant attached as ibit B.         10.5. Only Fixed Price Conversion. While any of the Series C Preferred is outstanding, the Company will not issue any security or create any options, warrants or other rights, which are convertible into any security of the Company at a price which is not fixed at the time of issuance or creation.         10.6. Restructure of Outstanding Debt. The parties acknowledge that the Company intends to seek extensions of the maturity for the Company’s outstanding $2.8 million of Convertible Debentures, due April 15, 2001 from the individual debentureholders. In connection with seeking such extension, the Company shall not reduce the conversion price of the Debentures below $1.50 per share of common stock, materially increase the obligations of the Company under the Debentures, issue other equity of the Company to the debentureholders, or make any other change to the Debentures that would materially and adversely impact the Holders of the outstanding Series C Preferred without, in any case, first obtaining the written consent of the Holders of 80% of the Series C Preferred then outstanding.          11. Miscellaneous.         11.1. Publicity. Without the prior approval of the other parties, no party shall issue, make or distribute any press release, public announcement or other publicity or disclosure (each a “Release”) that refers to the Holders’ investment in or contracts or agreements with the Company, except in each instance, if, upon the advice of counsel, the party believes such Release is required by applicable law or regulations, or by a court or agency having jurisdiction, in which case such party shall use its best efforts to give the other parties written notice thereof, provide the text of such Release and permit the other parties reasonable opportunity to review and comment upon the relevant portions of such Release.         11.2. Expenses. Each party hereto will pay its own expenses in connection with the transactions contemplated hereby.         11.3. Survival of Agreements. All covenants and agreements made herein, or made in the Warrants delivered to the Holders pursuant to or in connection with this Agreement, shall survive the execution and delivery of this Agreement, the issuance, sale and delivery of the Series C preferred and Warrants. The Company shall not be liable to the Holders in respect to the representations and warranties made herein unless claims have been initiated against it on or before the date that is twenty-four (24) months from the date of this Agreement.         11.4. Brokerage. Each party hereto will indemnify and hold harmless the others against and in respect of any claim for brokerage or other commissions relative to this Agreement or to the transactions contemplated hereby, based in any way an agreements, arrangements or understandings made or claimed to have been made by such party with any third party.         11.5. Parties in Interest. All representations, covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto shall bind and inure to the benefit of the respective successors and assigns of the parties hereto whether so expressed or not. Without limiting the generality of the foregoing, all representations, covenants and agreements benefitting the Holders shall inure to the benefit of holders who may purchase any of the Series C Preferred in a private transaction from time to time of the shares sold by the Company pursuant to the terms of this Agreement.         11.6. Notices. All notices, requests, consents and other communications hereunder shall be in writing and shall be delivered in person or mailed by certified or registered mail, return receipt requested, addressed as follows: The Company:          Pease Oil and Gas Company         751 Horizon Court, Suite 203         P. O. Box 60219         Grand Junction, Colorado 81506-8718         Attention: Patrick J. Duncan, President With a copy to:          Alan W. Peryam, Esq.         Alan W. Peryam, LLC         1120 Lincoln Street, Suite 1000         Denver, Colorado 80203 The Holders:          To the addresses set forth on Schedule 1 hereto or, in any such case, at such other address or addresses as shall have been furnished in writing by such party to the others.         11.7. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the state of Colorado.         11.8. Entire Agreement. This Agreement, including the Schedules and Exhibits hereto, constitutes the sole and entire agreement of the parties with respect to the subject matter hereof. All Schedules and Exhibits hereto are hereby incorporated herein by reference.         11.9. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.         11.10. Amendments. This Agreement may not be amended or modified, and no provisions hereof may be waived, without the written consent of the Company and the holders of at least two-thirds of the outstanding shares of Series C Preferred received by Holders pursuant to the terms of this Agreement.         11.11. Severability. If any provision of this Agreement shall be declared void or unenforceable by any judicial or administrative authority, the validity of any other provision and of the entire Agreement shall not be affected thereby.         11.12. Title and Subtitles. The titles and subtitles used in this Agreement are for convenience only and are not to be considered in construing or interpreting any term or provision of this Agreement.         11.13. Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined):           (a) “person” shall mean an individual, corporation, trust, partnership, joint venture, unincorporated organization, government agency or any agency or political subdivision thereof, or other entity.           (b) “subsidiary” shall mean, as to the Company, any corporation of which more than 50% of the outstanding stock having ordinary voting power to elect a majority of the Board of Directors of such corporation (irrespective of whether or not at the time stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned by the Company, or by one or more of its subsidiaries, or by the Company and one or more of its subsidiaries.           (c) “Governmental Authority” shall mean (i) the United States of America or any state within the United States of America and (ii) any court or any governmental department, commission, board, bureau, agency or other instrumentality of the United States of America or of any state within the United States of America.         11.14. Grounds for Termination. This Agreement may be terminated at any time prior to Closing:           (a) By mutual agreement of the Company, on one hand, and the Holders, on the other hand; and           (b) By the Company or any Holder if the Closing shall not have occurred on or before December 15, 2000, provided, however, that no party shall be entitled to terminate this Agreement under this Section 11.14(b) if the Closing has failed to occur because such party negligently or willfully failed to perform or observe in any material respect its covenants and agreements hereunder.         11.15. Effect of Termination. In the event that the Closing does not occur as a result of any party hereto exercising its rights to terminate pursuant to Section 11.14, then this Agreement shall be null and void and, except as expressly provided herein, no party shall have any rights or obligations under this Agreement, except that nothing herein shall relieve any party from liability for any willful or negligent failure to perform or observe in any material respect any agreement or covenant contained herein. In the event the termination of this Agreement results from the willful or negligent failure of any party to perform in any material respect any agreement or covenant herein, then the other parties shall be entitled to all remedies available at law or in equity and shall be entitled to recover court costs and reasonable attorneys' fees in addition to any other relief to which such party may be entitled.         IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective on the day and year first above written.                                                                              PEASE OIL AND GAS COMPANY                                                                              a Nevada corporation ATTEST                                                                              By: /s/ Patrick J. Duncan                                                                                          Patrick J. Duncan, President By: /s/ Marilyn L. Adams                                 Marilyn L. Adams, Secretary                                                                              PURCHASERS:                                                                              The entities listed on the attached Schedule 1 SCHEDULE 1 SCHEDULE OF INVESTORS Name and Address of Series B Preferred of Warrants Signature ---------------- --------------------- ------------ --------- Kayne Anderson Diversified 19,503 325,050 By: Kayne Anderson Capital Partners, L.P. Capital Advisors, L.P. 1800 Avenue of the Stars Floor 2 By/s/ Robert Sinnott Century City, CA 90067 Robert Sinnott Arbco Associates, L.P. 16,000 266,667 By: Kayne Anderson 1800 Avenue of the Stars Capital Advisors, L.P. Floor 2 Century City, CA 90067 By/s/ Robert Sinnott Robert Sinnott Kayne Anderson 18,000 300,000 By: Kayne Anderson Non-Traditional Investments, Capital Advisors, L.P. L.P. 1800 Avenue of the Stars By/s/ Robert Sinnott Floor 2 Robert Sinnott Century City, CA 90067 Kayne Anderson Capital 6,000 100,000 By: Kayne Anderson Partners, L.P. Capital Advisors, L.P. 1800 Avenue of the Stars Floor 2 By/s/ Robert Sinnott Century City, CA 90067 Robert Sinnott Sandpiper &amp; Co. 26,000 433,333 By: State Street Research & c/o State Street Research & Management Company, as Management Company, Adviser as Adviser One Financial Center By/s/ Francis J. McNamara, III Boston, MA 02111 Francis J. McNamara, III Executive Vice President, General Clunsel & Secretary Marine Crew & Co. 14,000 233,333 By: State Street Research & c/o State Street Research & ------- ---------- Management Company, as Management Company, Adviser as Adviser One Financial Center By/s/ Francis J. McNamara, III Boston, MA 02111 Francis J. McNamara, III Executive Vice President, General Clunsel & Secretary Total 99,503 1,658,383 ====== =========

EXHIBIT 10.2 EMPLOYMENT AGREEMENT Between INTERMET CORPORATION And DAVID L. NEILSON -------------------------------------------------------------------------------- THIS AGREEMENT, dated as of January 4, 2000 is made by and between INTERMET CORPORATION, a Georgia corporation having its principal place of business in Troy, Michigan (the “Company”), and David L. Neilson (the “Executive”). WHEREAS, the Company desires to continue the services of the Executive, and the Executive is willing to continue to render such services; and WHEREAS, the Company and the Executive have previously entered into a Letter of Agreement dated December 30, 1996 ; and WHEREAS, the Company and the Executive desire to amend this Letter of Agreement dated December 30, 1996 in certain respects and to restate their agreement as set forth in this Agreement; and WHEREAS, in order to secure the continued services of the Executive, the Company believes it should continue to provide the Executive with an agreement for severance payments. NOW, THEREFORE, the Company and the Executive agree as follows: Article 1 — Termination of Employment 1.1   Termination of Employment for Cause or Other Than for Good Reason. If, before the end of the Contract Term, the Company terminates the Executive’s employment for Cause or the Executive terminates employment other than for Good Reason, then the Company shall pay to the Executive in a lump sum immediately after the Date of Termination that portion of the Executive’s then current annual base salary which is accrued but unpaid as of such Date of Termination. The Executive will not be entitled to receive any other compensation or benefits under this Agreement.   1.2   Termination of Employment for Death or Disability. If, before the end of the Contract Term, the Executive’s employment terminates due to death or Disability, the Company shall pay to the Executive (or to the Executive’s estate), in accordance with Company policy following the Date of Termination:   (a)   that portion of the Executive’s annual base salary which is accrued but unpaid as of the Date of Termination;   (b)   the amount of any Annual Bonus applicable to any Annual Bonus Period which ended prior to the Date of Termination, but which is unpaid as of the Date of Termination;   (c)   disability, life insurance, and other benefits as typically provided to an executive under the Company’s employee welfare benefit plans as a result of such an executive’s death or Disability; and 2 -------------------------------------------------------------------------------- (d)   a pro rata portion of the Annual Bonus applicable to the Annual Bonus Period during which the Date of Termination occurs based upon actual performance for the Annual Bonus Period (such pro rata bonus shall be based on the portion of such Annual Bonus Period that expired prior to the Date of Termination, shall be payable following such Annual Bonus Period in accordance with Company policy and shall be determined without regard to any reduction in earnings on account of interest paid on additional debt incurred by the Company in connection with any Change in Control).   1.3   Termination of Employment By the Company Without Cause or By the Executive for Good Reason (other than following a Change of Control). If, before the end of the Contract Term, unless such event follows a Change of Control, the Executive’s employment is terminated by the Company without Cause or by the Executive for Good Reason (as that term is defined in the following Section 1.4), the Executive shall receive the following:   (a)   In a lump sum, that portion of the Executive’s annual base salary which is accrued but unpaid as of the Date of Termination and any unpaid Annual Bonus applicable to any Annual Bonus Period which ended prior to the Date of Termination;   (b)   In monthly payments, the amount of the Executive’s annual base salary (not taking into account any reductions which would constitute Good Reason) which would be payable for the period beginning on the Date of Termination and ending on the date that is one (1) year following the Date of Termination;   (c)   Following the Annual Bonus Period during which the Date of Termination occurs and in accordance with Company policy, a pro rata portion of the Annual Bonus applicable to such Annual Bonus Period based upon actual performance for the Annual Bonus Period (such pro rata bonus shall be based on the portion of such Annual Bonus Period that expired prior to the Date of Termination, shall be payable following such Annual Bonus Period in accordance with Company policy and shall be determined without regard to any reduction in earnings on account of interest paid on additional debt incurred by the Company in connection with any Change in Control); and   (d)   A cash payment representing an Annual Bonus for the one-year period following the Date of Termination, which cash payment will be equal to the Annual Bonus that would have been payable to the Executive for the entire Annual Bonus Period during which the Date of Termination occurs, and which will be payable on the date that is one year following the Date of Termination; and   (e)   During the period in which the Executive is receiving the payments set forth in subsection 1.3(b) above, the employee benefits to which the Executive was entitled during the Contract Term. The employee benefits to which the Executive is entitled hereunder shall include the continued use of a Company vehicle. The Executive will 3 --------------------------------------------------------------------------------     not be entitled to participate in the Company’s 401(k) plan, employee stock ownership plan, or similar retirement savings plan following the Date of Termination. The amount of any employee benefits payable under this Section 1.3(d) and the use of the Company vehicle shall be reduced or eliminated to the extent the Executive becomes entitled to duplicative benefits by virtue of his/her subsequent employment after the Date of Termination.   1.4   For purposes of the foregoing Section 1.3, the term “Good Reason” means the occurrence of any one of the following events:   (a)   assignment to the Executive of any duties materially inconsistent with the Executive’s current position (or such other position to which he/she may have been promoted), or any other action that results in a material and adverse change in the Executive’s position, status, title or responsibilities, provided, however, that (i) a change of title or change in reporting relationship that does not otherwise result in a material diminution of status or responsibilities, or (ii) a change that results in the Executive not serving as a member of the Company’s highest level executive committee (currently designated as the Company’s Operating Committee) will not constitute Good Reason,   (b)   the failure of the Company to assign this Agreement to a successor to the Company,   (c)   any reduction in the Executive’s annual base salary or any change in the Executive’s Annual Bonus that is not permitted by Section 2.1 hereof , or   (d)   any other material adverse change to the terms and conditions of the Executive’s employment under this Agreement, if the Company fails to cure such event within thirty (30) days after written notice from the Executive; provided, however, that if the event is intentional, knowing or repeated, the Executive shall not be required to provide written notice or an opportunity to cure. 1.5   Termination of Employment By the Company Without Cause or By the Executive for Good Reason (following a Change of Control). If, before the end of the Contract Term, and within twenty-four (24) months following a Change of Control, the Executive’s employment is terminated by the Company without Cause or by the Executive for Good Reason (as that term is defined in the following Section 1.6), the Executive shall receive the following:   (a)   In a lump sum, that portion of the Executive’s annual base salary which is accrued but unpaid as of the Date of Termination and any unpaid Annual Bonus applicable to any Annual Bonus Period which ended prior to the Date of Termination;   (b)   In monthly payments, the amount of the Executive’s annual base salary (not taking into account any reductions which would constitute Good Reason) which would be 4 --------------------------------------------------------------------------------     payable for the period beginning on the Date of Termination and ending on the date that is two (2) years following the Date of Termination;   (c)   Following the Annual Bonus Period during which the Date of Termination occurs and in accordance with Company policy, a pro rata portion of the Annual Bonus applicable to such Annual Bonus Period based upon actual performance for the Annual Bonus Period (such pro rata bonus shall be based on the portion of such Annual Bonus Period that expired prior to the Date of Termination, shall be payable following such Annual Bonus Period in accordance with Company policy and shall be determined without regard to any reduction in earnings on account of interest paid on additional debt incurred by the Company in connection with any Change in Control); and   (d)   During the period in which the Executive is receiving the payments set forth in subsection 1.5(b) above, the employee benefits to which the Executive was entitled during the Contract Term. The employee benefits to which the Executive is entitled under this Section 1.5(d) shall include the continued use of a Company vehicle. The Executive will not be entitled to participate in the Company’s 401(k) plan, employee stock ownership plan, or similar retirement savings plan following the Date of Termination. The amount of any employee benefits payable under this Section 1.5(d) shall be reduced or eliminated to the extent the Executive becomes entitled to duplicative benefits by virtue of his/her subsequent employment after the Date of Termination.   1.6   For purposes of the foregoing Section 1.5, the term “Good Reason” means the occurrence of any one of the following events:   (a)   assignment to the Executive of any duties materially inconsistent with the Executive’s current position (or such other position to which he/she may have been promoted), or any other action that results in a material and adverse change in the Executive’s position, status, title or responsibilities,   (b)   the failure of the Company to assign this Agreement to a successor to the Company,   (c)   any reduction in the Executive’s annual base salary or any change in the Executive’s Annual Bonus that is not permitted by Section 2.1 hereof   (d)   any other material adverse change to the terms and conditions of the Executive’s employment under this Agreement, or   (e)   any change that would require the Executive’s place of employment to be located outside a radius of thirty-five (35) miles of the Executive’s current place of employment, 5 -------------------------------------------------------------------------------- if the Company fails to cure such event within thirty (30) days after written notice from the Executive; provided, however, that if the event is intentional, knowing or repeated, the Executive shall not be required to provide written notice or an opportunity to cure. 1.7   Other Termination Benefits. In addition to any amounts or benefits provided upon termination of employment hereunder and except as otherwise provided herein, the Executive shall be entitled to any payments or benefits explicitly provided under the terms of any plan, policy or program of the Company or as otherwise required by applicable law. Article 2 — Certain Definitions 2.1   “Annual Bonus” means the annual cash bonus paid to the Executive pursuant to the Company’s annual bonus plan. During the Contract Term, the Company shall maintain an annual bonus plan that provides the Executive with benefits that are substantially equivalent to the benefits provided under the Company’s current annual bonus plan, provided, however, that the Company shall continue to be permitted to adjust bonus participation levels for company executives, including for the Executive, based on performance factors in accordance with the Company’s current practice.   2.2   “Annual Bonus Period” means the annual period on which the Executive’s Annual Bonus is based.   2.3   “Contract Term” means the period commencing on January 4, 2000 and ending on January 3, 2001 ; provided, however, that commencing January 5, 2000 the Contract Term shall be automatically extended by one day on each day the Executive remains employed; and, provided further, that notwithstanding anything herein to the contrary, the Contract Term and all obligations of the Company hereunder shall terminate on the Executive’s sixty-fifth (65th) birthday.   2.4   “Date of Termination” means the date on which the Executive’s employment with the Company terminates.   2.5   “Disability” means any medically determinable physical or mental impairment that can be expected to last for a continuous period of not less than six (6) months, and that renders the Executive unable to perform the duties required under this Agreement. The date of the determination of Disability is the date on which the Executive is certified as having incurred a Disability by a physician acceptable to the Company.   2.6   “Cause” means (a) the Executive’s committing any felony or other crime involving dishonesty; (b) any serious misconduct in the course of the Executive’s employment; or (c) the Executive’s habitual neglect of the Executive’s duties (other than on account of Disability), except that Cause shall not mean:   (1)   bad judgment or negligence other than habitual neglect of duty; 6 -------------------------------------------------------------------------------- (2)   any act or omission believed by the Executive in good faith to have been in or not opposed to the interest of the Company (without intent of the Executive to gain therefrom, directly or indirectly, a profit to which the Executive was not legally entitled); or   (3)   any act or omission with respect to which a determination could properly have been made that the Executive met the applicable standard of conduct for indemnification or reimbursement under the by-laws of the Company, any applicable indemnification agreement or the laws and regulations under which the Company is governed, in each case in effect at the time of such act or omission.   2.7   “Change in Control” means the occurrence of any of the following events:   (a)   any “person” (as such term is defined in Section 3(a)(9) of the Securities Exchange Act of 1934 (the “Exchange Act”) and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a “beneficial owner” (as defined in Rule 1 3d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company’s then outstanding securities eligible to vote for the election of the Board of Directors of the Company (the “Company Voting Securities”) provided, however, that the event described in this paragraph shall not be deemed to be a Change in Control by virtue of any of the following acquisitions: (i) by the Company or, direct or indirect, majority-owned subsidiaries of the Company, (ii) by any employee benefit plan sponsored or maintained by the Company or any corporation controlled by the Company, (iii) by any underwriter temporarily holding securities pursuant to an offering of such securities, (iv) pursuant to a Non-Control Transaction (as defined in paragraph (c)), (v) pursuant to any acquisition by the Executive or any group of persons including the Executive, or (vi) in which Company Voting Securities are acquired from the Company, if a majority of the Board of Directors of the Company approves a resolution providing expressly that the acquisition pursuant to this clause (vi) does not constitute a Change in Control under this paragraph (a);   (b)   individuals who, on January 4, 2000, constitute the Board of Directors of the Company (the “Incumbent Board”) cease for any reason to constitute at least a majority thereof, provided that (i) any person becoming a director subsequent to January 4, 2000, whose election, or nomination for election, by the Company’s shareholders was approved by a vote of at least three-quarters of the directors comprising the Incumbent Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without objection to such nomination) shall be, for purposes of this paragraph (b), considered as though such person were a member of the Incumbent Board; Provided however, that no individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest with respect to directors or any other actual or threatened solicitation of proxies or 7 --------------------------------------------------------------------------------     consents by or on behalf of any person other than the Board of Directors shall be deemed to be a member of the Incumbent Board;   (c)   the consummation of a merger or consolidation or similar form of corporate reorganization, or sale or other disposition of all or substantially all of the assets, of the Company (a “Business Combination”) is consummated, unless immediately following such Business Combination: (i) more than 50% of the total voting power of the corporation resulting from such Business Combination (including, without limitation, for purposes of making such 50% determination, any shares owned through any entity which directly or indirectly has beneficial ownership of the Company Voting Securities or all or substantially all of the Company’s assets) eligible to elect directors of such corporation is represented by shares held by shareholders of the Company immediately prior to such Business Combination (either by remaining outstanding or being converted), (ii) no person (other than any holding company resulting from such Business Combination, any employee benefit plan sponsored or maintained by the Company (or the corporation resulting from such Business Combination), or any person which beneficially owned, immediately prior to such Business Combination, directly or indirectly, 30% or more of the Company Voting Securities) becomes the beneficial owner, directly or indirectly of 30% or more of the total voting power of the outstanding voting securities eligible to elect directors of the corporation resulting from such Business Combination, and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or action of the Board of Directors, providing for such Business Combination (a “Non-Control Transaction”); or   (d)   the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company. Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any person acquires beneficial ownership of more than 30% of the Company Voting Securities as a result of the acquisition of Company Voting Securities by the Company which, by reducing the number of Company Voting Securities outstanding, increases the percentage of shares beneficially owned by such person; provided, that if a Change in Control would occur as a result of such an acquisition by the Company (if not for the operation of this sentence), and after the Company’s acquisition such person becomes the beneficial owner of additional Company Voting Securities that increases the percentage of outstanding Company Voting Securities beneficially owned by such person, then a Change in Control shall occur. 2.8   “Good Reason” shall have the meaning set forth in Section 1.4 or 1.6, as the case may be. Article 3 — Restrictive Covenants 3.1   Trade Secrets. Confidential and Proprietary Business Information 8 -------------------------------------------------------------------------------- (a)   The Company has advised the Executive and the Executive acknowledges that it is the policy of the Company to maintain as secret and confidential all Protected Information (as defined below), and that Protected Information has been and will be developed at substantial cost and effort to the Company. “Protected Information” means trade secrets, confidential and proprietary business information of the Company, any information of the Company other than information which has entered the public domain (unless such information entered the public domain through the efforts of or on account of the Executive), and all valuable and unique information and techniques acquired, developed or used by the Company relating to its business, operations, employees and customers, which give the Company a competitive advantage over those who do not know the information and techniques and which are protected by the Company from unauthorized disclosure, including but not limited to, customer lists (including potential customers), sources of supply processes, plans, materials, pricing information, internal memoranda, marketing plans, internal policies, and products and services which may be developed from time to time by the Company and its agents or employees.   (b)   The Executive acknowledges that the Executive will acquire Protected Information with respect to the Company and its successors in interest, which information is valuable, special and a unique asset of the Company’s business and operations and that disclosure of such Protected Information would cause irreparable damage to the Company.   (c)   The Executive shall not, directly or indirectly, divulge, furnish or make accessible to any person, firm, corporation, association or other entity (otherwise than as may be required in the regular course of the Executive’s employment) nor use in any manner, either during or after termination of employment by the Company any Protected Information or cause any such information of the Company to enter the public domain.   3.2   Non-Competition.   (a)   The Executive agrees that the Executive shall not during the Executive’s employment with the Company, and, if the Executive’s employment is terminated for any reason other than termination of employment without Cause or for Good Reason, thereafter for a period of one (1) year directly or indirectly, in any capacity, engage or participate in or become employed by or render advisory or consulting or other services in connection with any Prohibited Business as defined below.   (b)   The Executive agrees that if the Executive’s employment is terminated without Cause or for Good Reason, thereafter during the period in which the Executive is receiving payments under either Section 1.3(b) or 1.5(b) hereof, directly or indirectly, in any capacity, engage or participate in or become employed by or render advisory or consulting or other services in connection with any Prohibited Business as defined below. 9 -------------------------------------------------------------------------------- (c)   Notwithstanding Section 3.2(b) above, at any time during which the Executive is receiving the payments and benefits due the Executive pursuant to Sections 1.3(b) and 1.3(d), or Sections 1.5(b) and 1.5(d), as the case may be, the Executive may elect by written notice to the Company to forego and release the Company from paying such payments and providing such benefits. From and after the date of such notice (i) the Company shall have no further obligation to make such payments or provide such benefits, and (ii) the obligation of the Executive set forth in Section 3.2(b) shall terminate. In the event that the Executive is entitled to the Annual Bonus described in Section 1.3 (d) and makes the election provided for by this Section 3.2 (c), such Annual Bonus will be pro-rated based on the time period from the Date of Termination to the date the Executive makes the election provided for by this Section 3.2 (c).   (d)   The Executive agrees that the Executive shall not during the Executive’s employment with the Company, and, if the Executive’s employment is terminated for any reason, thereafter for a period of one (1) year, make any financial investment, whether in the form of equity or debt, or own any interest, directly or indirectly, in any Prohibited Business. Nothing in this Section 7.02 shall, however, restrict the Executive from making any investment in any Company whose stock is listed on a national securities exchange or actively traded in the over-the-counter market; provided that (i) such investment does not give the Executive the right or ability to control or influence the policy decisions of any Prohibited Business, and (ii) such investment does not create a conflict of interest between the Executive’s duties hereunder and the Executive’s interest in such investment.   (e)   “Prohibited Business” shall be defined as any business and any branch, office or operation thereof, which is a direct and material competitor of the Company wherever the Company does business, in the United States or abroad, and which has established or seeks to establish contact, in whatever form (including but not limited to solicitation of sales, or the receipt or submission of bids) with any entity who is at any time a client, customer or supplier of the Company (including but not limited to all subdivisions of the federal government).   3.3   Undertaking Regarding Employees. From the date hereof until two years after the Executive’s Date of Termination, the Executive shall not, directly or indirectly, (a) encourage any employee of the Company or its successors in interest to leave their employment with the Company or its successors in interest; or (b) employ, hire, solicit or cause to be employed or hired or solicited (other than by the Company or its successors in interest), or establish a business with, or encourage others to hire, any person who within two (2) years prior thereto was employed by the Company or its successors in interest.   3.4   Disclosure of Employee-Created Trade Secrets. Confidential and Proprietary Business Information. The Executive agrees to promptly disclose to the Company all Protected Information developed in whole or in part by the Executive during the 10 --------------------------------------------------------------------------------     Executive’s employment with the Company and which relate to the Company’s business. Such Protected Information is, and shall remain, the exclusive property of the Company. All writings created during the Executive’s employment with the Company (excluding writings unrelated to the Company’s business) are considered to be “works-for-hire” for the benefit of the Company and the Company shall own all rights in such writings. Article 4 — Successors 4.1   The Company shall cause this Agreement to be binding on the Company and any successor to the Company. Article 5 — Superseding Effect 5.1   This Agreement replaces and supercedes the prior Letter of Agreement between the Company and the Executive dated December 30, 1996, which prior agreement shall have no further force or effect. The Executive acknowledges that this Agreement has been entered into voluntarily by the Executive and the Company, and that the replacement of the prior agreement with this Agreement does not constitute a material adverse change to the terms and conditions of the Executive’s employment under the terms of the prior agreement. INTERMET CORPORATION By: /s/  John Doddridge            John Doddridge Title: Chairman & Chief Executive Officer /s/ David L. Neilson        Executive 11

QuickLinks -- Click here to rapidly navigate through this document [LOGO]   Wells Fargo Bank Minnesota, National Association   Credit Agreement -------------------------------------------------------------------------------- --------------------------------------------------------------------------------     THIS CREDIT AGREEMENT (the "Agreement") dated as of June 30, 2000 (the "Effective Date") is between Wells Fargo Bank Minnesota, National Association (the "Bank") and Datalink Corporation (the "Borrower"). BACKGROUND     The Borrower has asked the Bank to provide it with a $10,000,000.00 line of credit to be used for financing potential acquisitions. The Borrower has also asked the Bank to provide it with a $5,000,000.00 line of credit for financing its working capital needs. The Bank is agreeable to meeting the Borrower's request, provided that the Borrower agrees to the terms and conditions of this Agreement.     For purposes of this Agreement, Revolving Note A and Revolving Note B shall collectively be referred to as the "Notes." The Notes and this Agreement, and any modifications, amendments or replacements thereto shall be referred to collectively as the "Documents."     In consideration of the above premises, the Bank and the Borrower agree as follows: 1.  LINE OF CREDIT A     1.1 Line of Credit A Amount. During the Line A Availability Period defined below, the Bank agrees to provide a revolving line of credit ("Line A") to the Borrower. Outstanding amounts under Line A shall not, at any one time, exceed TEN MILLION AND 00/100 DOLLARS ($10,000,000.00).     1.2 Line A Availability Period. The "Line A Availability Period" shall mean the period of time from the Effective Date or the date on which all conditions precedent described in this Agreement have been met, whichever is later, to the Line A Expiration Date of June 30, 2001.     1.3 Revolving Note A. The Borrower's obligation to repay advances under Line A shall be evidenced by a single promissory note ("Revolving Note A") dated as of the Effective Date, and in form and content acceptable to the Bank. Reference is made to Revolving Note A for interest rate and repayment terms. 2.  LINE OF CREDIT B     2.1 Line of Credit B Amount. During the Line B Availability Period defined below, the Bank agrees to provide a revolving line of credit ("Line B") to the Borrower. Outstanding amounts under Line B shall not, at any one time, exceed FIVE MILLION AND 00/100 DOLLARS ($5,000,000.00).     2.2 Line B Availability Period. The "Line B Availability Period" shall mean the period of time from the Effective Date or the date on which all conditions precedent described in this Agreement have been met, whichever is later, to the Line B Expiration Date of June 30, 2001.     2.3 Revolving Note B. The Borrower's obligation to repay advances under Line B shall be evidenced by a single promissory note ("Revolving Note B") dated as of the Effective Date, and in form and content acceptable to the Bank. Reference is made to Revolving Note B for interest rate and repayment terms.     2.4 Standby Letters of Credit     (a)  Issuance and Expiration.  During the Line B Availability Period, the Bank agrees to issue standby letters of credit ("Standby L/Cs") for the account of the Borrower, provided that the Borrower is in compliance with the terms of this Agreement. Each Standby L/C must expire at the earlier of the Line B Expiration Date or 180 days after issuance, or at such time as the Bank and the Borrower may agree to at the time of issuance. Prior to the issuance of a Standby L/C, the Borrower will execute the Bank's -------------------------------------------------------------------------------- standard Application and Agreement for Irrevocable Standby Letter of Credit (the "Standby L/C Agreement") and such other documents as the Bank deems necessary.     (b)  Fees.  The Borrower shall pay a standby letter of credit fee of 1.50% per annum on the face amount of each Standby L/C, subject to a minimum fee of $300, and calculated on the basis of actual days elapsed in a 360-day year. This fee shall be paid quarterly in advance and is in addition to all other fees or expenses provided for in the L/C Application.     (c)  Reduction of Line Availability.  Availability under Line B shall be reduced dollar for dollar by the face amount of all outstanding Standby L/Cs, plus any unreimbursed draws. Without limiting any rights and remedies available to the Bank under any Standby L/C Agreement, any draw under a Standby L/C may, at the Bank's option, be repaid through an automatic advance under Line B, which shall be repayable according to the terms of this Agreement.     (d)  Cash Collateralization of Outstanding Standby L/Cs.  Should a default occur under this Agreement, the Bank may require the Borrower to deposit with it in a non-interest bearing account, immediately available funds equal to the face amount of outstanding Standby L/Cs. The Borrower hereby grants the Bank a security interest in these funds as security for all of the Borrower's obligations to the Bank.     2.5 Documentary Letters of Credit     (a)  Issuance and Expiration.  During the Line B Availability Period, the Bank agrees to issue documentary letters of credit ("Documentary L/Cs") for the account of the Borrower, provided that the Borrower is in compliance with the terms of this Agreement. Each Documentary L/C must expire prior to the Line B Expiration Date or at such time as the Bank and the Borrower agree to at the time of issuance, and must require drafts payable at sight. Prior to the issuance of a Documentary L/C, the Borrower will execute the Bank's standard Application and Agreement for Irrevocable Documentary Letters of Credit (the "Documentary L/C Agreement") and such other documents as the Bank deems necessary.     (b)  Fees and Expenses.  Fees and expenses related to each Documentary L/C will be agreed upon at issuance.     (c)  Reduction of Line Availability.  Availability under Line B shall be reduced dollar for dollar by the face amount of all outstanding Documentary L/Cs, plus any unreimbursed draws. Without limiting any rights and remedies available to the Bank under the Documentary L/C Agreement and related documents, any draw under a Documentary L/C may, at the Bank's option, be repaid through an automatic advance under Line B, which shall be repayable according to the terms of this Agreement.     (d)  Cash Collateralization of Outstanding Documentary L/Cs.  Should a default occur under this Agreement the Bank may require the Borrower to deposit with it in a non-interest bearing account immediately available funds equal to the face amount of outstanding Documentary L/Cs. The Borrower hereby grants the Bank a security interest in these funds as security for all of the Borrower's obligations to the Bank.     2.6 Line B Commitment Fee. During the Line B Availability Period, the Borrower shall pay the Bank a commitment fee of 0.15% per annum on the average daily unused amount of Line B. This fee shall be calculated on the basis of actual days elapsed in a 360 day year and shall be paid quarterly in arrears. 3.  FEES AND EXPENSES     3.1 Documentation Expense. The Borrower agrees to reimburse the Bank for its reasonable expenses relating to the preparation of the Documents and any possible future amendments to the Documents, which reimbursement may include, but shall not be limited to, reimbursement of reasonable attorneys' fees, including the allocated costs of the Bank's in-house counsel. Despite such reimbursement the Borrower acknowledges that the Bank's counsel is engaged solely to represent the Bank and does not represent the Borrower. --------------------------------------------------------------------------------     3.2 Collection Expense. In the event the Borrower fails to comply with any covenant or condition of this Agreement or the Documents, or fails to pay the Bank any amounts due under this Agreement or under the Documents, the Borrower shall pay all costs of workout and collection, including reasonable attorneys' fees and legal expenses incurred by the Bank. 4.  ADVANCES AND PAYMENTS     4.1 Requests for Advances. Any line advance requested under the terms of this Agreement shall be requested by telephone or in a writing delivered to the Bank (or transmitted via facsimile) by any person reasonably believed by the Bank to be authorized by the Borrower to do so. The Bank will not consider any such request following an event which is, or with notice or the lapse of time would be, an event of default under this Agreement. Proceeds shall be deposited into the Borrower's account at the Bank or disbursed in such other manner as the parties may agree.     4.2 Interest Rate Options For Revolving Notes A and B. Revolving Notes A and B permit the Borrower to fix an interest rate for a time period and principal amount agreeable to the Bank and the Borrower, based on (1) the Base Rate (as defined in each note), floating, minus 1.0% (the "Base Rate Option"), which shall apply at all times whenever the rate has not otherwise been fixed by the agreement of the Bank and the Borrower, or (2) an interest rate or rates described in each note that is derived from and available to the Bank on international money markets for a similar time period and principal amount, which rates are more fully described in each note, plus a margin that, with respect to Revolving Note A, will vary based upon the Borrower's financial performance as provided in Section 4.3 of this Agreement, and, with respect to Revolving Note B, of 1.10% (the "LIBOR Interest Rate Option").     To elect the LIBOR Interest Rate Option, the Borrower must request a quote from the Bank two days prior to funding. This request must designate an amount (the "LIBOR Interest Rate Portion") and a period (the "LIBOR Interest Rate Period"). The LIBOR Interest Rate Portion must be at least $100,000 and the LIBOR Interest Rate Period will be for 30, 60 or 120 days, or any other period to which the parties may agree. The Bank shall not be obligated to provide a LIBOR Interest Rate quote if it determines that no deposits with an amount and maturity equal to those for which a quotation has been requested are available to it in the London Interbank Market. The Borrower must orally accept a quote when received or it will be deemed rejected. If accepted, the LIBOR Interest Rate Option will remain in effect for the LIBOR Interest Rate Period specified in the quote. At the end of each LIBOR Interest Rate Period the principal amount subject to the LIBOR Interest Rate Option shall bear interest at the Base Rate Option.     4.3 Performance Based Rate Pricing For Line A. Following its review of the Borrower's interim financial statements and quarterly Compliance Certificate, the Bank shall adjust the LIBOR Interest Rate Option margin applicable to Revolving Note A to a margin that is based on the following performance criteria:     (a) Effective the first day of the calendar quarter in which the Borrower's Funded Debt to EBITDA Ratio, as defined in Section 7.2(d), is determined by the Bank to be less than 0.55 to 1.0, the margin shall be 1.10%.     (b) Effective the first day of the calendar quarter in which the Borrower's Funded Debt to EBITDA Ratio, as defined in Section 7.2(d), is determined by the Bank to be at least 0.55 to 1.0 but no more than 1.10 to 1.0, the margin shall be 1.30%.     (c) Effective the first day of the calendar quarter in which the Borrower's Funded Debt to EBITDA Ratio, as defined in Section 7.2(d), is determined by the Bank to be more than 1.10 to 1.0, the margin shall be 1.50%, unless the default rate of interest set forth in Section 4.5 of this Agreement is applicable.     4.4 Effective Date of Performance Based Pricing Changes. Any margin change described above shall become effective on the first day of the calendar quarter following the Bank's receipt of the Borrower's interim financial statements and Compliance Certificate as provided in Sections 7.1(b) and -------------------------------------------------------------------------------- 7.1(c) of this Agreement. Following any event of default defined described in Section 8 of this Agreement, and regardless of whether or not the Revolving Note has been accelerated, Revolving Note A shall commence accruing interest at the rate described in Section 4.3(c) herein.     4.5 Default Rate of Interest. Following the occurrence of any event of default as defined in Section 8 of the Agreement, or following the maturity of each of Line A and Line B and the acceleration of Revolving Note A and Revolving Note B, the interest rate applicable to Revolving Note A and Revolving Note B shall be increased to annual rate equal to the Base Rate plus 2.0%, floating. This rate of interest shall commence as of the date that the Bank in its sole discretion determines that the last event constituting the event of default takes place, which period shall include any applicable grace period, if any, and shall continue through the last day of the fiscal quarter in which the event of default has been cured. The rate shall also apply in the event that Line A and Line B have matured and that Revolving Note A and Revolving Note B have been accelerated.     The Bank's assessment or acceptance of interest paid at an increased rate shall not constitute a waiver of any default under the terms of the Agreement and Revolving Note A and Revolving Note B, or a waiver of the Bank's right to terminate Line A and Line B and accelerate or demand payment of Revolving Note A or Revolving Note B.     4.6 Payments. All principal, interest and fees due under the Documents shall be paid by the direct debit of available funds deposited in the Borrower's account with the Bank. The Bank shall debit the account on the dates the payments become due. If a due date does not fall on a day on which the Bank is open for substantially all of its business (a "Banking Day", except as otherwise provided), the Bank shall debit the account on the next Banking Day, and interest shall continue to accrue during the extended period. If there are insufficient funds in the account on the day the Bank enters any debit authorized by this Agreement, the debit will be reversed and the payment shall be due immediately without necessity of demand by direct remittance of immediately available funds. For amounts bearing interest at the LIBOR Rate (if any), a Banking Day is a day on which the Bank is open for business and on which dealings in U.S. dollar deposits are carried on in the London Interbank Market. 5.  CONDITIONS PRECEDENT     The Borrower must deliver to the Bank the documents described in Exhibit B, properly executed and in form and content acceptable to the Bank, prior to the Bank's initial advance or disbursement under this Agreement. 6.  REPRESENTATIONS AND WARRANTIES     To induce the Bank to enter into this Agreement, the Borrower, to the best of its knowledge and upon due inquiry, makes the representations and warranties contained in Exhibit C. Each request for an advance or a disbursement under this Agreement following the Effective Date constitutes a reaffirmation of these representations and warranties. 7.  COVENANTS     7.1 Financial Information and Reporting. Except as otherwise stated in this Agreement, all financial information provided to the Bank shall be compiled using generally accepted accounting principles consistently applied.     During the time period that credit is available under this Agreement, and afterward until all amounts due under the Documents are paid in full, unless the Bank shall otherwise agree in writing, the Borrower agrees to:     (a)  Annual Financial Statements.  Provide the Bank within 120 days of the Borrower's fiscal year end, the Borrower's annual financial statements. The statements must be audited with an unqualified opinion by a certified public accountant acceptable to the Bank, and must be accompanied by a certificate of such accountants stating that, in conducting their audit, they have no knowledge of any event of default under this Agreement, or any event which would, after the lapse of time or the giving -------------------------------------------------------------------------------- of notice, or both, constitute an event of default under this Agreement or any of the other Documents, specifying the nature and duration of the default.     (b)  Interim Financial Statements.  Provide the Bank within 45 days of each fiscal quarter end, the Borrower's interim financial statements for the interim period then ending. The statements must be current through the end of that period and must be certified as correct by an officer of the Borrower in form acceptable to the Bank.     (c)  Compliance Certificate.  Provide the Bank concurrently with the interim financial statements required above, a Compliance Certificate in the form of Exhibit D, that has been signed by an officer of the Borrower, which: (1) certifies that the statements have been accurately prepared in accordance with generally accepted accounting principles applied consistently with the last annual financial statements provided by the Borrower; (2) certifies that the officer has no knowledge of any event which has or might, after the lapse of time or the giving of notice, or both, constitute an event of default under this Agreement or the Documents, or of any event which would, after the lapse of time or the giving of notice, or both, constitute an event of default under the Agreement or the Documents; and (3) demonstrates that the Borrower remains in compliance with all financial covenants that must be complied with as of the date of the financial statements.     (d)  Financial Projections.  Provide the Bank no later than 120 days prior to each fiscal year end, financial projections for the Borrower's operations in the next fiscal year in form acceptable to the Bank.     (e)  Notices.  Provide the Bank prompt written notice of: (1) any event of default or any event which would, after the lapse of time or the giving of notice, or both, constitute an event of default under the Agreement or any of the Documents; or (2) any future event that would cause the representations and warranties contained in this Agreement to be untrue when applied to the Borrower's circumstances as of the date of such event.     (f)  Additional Information.  Provide the Bank with such other information as it may reasonably request, and permit the Bank to visit and inspect its properties and examine its books and records.     7.2 Financial Covenants. During the time period that credit is available under this Agreement, and afterward until all amounts due under the Documents are paid in full, unless the Bank shall otherwise agree in writing, the Borrower agrees to comply with the financial covenants described below, which shall be calculated using generally accepted accounting principles consistently applied, except as they may be otherwise modified by the following capitalized definitions:     "Net Working Capital" means Current Assets less Current Liabilities.     "Subordinated Debt" means debt that is expressly subordinated to the Bank in a writing acceptable to the Bank.     "Tangible Net Worth" means total assets less total liabilities and less the following types of assets: (1) leasehold improvements; (2) receivables and other investments in or amounts due from any shareholder, director, officer, employee or other person or entity related to or affiliated with the Borrower; and (3) goodwill, patents, copyrights, mailing lists, trade names, trademarks, servicing rights, organizational and franchise costs, bond underwriting costs and other like assets properly classified as intangible.     (a)  Tangible Net Worth plus Subordinated Debt.  Maintain a minimum Tangible Net Worth plus Subordinated Debt of at not less than $15,000,000.00, as of its fiscal quarter ending March 31, 2000, and, for each fiscal quarter end thereafter, amount equal to $15,000,000.00 plus 75% of its cumulative net earnings for each preceding fiscal quarter, starting with the fiscal quarter ending as of March 31, 2000.     (b)  Senior Liabilities to Tangible Net Worth plus Sub Debt.  Maintain a ratio of total liabilities less Subordinated Debt to Tangible Net Worth plus Subordinated Debt of not greater than 2.25 to 1.0 as of the end of each fiscal quarter. --------------------------------------------------------------------------------     (c)  Net Working Capital.  Maintain Net Working Capital of not less than $14,500,000.00 as of the end of each fiscal quarter.     (d)  Funded Debt to EBITDA.  Maintain a ratio of total interest bearing debt to earnings plus interest, taxes, depreciation and amortization of 1.65 to 1.0 as of the end of each fiscal quarter based on a rolling four quarter period.     (e)  Net Profit.  Obtain a profit of at least $1.00 as of the end of each fiscal quarter.     7.3 Other Covenants. During the time period that credit is available under this Agreement, and afterward until all amounts due under the Documents are paid in full, unless the Bank shall otherwise agree in writing, the Borrower agrees to:     (a)  Additional Borrowings.  Refrain from incurring any indebtedness except: (1) trade credit incurred in the ordinary course of business; (2) indebtedness expressly subordinated to the Bank in a writing acceptable to the Bank; and (3) indebtedness in existence on the date of this Agreement and disclosed in advance to the Bank in writing.     (b)  Other Liens, Assignments, and Subordinations.  Refrain from allowing any security interest or lien on property it owns now or in the future, or assign any interest that it may have in any assets or subordinate any rights that it may have in any assets now or in the future, except: (1) liens, assignments, or subordinations in favor of the Bank; (2) liens, assignments, or subordinations outstanding on the date of this Agreement and disclosed in advance to the Bank in writing; (3) liens for taxes or assessments or other governmental charges not delinquent or which the Borrower is contesting in good faith; and (4) liens that are imposed by law for obligations for labor or materials not overdue for more than 120 days, such as mechanics', materialmen's, carriers', landlords', and warehousemen's liens, or liens, pledges, or deposits under workers' compensation, unemployment insurance, Social Security, or similar legislation.     (c)  Capital Expenditures.  Refrain from making, or committing to make, capital expenditures (including the total amount of any capital leases) in an aggregate amount exceeding $2,000,000.00 in any single fiscal year.     (d)  Out of Debt Period.  Reduce the principal outstanding under Revolving Note B to $0.00 for 30 consecutive days each calendar year.     (e)  Change of Ownership.  Refrain from permitting or suffering any change in the capital ownership of the Borrower that results in any one person or entity from obtaining a controlling interest in the Borrower.     (g)  Guaranties.  Refrain from assuming, guaranteeing, endorsing or otherwise becoming contingently liable for any obligations of any other person, except for those guaranties outstanding as of the Effective Date and disclosed to the Bank in writing.     (h)  Deposit Accounts.  Maintain its principal deposit accounts with the Bank.     (i)  Form of Organization and Mergers.  Refrain from changing its legal form of organization, or consolidating, merging, pooling, syndicating or otherwise combining with any other entity.     (j)  Maintenance of Properties.  Make all repairs, renewals or replacements necessary to keep its plant, properties and equipment in good working condition.     (k)  Books and Records.  Maintain adequate books and records, refrain from making any material changes in its accounting procedures for tax or other purposes, and permit the Bank to inspect same upon reasonable notice.     (l)  Compliance with Laws.  Comply in all material respects with all laws applicable to its form of organization, business, and the ownership of its property.     (m)  Preservation of Rights.  Maintain and preserve all permits, licenses, rights, privileges, charters and franchises that it now owns. --------------------------------------------------------------------------------     These covenants were negotiated by the Bank and Borrower based on information provided to the Bank by the Borrower. A breach of a covenant is an indication that the risk of the transaction has increased. As consideration for any waiver or modification of these covenants, the Bank may require: additional collateral, guaranties or other credit support; higher fees or interest rates; and possible modifications to the Documents and the monitoring of the Agreement. The waiver or modification of any covenant that has been violated by the Borrower shall be made at the sole discretion of the Bank. These options do not limit the Bank's right to exercise its rights under Section 8 of this Agreement. 8.  EVENTS OF DEFAULT AND REMEDIES     8.1 Default. Upon the occurrence of any one or more of the following events of default, or at any time afterward unless the default has been cured, the Bank may declare Line A and Line B to be terminated and in its discretion accelerate and declare the unpaid principal, accrued interest and all other amounts payable under the Notes and the Documents to be immediately due and payable:     (a) Failure by the Borrower to make any payment of principal or interest due under either Revolving Note A or Revolving Note B, which continues for ten (10) days after its due date.     (b) Default by the Borrower in the observance or performance of any covenant or agreement contained in this Agreement, and continuance for more than fifteen (15) days.     (c) Default by the Borrower with respect to any indebtedness or obligation owed to the Bank, which is unrelated to any loan or facility subject to the terms of this Agreement, or to any third party creditor, which would allow the maturity of any such indebtedness or obligation to be accelerated.     (d) Any representation or warranty made by the Borrower to the Bank in this Agreement, or any financial statement or report submitted to the Bank by or on behalf of the Borrower before or after the Effective Date is untrue or misleading in any material respect.     (e) Any litigation or governmental proceeding against the Borrower seeking an amount that would have a material adverse effect on the Borrower and its operations which is not insured or subject to indemnity by a solvent third party either (1) results in a judgment in an amount that would have a material adverse effect on the Borrower or (2) remains unresolved on the 270th day following the date of service on the Borrower.     (f)  A garnishment, levy or writ of attachment, or any local, state, or federal notice of tax lien or levy is made or issues against the Borrower, or any post judgment process or procedure is commenced or any supplementary remedy for the enforcement of a judgment is employed against the Borrower or the Borrower's property.     (g) A material adverse change occurs in the Borrower's financial condition or ability to repay its obligations to the Bank.     8.2 Immediate Default. If, with or without the Borrower's consent, a custodian, trustee or receiver is appointed for any of the Borrower's properties, or if a petition is filed by or against the Borrower under the United States Bankruptcy Code, or the Borrower is dissolved, liquidated, or winds up its business then Line A and Line B shall immediately terminate without notice, and the unpaid principal, accrued interest, and all other amounts payable under the Notes and the Documents shall become immediately due and payable without notice or demand. 9.  MISCELLANEOUS     9.1 No Waiver; Cumulative Remedies. No failure or delay by the Bank in exercising any rights under this Agreement shall be deemed a waiver of those rights. The remedies provided for in this Agreement and the Documents are cumulative and not exclusive of any remedies provided by law.     9.2 Amendments or Modifications. Any amendment or modification of this Agreement must be in writing and signed by the Bank and Borrower. Any waiver of any provision in this Agreement must be in writing and signed by the Bank. --------------------------------------------------------------------------------     9.3 Binding Effect: Assignment. This Agreement and the Documents are binding on the successors and assigns of the Borrower and Bank. The Borrower may not assign its rights under this Agreement and the Documents without the Bank's prior written consent. The Bank may sell participations in or assign this Agreement and the Documents and exchange financial information about the Borrower with actual or potential participants or assignees.     9.4 Minnesota Law. This Agreement and the Documents shall be governed by the substantive laws (other than conflict of laws) of the State of Minnesota, and the Bank and Borrower consent to the personal jurisdiction of the state and federal courts located in the State of Minnesota.     9.5 Severability of Provisions. If any part of this Agreement or the Documents are unenforceable, the rest of this Agreement or the Documents may still be enforced.     9.6 Integration. This Agreement and the Documents describe the entire understanding and agreement of the parties and supersede all prior agreements between the Bank and the Borrower relating to each credit facility subject to this Agreement, whether verbal or in writing, and 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. In the event of any inconsistency between the Agreement and the Documents, inconsistent terms shall, where possible, be construed as conferring cumulative rights and remedies upon the Bank, and, to the extent that such construction is not possible, the terms of this Agreement shall govern. Address for notices to Bank:   Address for notices to Borrower:   Wells Fargo Bank Minnesota,       Datalink Corporation   National Association   7423 Washington Avenue South MAC N9305-114 Sixth & Marquette   Minneapolis, Minnesota 55439 Minneapolis, MN 55479   Attention: Daniel J. Kinsella, Attention: Michael Krutsch,            Chief Financial Officer          Vice President       WELLS FARGO BANK MINNESOTA,   NATIONAL ASSOCIATION       DATALINK CORPORATION   By: /s/ Michael Krutsch      --------------------------------------------------------------------------------       By: /s/ Daniel J. Kinsella      -------------------------------------------------------------------------------- Its Officer    --------------------------------------------------------------------------------   Its CFO    -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- EXHIBIT A CONDITIONS PRECEDENT AND SECURITY Notes Revolving Notes A and B Authorization Certificate of Authority of Borrower. A Certificate of Authority dated                 and certifying the incumbency and signatures of the officers or other persons authorized to execute the Documents, and authorizing the execution of the Documents and performance in accordance with their terms. Organization Articles of Incorporation and By-Laws. A recently certified copy of the Borrower's Articles of Incorporation and By-laws, and any amendments, if applicable. Certificate of Good Standing. A recently certified copy of the Borrower's Certificate of Good Standing. Other Arbitration Agreement. The Bank's standard form of Arbitration Agreement signed by the Bank and Borrower, subjecting potential controversies between them to binding arbitration, including but not limited to those relating to the Documents and this Agreement. -------------------------------------------------------------------------------- EXHIBIT B REPRESENTATIONS AND WARRANTIES Organizational Status. The Borrower is a corporation duly formed and in good standing under the laws of the State of Minnesota. Authorization. The execution and delivery of the Documents is within the Borrower's powers, has been duly authorized by the Borrower and does not conflict with any of the Borrower's organizational documents or any other agreement by which the Borrower is bound, and has been signed by all persons authorized and required to do so under its organizational documents. Financial Reports. The Borrower has provided the Bank with the Borrower's annual audited financial statement dated December 31, 1999 and its interim financial statement dated March 31, 2000, and these statements fairly represent the financial condition of the Borrower as of their respective dates and were prepared in accordance with generally accepted accounting principles consistently applied. Litigation. There is no litigation or governmental proceeding pending or threatened against the Borrower which could have a material adverse effect on the Borrower's financial condition or business. Taxes. The Borrower has paid when due all federal, state and local taxes. No Default. There is no event which is, or with notice or the lapse of time would be, an event of default under this Agreement. ERISA. The Borrower is in compliance in all material respects with the Employee Retirement Income Security Act of 1974 and has received no notice to the contrary from the Pension Benefit Guaranty Corporation or any related governmental entity. -------------------------------------------------------------------------------- EXHIBIT C DATALINK CORPORATION OFFICER'S CERTIFICATE OF COMPLIANCE TO:   Wells Fargo Bank Minnesota,   National Association MAC N9305- 114 Sixth & Marquette Minneapolis, MN 55479 (the "Bank")     I am an officer of Datalink Corporation (the "Borrower") and under the terms of a Credit Agreement (the "Agreement") between the Bank and the Borrower dated effective June 30, 2000, certify that:     1.  The attached financial statements of the Borrower from                 through                  (the "Statement Date") are true and correct and have been accurately prepared in accordance with generally accepted accounting principles applied consistently with the Borrower's most recent annual financial statement; and     2.  I have read and am familiar with the Agreement and have no knowledge of an existing event of default under the Agreement or of any event which would, after the lapse of time or the giving of notice, or both, constitute an event of default under the Agreement. The calculations regarding each financial covenant, as of the Statement Date, and regardless of whether the Borrower must be in compliance with each covenant as of the Statement Date, are as follows: Covenant --------------------------------------------------------------------------------   Actual --------------------------------------------------------------------------------   Required -------------------------------------------------------------------------------- Tangible Net Worth plus Sub Debt           Net Worth           (-) Intangible Assets           (+) Subordinated Debt             --------------------------------------------------------------------------------     Tangible Net Worth plus Sub Debt   $                    --------------------------------------------------------------------------------   $15,000,000 each FQE, plus 75% of cumulative net earnings for each quarter thereafter Senior Liabilities to Tangible Net Worth plus Sub Debt Ratio           Total Liabilities           (-) Subordinated Debt           Senior Liabilities             --------------------------------------------------------------------------------       Tangible Net Worth           (+) Subordinated Debt           TNW plus Sub Debt             --------------------------------------------------------------------------------     Senior Liabilities/TNW plus Sub Debt       2.25:1.0 each FQE     --------------------------------------------------------------------------------     Capital Expenditures (Year to Date)   $                    --------------------------------------------------------------------------------   Maximum of $2,000,000.00 in any fiscal year -------------------------------------------------------------------------------- Net Working Capital           Current Assets           (-) Current Liabilities             --------------------------------------------------------------------------------     Net Working Capital   $                    --------------------------------------------------------------------------------   $14,500,000.00 each FQE Net Profit   $                    --------------------------------------------------------------------------------   $1.00 each FQE   Funded Debt to EBITDA                   Funded Debt           Earnings           (+) Interest           (+) Taxes           (+) Depreciation           (+) Amortization             --------------------------------------------------------------------------------             Maximum of 1.65 to 1.0     --------------------------------------------------------------------------------     Funded Debt / EBITDA             --------------------------------------------------------------------------------     DATALINK CORPORATION       By:       --------------------------------------------------------------------------------           Its:       --------------------------------------------------------------------------------           Date:       --------------------------------------------------------------------------------         -------------------------------------------------------------------------------- [LOGO]   Wells Fargo Bank Minnesota, National Association   Revolving Note A -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- $10,000,000.00   June 30, 2000     FOR VALUE RECEIVED, Datalink Corporation (the "Borrower") promises to pay to the order of Wells Fargo Bank Minnesota, National Association (the "Bank"), at its principal office or such other address as the Bank or holder may designate from time to time, the principal sum of TEN MILLION AND 00/100 DOLLARS ($10,000,000.00), or the amount shown on the Bank's records to be outstanding, plus interest (calculated on the basis of actual days elapsed in a 360-day year) accruing each day on the unpaid principal balance at the annual interest rate(s) defined below. Absent manifest error, the Bank's records shall be conclusive evidence of the principal and accrued interest owing hereunder. INTEREST RATE     Base Rate Option.  Unless the Borrower chooses the LIBOR Interest Rate Option as defined below, the principal balance outstanding under this Revolving Note A shall bear interest at an annual rate equal to the Base Rate, minus 1.0%, floating (the "Base Rate Option"). Base Rate means the rate of interest established by the Bank from time to time as its "base" or "prime" rate of interest at its principal office in Minneapolis, Minnesota.     LIBOR Interest Rate Option.  Subject to the terms and conditions of the Agreement the Borrower may elect that all or portions of the principal balance of this Revolving Note A bear interest at the LIBOR Interest Rate plus the margin described in Section 4.3 of the Agreement (the "LIBOR Interest Rate Option"). Specific reference is made to the Interest Rate Options section of the Agreement for terms governing the designation of interest periods and rate portions. The initial margin applicable to borrowings as of the Effective date shall be 1.10%.     The LIBOR Interest Rate shall be computed in accordance with the following formula. LIBOR Interest Rate   =   London Interbank Offered Rate -------------------------------------------------------------------------------- 1.00 – Reserve Requirement     Where,                 (1) "London Interbank Offered Rate" means the Bank's cost of funds as determined by the Bank's Treasury Division, based upon the average rate at which U.S. Dollar deposits with a term equal to the applicable LIBOR Interest Rate Period and in an amount equal to the LIBOR Interest Rate Portion are available to the Bank at the time of determination on the London Interbank Market.     (2) "Reserve Requirement" means the Federal Reserve System requirement (expressed as a percentage) applicable to the dollar deposits used in calculating the LIBOR Interest Rate above.     DEFAULT RATE OF INTEREST.  Following the occurrence of any event of default as defined in Section 8 of the Agreement, the interest rate applicable to this Revolving Note A shall be increased to annual rate equal to the Base Rate plus 2.0%, floating. This default rate of interest shall commence as of the date that the Bank in its sole discretion determines that the last event constituting the event of default takes place, which period shall include any applicable grace period, if any, and shall continue through the last day of the fiscal quarter in which the event of default has been cured.     The Bank's assessment or acceptance of interest paid at an increased rate shall not constitute a waiver of any default under the terms of the Agreement and this Revolving Note A, or a waiver of the Bank's right to accelerate or demand payment of this Revolving Note A. REPAYMENT TERMS     Interest.  Interest accruing under the Base Rate Option shall be payable on the first day of each month, beginning July 1, 2000. Interest accruing under the LIBOR Interest Rate Option shall be -------------------------------------------------------------------------------- payable, as applicable, at the end of each LIBOR Interest Rate Period or the first day of each month, whichever is earlier.     Principal.  Principal, and any unpaid interest, shall be due on the Line Expiration Date set forth in Section 1.2 of the Agreement.     PREPAYMENT AND PREPAYMENT FEE.  The Borrower may prepay principal accruing interest under the Base Rate Option at any time without penalty. Each prepayment of principal accruing interest at an optional interest rate, whether voluntary or by reason of acceleration, shall be accompanied by a prepayment fee equal to the amount of interest that would have accrued on the amount of principal prepaid from the date of prepayment or its maturity or repricing date, at an annual rate equal to (1) the optional rate then in effect under this Revolving Note A on the principal being prepaid, less (2) the yield (including interest and discount) on a United States Treasury Security of comparable term that could be purchased on the date of prepayment with a maturity on (or about) the maturity or repricing date, discounted to its present value using the yield on the replacement security as a discount factor, discounted monthly; provided, however, that no prepayment fee shall be due (and no credit or rebate required) if the yield described in clause (2) exceeds the rate described in clause (1).     Each prepayment shall be applied in inverse order of maturity or as the Bank in its sole discretion may deem appropriate. Such prepayment shall not excuse the Borrower from making subsequent payments in the order agreed to above until the indebtedness is paid in full.     ADDITIONAL TERMS AND CONDITIONS.  This Revolving Note A is issued pursuant to a Credit Agreement of even date between the Bank and the Borrower (the "Agreement"). The Agreement, and any amendments or substitutions, contains additional terms and conditions, including default and acceleration provisions, which are incorporated into this Revolving Note A by reference. Capitalized terms not expressly defined herein shall have the meanings given them in the Agreement. The Borrower agrees to pay all costs of collection, including reasonable attorneys' fees and legal expenses incurred by the Bank if this Revolving Note A is not paid as provided above. This Revolving Note A shall be governed by the substantive laws of the State of Minnesota.     WAIVER OF PRESENTMENT AND NOTICE OF DISHONOR.  Borrower and any other person who signs, guarantees or endorses this Revolving Note A, to the extent allowed by law, hereby waives presentment, demand for payment, notice of dishonor, protest, and any notice relating to the acceleration of the maturity of this Revolving Note A. DATALINK CORPORATION           By:       /s/ Daniel J. Kinsella --------------------------------------------------------------------------------                   Its:       CFO --------------------------------------------------------------------------------                 -------------------------------------------------------------------------------- [LOGO]   Wells Fargo Bank Minnesota, National Association   Revolving Note B -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- $5,000,000.00   June 30, 2000     FOR VALUE RECEIVED, Datalink Corporation (the "Borrower") promises to pay to the order of Wells Fargo Bank Minnesota, National Association (the "Bank"), at its principal office or such other address as the Bank or holder may designate from time to time, the principal sum of FIVE MILLION AND 00/100 DOLLARS ($5,000,000.00), or the amount shown on the Bank's records to be outstanding, plus interest (calculated on the basis of actual days elapsed in a 360-day year) accruing each day on the unpaid principal balance at the annual interest rate(s) defined below. Absent manifest error, the Bank's records shall be conclusive evidence of the principal and accrued interest owing hereunder. INTEREST RATE     Base Rate Option.  Unless the Borrower chooses the LIBOR Interest Rate Option as defined below, the principal balance outstanding under this Revolving Note B shall bear interest at an annual rate equal to the Base Rate, minus 1%, floating (the "Base Rate Option"). Base Rate means the rate of interest established by the Bank from time to time as its "base" or "prime" rate of interest at its principal office in Minneapolis, Minnesota.     LIBOR Interest Rate Option.  Subject to the terms and conditions of the Agreement the Borrower may elect that all or portions of the principal balance of this Revolving Note B bear interest at the LIBOR Interest Rate plus 1.10% (the "LIBOR Interest Rate Option"). Specific reference is made to the Interest Rate Options section of the Agreement for terms governing the designation of interest periods and rate portions.     The LIBOR Interest Rate shall be computed in accordance with the following formula. LIBOR Interest Rate   =   London Interbank Offered Rate -------------------------------------------------------------------------------- 1.00 – Reserve Requirement     Where,                 (1) "London Interbank Offered Rate" means the Bank's cost of funds as determined by the Bank's Treasury Division, based upon the average rate at which U.S. Dollar deposits with a term equal to the applicable LIBOR Interest Rate Period and in an amount equal to the LIBOR Interest Rate Portion are available to the Bank at the time of determination on the London Interbank Market.     (2) "Reserve Requirement" means the Federal Reserve System requirement (expressed as a percentage) applicable to the dollar deposits used in calculating the LIBOR Interest Rate above.     DEFAULT RATE OF INTEREST.  Following the occurrence of any event of default as defined in Section 8 of the Agreement, the interest rate applicable to this Revolving Note B shall be increased to annual rate equal to the Base Rate plus 2.0%, floating. This default rate of interest shall commence as of the date that the Bank in its sole discretion determines that the last event constituting the event of default takes place, which period shall include any applicable grace period, if any, and shall continue through the last day of the fiscal quarter in which the event of default has been cured.     The Bank's assessment or acceptance of interest paid at an increased rate shall not constitute a waiver of any default under the terms of the Agreement and this Revolving Note B, or a waiver of the Bank's right to accelerate or demand payment of this Revolving Note B. REPAYMENT TERMS     Interest.  Interest accruing under the Base Rate Option shall be payable on the first day of each month, beginning July 1, 2000. Interest accruing under the LIBOR Interest Rate Option shall be -------------------------------------------------------------------------------- payable, as applicable, at the end of each LIBOR Interest Rate Period or the first day of each month, whichever is earlier.     Principal.  Principal, and any unpaid interest, shall be payable in a single payment due on the Line Expiration Date set forth in Section 2.2 of the Agreement.     PREPAYMENT AND PREPAYMENT FEE.  The Borrower may prepay principal accruing interest under the Base Rate Option at any time without penalty. Each prepayment of principal accruing interest at an optional interest rate, whether voluntary or by reason of acceleration, shall be accompanied by a prepayment fee equal to the amount of interest that would have accrued on the amount of principal prepaid from the date of prepayment or its maturity or repricing date, at an annual rate equal to (1) the optional rate then in effect under this Revolving Note B on the principal being prepaid, less (2) the yield (including interest and discount) on a United States Treasury Security of comparable term that could be purchased on the date of prepayment with a maturity on (or about) the maturity or repricing date, discounted to its present value using the yield on the replacement security as a discount factor, discounted monthly; provided, however, that no prepayment fee shall be due (and no credit or rebate required) if the yield described in clause (2) exceeds the rate described in clause (1).     Each prepayment shall be applied in inverse order of maturity or as the Bank in its sole discretion may deem appropriate. Such prepayment shall not excuse the Borrower from making subsequent payments in the order agreed to above until the indebtedness is paid in full.     ADDITIONAL TERMS AND CONDITIONS.  This Revolving Note B is issued pursuant to a Credit Agreement of even date between the Bank and the Borrower (the "Agreement"). The Agreement, and any amendments or substitutions, contains additional terms and conditions, including default and acceleration provisions, which are incorporated into this Revolving Note B by reference. Capitalized terms not expressly defined herein shall have the meanings given them in the Agreement. The Borrower agrees to pay all costs of collection, including reasonable attorneys' fees and legal expenses incurred by the Bank if this Revolving Note B is not paid as provided above. This Revolving Note B shall be governed by the substantive laws of the State of Minnesota.     WAIVER OF PRESENTMENT AND NOTICE OF DISHONOR.  Borrower and any other person who signs, guarantees or endorses this Revolving Note B, to the extent allowed by law, hereby waives presentment, demand for payment, notice of dishonor, protest, and any notice relating to the acceleration of the maturity of this Revolving Note B. DATALINK CORPORATION           By:       /s/ Daniel J. Kinsella --------------------------------------------------------------------------------                   Its:       CFO --------------------------------------------------------------------------------                 -------------------------------------------------------------------------------- [LOGO]   Wells Fargo Bank Minnesota, National Association   Arbitration Agreement -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Wells Fargo Bank Minnesota,   National Association MAC N9305-114 Sixth & Marquette Minneapolis, Minnesota 55479 (the "Bank")   Datalink Corporation 7423 Washington Avenue South Minneapolis, Minnesota 55439 (the "Customer") June 30, 2000 1.Agreement to Arbitrate. The Bank and Borrower agree to submit to binding arbitration by the American Arbitration Association (the "AAA") of all claims, disputes and controversies (whether in tort, contract, or otherwise, except "core proceedings" under the U.S. Bankruptcy Code) arising between themselves and their respective employees, officers, directors, attorneys and other agents, which relate in any way without limitation to existing and future loans and extensions of credit or requests for additional credit, including by way of example but not by way of limitation the negotiation, collateralization, administration, repayment, modification, default, termination and enforcement of such loans or extensions of credit. 2.Rules Governing Arbitration. Arbitration under this Agreement will be governed by the Federal Arbitration Act and proceed in Minneapolis, Minnesota in accordance with AAA Rules. 3.Selection of Arbitrator. Arbitration will be conducted before a single neutral arbitrator selected in accordance with AAA Rules and who shall be an attorney who has practiced commercial law for at least ten years. 4.Statutes of Limitation and Procedural Issues. The arbitrator will determine whether an issue is arbitratable and will give effect to applicable statutes of limitation. Judgment upon the arbitrator's award may be entered in any court having jurisdiction. The arbitrator has the discretion to decide, upon documents only or with a hearing, any motion to dismiss for failure to state a claim or any motion for summary judgment. The institution and maintenance of an action for judicial relief or for any provisional or ancillary remedy shall not constitute a waiver of the right of any party, including the plaintiff, to submit the controversy or claim to arbitration if any other party contests such action for judicial relief. 5.Discovery. Discovery will be governed by the Minnesota Rules of Civil Procedure. Discovery must be completed at least 20 days before the hearing date and within 180 days of the commencement of arbitration. Each request for an extension and all other discovery disputes will be determined by the arbitrator upon a showing that the request is essential for the party's presentation and that no alternative means for obtaining information are available during the initial discovery period. 6.Exceptions to Arbitration. This Agreement does not limit the right of either party to a) foreclose against real or personal property collateral; b) exercise self-help remedies such as setoff or repossession; c) obtain provisional remedies such as replevin, injunctive relief, attachment or the appointment of a receiver during the pendency or before or after any arbitration proceeding; or d) obtain a cognovit judgment, if available. These exceptions do not constitute a waiver of the right or obligation of either party to submit any dispute to arbitration, including those arising from the exercise of these remedies. -------------------------------------------------------------------------------- 7.Arbitration Costs and Fees. The arbitrator will award costs and expenses in accordance with the provisions of the documents evidencing each loan or extension of credit. WELLS FARGO BANK MINNESOTA,   NATIONAL ASSOCIATION   DATALINK CORPORATION   By:       /s/ Michael Krutsch --------------------------------------------------------------------------------       By:       /s/ Daniel J. Kinsella --------------------------------------------------------------------------------   Its       Officer --------------------------------------------------------------------------------       Its       CFO -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- QUICKLINKS EXHIBIT A CONDITIONS PRECEDENT AND SECURITY EXHIBIT B REPRESENTATIONS AND WARRANTIES EXHIBIT C DATALINK CORPORATION OFFICER'S CERTIFICATE OF COMPLIANCE

QuickLinks -- Click here to rapidly navigate through this document Exhibit 10(r) MANAGEMENT AGREEMENT     AGREEMENT made as of this 1st day of September, 1996 by and between Minntech Corporation, a Minnesota corporation, with its principal executive office at Plymouth, Minnesota ("Company") and Paul E. Helms residing at 140 Carlson Parkway, Minnesota, Minnesota 55305 (the "Executive").     WHEREAS, Company considers the establishment and maintenance of a sound and vital management to be essential to protecting and enhancing the best interests of Company and its shareholders; and     WHEREAS, the Executive is expected to make a significant contribution to the profitability, growth and financial strength of Company; and     WHEREAS, Company, as a publicly held corporation, recognizes that 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 the Executive in the performance of the Executive's duties to the detriment of Company and its shareholders; and     WHEREAS, the Executive is willing to be an employee of Company upon the understanding that Company will provide income security if the Executive's employment is terminated under certain terms and conditions; and     WHEREAS, it is in the best interests of Company and its shareholders to reinforce and encourage the continued attention and dedication of management personnel, including the Executive, to their assigned duties without distraction and to increase the likelihood of the continued availability to Company of the Executive in the event of a Change in Control.     THEREFORE, in consideration of the foregoing and other respective covenants and agreements of the parties herein contained, the parties hereto agree as follows:     1.  Term of Agreement.  This Agreement shall commence on the date hereof and shall continue in effect until such time as Company notifies the Executive or the Executive notifies Company of termination of this Agreement; provided, however, that in no event may this Agreement be terminated prior to two years from the date hereof, and notice of termination on the second or any subsequent anniversary date hereof must be given by Company in writing mailed to the Executive at his or her last known address within 60 days prior to such anniversary date or by the Executive by notice in writing mailed to Company at the principal executive office of Company within 60 days prior to such anniversary date. If no such notice is given, then the term of this Agreement shall be extended for additional periods of one year. Notwithstanding the preceding sentence, if a Change in Control occurs during the term of this Agreement (including any extension hereof), this Agreement shall continue in effect for a period of 36 months from the date of the occurrence of a Change in Control. Except as provided in Section 2(b) or Section 3(e) of this Agreement, nothing stated herein shall limit the right of the Executive or Company to terminate the employment of the Executive with Company at any time prior to the expiration of the term of this Agreement, with or without Cause (as defined in Section 3(b) of this Agreement) and for any reason whatsoever, subject to the right of the Executive to receive any payment and other benefits that may be due pursuant to the terms and conditions of Section 4 of this Agreement.     2.  Change in Control.  No amounts shall be payable hereunder unless a Change in Control, as set forth below, shall occur during the term of this Agreement.     (a) For purposes of this Agreement, a "Change in Control" of Company shall be deemed to occur if any of the following occur:      (i) Any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended, or any successor statute thereto (the "Exchange Act")) acquires or becomes a "beneficial owner" (as defined in Rule 13d-3 or any successor rule under the Exchange Act), directly or indirectly, of securities of Company representing 30% or -------------------------------------------------------------------------------- more of the combined voting power of Company's then outstanding securities entitled to vote generally in the election of directors ("Voting Securities"), provided, however, that the following shall not constitute a Change in Control pursuant to this Section 2(a)(i):     (A) any acquisition or beneficial ownership by Company or a subsidiary of Company;     (B) any acquisition or beneficial ownership by any employee benefit plan (or related trust) sponsored or maintained by Company or one or more of its subsidiaries;     (C) any acquisition or beneficial ownership by any corporation with respect to which, immediately following such acquisition, more than 70% of both the combined voting power of Company's then outstanding Voting Securities and the common stock of Company is then beneficially owned, directly or indirectly, by all or substantially all of the persons who beneficially owned Voting Securities and common stock of Company immediately prior to such acquisition in substantially the same proportions as their ownership of such Voting Securities and common stock, as the case may be, immediately prior to such acquisition;     (ii) A majority of the members of the Board of Directors of Company shall not be Continuing Directors. For purposes of this subsection 2(a)(ii), "Continuing Directors" shall mean: (A) individuals who, on the date hereof, are directors of Company, (B) individuals elected as directors of Company subsequent to the date hereof for whose election proxies shall have been solicited by the Board of Directors of Company or (C) any individual elected or appointed by the Board of Directors of Company to fill vacancies on the Board of Directors of Company caused by death or resignation (but not by removal) or to fill newly-created directorships;     (iii) Approval by the shareholders of Company of a reorganization, merger or consolidation of Company (other than a merger or consolidation with a subsidiary of Company) or a statutory exchange of outstanding Voting Securities of Company, unless immediately following such reorganization, merger, consolidation or exchange, all or substantially all of the persons who were the beneficial owners, respectively, of Voting Securities and common stock of Company immediately prior to such reorganization, merger, consolidation or exchange beneficially own, directly or indirectly, more than 70% of, respectively, the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors and the then outstanding shares of common stock, as the case may be, of the corporation resulting from such reorganization, merger, consolidation or exchange in substantially the same proportions as their ownership, immediately prior to such reorganization, merger, consolidation or exchange, of the Voting Securities and common stock of Company, as the case may be;     (iv) Approval by the shareholders of Company of (x) a complete liquidation or dissolution of Company or (y) the sale or other disposition of all or substantially all of the assets of Company (in one or a series of transactions), other than to a corporation with respect to which, immediately following such sale or other disposition, more than 70% of, respectively, the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors and the then outstanding shares of common stock of such corporation is then beneficially owned, directly or indirectly, by all or substantially all of the persons who were the beneficial owners, respectively, of the Voting Securities and common stock of Company immediately prior to such sale or other disposition in substantially the same proportions as their ownership, immediately prior to such sale or other disposition, of the Voting Securities and common stock of Company, as the case may be; or 2 --------------------------------------------------------------------------------     (v) Company enters into a letter of intent, an agreement in principle or a definitive agreement relating to a Change in Control described in Section 2(a)(i), 2(a)(ii), 2(a)(iii) or 2(a)(iv) above that ultimately results in such a Change in Control or a tender or exchange offer or proxy contest is commenced which ultimately results in a Change in Control described in Section 2(a)(i) or 2(a)(ii) hereof. Notwithstanding the above, a Change in Control shall not be deemed to occur with respect to the Executive if (x) the acquisition or beneficial ownership of the 30% or greater interest referred to in Section 2(a)(i) is by the Executive or by a group, acting in concert, that includes the Executive or (y) if a majority of the then combined voting power of the then outstanding voting securities (or voting equity interests) of the surviving corporation or of any corporation (or other entity) acquiring all or substantially all of the assets of Company shall, immediately after a reorganization, merger, consolidation, statutory share exchange or disposition of assets referred to in Section 2(a)(iii) or 2(a)(iv), be beneficially owned, directly or indirectly, by the Executive or by a group, acting in concert, that includes the Executive.     (b) The Executive agrees that, subject to the terms and conditions of this Agreement, in the event of a Change in Control of Company described in Section 2(a)(i), 2(a)(ii), 2(a)(iii) or 2(a)(iv), occurring after the date hereof, the Executive, if employed by Company immediately prior to such a Change in Control, will not voluntarily terminate employment with Company except for Good Reason for a period of 90 days after the occurrence of such a Change in Control of Company.     (c) For purposes of this Agreement, a "subsidiary" of Company shall mean any entity of which securities or other ownership interests having general voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by Company.     3.  Termination Following Change in Control.  If a Change in Control shall occur during the term of this Agreement, the Executive shall be entitled to the payments and other benefits provided in subsection 4(d) in the event of the termination of the Executive's employment with Company unless the Executive's termination is (A) because of the Executive's death, (B) by Company for Cause or Disability, or (C) by the Executive other than for Good Reason.     (a)  Disability.  If, as a result of incapacity due to physical or mental illness, the Executive shall have been absent from the full-time performance of the Executive's duties with Company for six consecutive months, and within 30 days after written Notice of Termination is given, the Executive shall not have returned to the full-time performance of the Executive's duties, Company may terminate the Executive's employment for "Disability". Any question as to the existence of the Executive's Disability upon which the Executive and Company cannot agree shall be determined by a qualified independent physician selected by the Executive (or, if the Executive is unable to make such selection, it shall be made by any adult member of the Executive's immediate family), and approved by Company. The determination of such physician made in writing to Company and to the Executive shall be final and conclusive for all purposes of this Agreement.     (b)  Cause.  Termination of the Executive's employment for "Cause" shall mean termination upon the conviction of the Executive by a court of competent jurisdiction for felony criminal conduct.     (c)  Good Reason.  Termination by the Executive for "Good Reason" shall mean termination by the Executive if, without the Executive's express written consent, any of the following shall occur:      (i) the assignment to the Executive of any duties inconsistent with the Executive's status or position with Company, or a substantial alteration in the nature or status of the Executive's responsibilities from those in effect immediately prior to the Change in Control; 3 --------------------------------------------------------------------------------     (ii) a reduction by Company in the Executive's annual base salary in effect immediately prior to a Change in Control;     (iii) the relocation of Company's principal executive offices to a location more than fifty miles from Plymouth, Minnesota or Company requiring the Executive to be based anywhere other than Company's principal executive office (or if the Executive is based at a location other than Company's principal executive office immediately prior to the first Change in Control, anywhere other than such location) except for required travel on Company's business to an extent substantially consistent with the Executive's prior business travel obligations;     (iv) the failure by Company to continue to provide the Executive with benefits at least as favorable to those enjoyed by the Executive under any of Company's pension, life insurance, medical, health and accident, disability, deferred compensation, incentive awards, employee stock options, or savings plans in which the Executive was participating at the time of the Change in Control, the taking of any action by Company which would directly or indirectly materially reduce any of such benefits or deprive the Executive of any material fringe benefit enjoyed at the time of the Change in Control, or the failure by Company to provide the Executive with the number of paid vacation days to which the Executive is entitled at the time of the Change in Control, provided, however, that Company may amend any such plan or programs as long as such amendments do not reduce any benefits to which the Executive would be entitled upon termination;     (v) a termination pursuant to Section 3(d) of this Agreement;     (vi) the failure of Company to obtain a satisfactory agreement from any successor to assume and agree to perform this Agreement, as contemplated in Section 6; or    (vii) any purported termination of the Executive's employment which is not made pursuant to a Notice of Termination satisfying the requirements of subsection (e) below; for purposes of this Agreement, no such purported termination shall be effective.     (d)  Voluntary Termination Deemed Good Reason.  Notwithstanding anything herein to the contrary, during the period commencing on the 91st day following a Change in Control under Section 2(a)(i), 2(a)(ii), 2(a)(iii) or 2(a)(iv) of this Agreement and ending on the 180th day following such a Change in Control, the Executive may voluntarily terminate his or her employment for any reason, and such termination shall be deemed "Good Reason" for all purposes of this Agreement. In the event of such voluntary termination pursuant to this subsection 3(d)), the multiple applied to the Severance Payment (as defined in Section 4(d)), if any, payable to the Executive pursuant to subsection 4(d)(ii) below shall be reduced by 50%.     (e)  Notice of Termination.  Any purported termination of the Executive's employment by Company or by the Executive shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 7. 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 the facts and circumstances claimed to provide a basis for termination of the Executive's employment.     (f)  Date of Termination.  For purposes of this Agreement, "Date of Termination" shall mean:      (i) if the Executive's employment is terminated for Disability, 30 days after Notice of Termination is given (provided that the Executive shall not have returned to the full-time performance of the Executive's duties during such 30 day period); and     (ii) if the Executive's employment is terminated pursuant to subsections (b), (c) or (d) 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 (b) above, shall not be 4 -------------------------------------------------------------------------------- less than 10 days, and, in the case of a termination pursuant to subsection (c) or (d) above, shall not be less than 10 nor more than 30 days, respectively, from the date such Notice of Termination is given).     (g)  Dispute of Termination.  If, within 10 days after any Notice of Termination is given, the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally determined, either by mutual written agreement of the parties, or by a final judgment, order or decree of a court of competent jurisdiction (which is not appealable or the time for appeal therefrom having expired and no appeal having been perfected); provided, 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, Company shall continue to pay the Executive full compensation in effect when the notice giving rise to the dispute was given (including, but not limited to, base salary) and continue the Executive as a participant in all compensation, benefit and insurance plans in which the Executive was participating 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, except as provided in Section 4(d)(v), shall not be offset against or reduce any other amounts under this Agreement.     4.  Compensation Upon Termination or During Disability.  Upon termination of the Executive's employment (or, with respect to Section 4(a), during a period of Disability) following a Change in Control, as defined in Section 2(a), of Company or if there shall be a termination by Company of the Executive's employment prior to a Change in Control, or the Executive shall terminate employment with Company for Good Reason prior to a Change in Control (for which purpose the references in Section 3(c) to changes from circumstances existing immediately prior to or at the time of a Change in Control that constitute Good Reason for termination shall instead be deemed to be references to circumstances existing immediately prior to or at the time that the Change in Control is first anticipated), and the Executive reasonably demonstrates that such termination by Company or event constituting Good Reason for termination by the Executive (x) was requested by a third party that had previously taken other steps reasonably calculated to result in a Change in Control described in Section 2(a)(i), 2(a)(ii), 2(a)(iii) or 2(a)(iv) and ultimately resulting in such a Change in Control following termination of the Executive's employment or (y) otherwise arose in connection with or in anticipation of a Change in Control described in Section 2(a)(i), 2(a)(ii), 2(a)(iii) or 2(a)(iv) that ultimately occurs following termination of the Executive's employment, the Executive shall be entitled to the following benefits:     (a) Except as provided in Section 4(b), during any period that the Executive fails to perform full-time duties with Company as a result of Disability, Company shall pay the Executive the base salary of the Executive at the rate in effect at the commencement of any such period, until such time as the Executive is determined to be eligible for long term disability benefits in accordance with Company's insurance programs then in effect.     (b) If the Executive's employment shall be terminated by Company for Cause or Disability or by the Executive, following a Change in Control, other than for Good Reason, Company shall pay to the Executive his or her full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given and Company shall have no further obligation to the Executive under this Agreement.     (c) If the Executive's employment shall be terminated by Company for Cause or Disability, or is terminated by reason of death, Company shall immediately cause to be commenced payment to the Executive (or the Executive's designated beneficiaries or estate, if no beneficiary is designated) 5 -------------------------------------------------------------------------------- of any and all benefits to which the Executive is entitled, if any, under Company's insurance programs then in effect.     (d) Except for termination of the Executive's employment with Company by reason of death, if the Executive's employment with Company shall be terminated (A) by Company other than for Cause or Disability or (B) by the Executive for Good Reason, then the Executive shall be entitled to the benefits provided below:      (i) Company shall pay the Executive the Executive's full base salary through the Date of Termination at the rate in effect at the time the Notice of Termination is given.     (ii) In lieu of any further salary payments for periods subsequent to the Date of Termination, Company shall pay as a severance payment (the "Severance Payment") an amount equal to (A) one (1) times (subject to reduction pursuant to Section 3(d) in the event of a termination of employment by the Executive pursuant to Section 3(d)) the average of the annual compensation which was paid to the Executive by Company (or any corporation affiliated with Company within the meaning of Section 1504 of the Internal Revenue Code of 1986, as amended (the "Code")) and includible in the Executive's gross income for federal income tax purposes for the shorter of the period consisting of (1) the five most recently completed taxable years of the Executive ending before the earlier of the first Change in Control (for which purpose the first Change in Control shall not be deemed to be a Change in Control pursuant to Section 2(a)(v) unless the Executive's termination of employment with Company occurs prior to the first Change in Control pursuant to Section 2(a)(i), 2(a)(ii), 2(a)(iii) or 2(a)(iv)) or (2) that portion of such five-year period during which the Executive was employed by Company, less (B) $1.00. Such average shall be determined in accordance with temporary or final regulations promulgated under Section 280G(d) of the Code or any successor provision thereto. The Severance Payment shall be made in full within 60 days after termination of employment. Such Severance Payment shall be reduced by any severance pay that the Executive receives from Company, any subsidiary of Company or any successor thereof under any other policy or agreement of Company in the event of involuntary termination of the Executive's employment.     (iii) For a 36 month period after the Date of Termination, Company shall arrange to provide the Executive with life, disability, accident and health insurance benefits substantially similar to those which the Executive is receiving or entitled to receive immediately prior to the Notice of Termination. Benefits otherwise receivable by the Executive pursuant to this paragraph (iii) shall be reduced to the extent comparable benefits are actually received by the Executive from another employer or other third party during such 36 month period, and any such benefits actually received by the Executive shall be reported to Company.     (iv) Company shall also pay to the Executive all legal fees and expenses incurred by the Executive as a result of such termination (including all such fees and 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).     (v) Notwithstanding any provision to the contrary contained herein except the last sentence of this Section 4(d)(v), if the lump sum cash payment due and the other benefits to which the Executive shall become entitled under this Section 4 hereof, either alone or together with other payments in the nature of compensation to the Executive which are contingent on a change in the ownership or effective control of Company or in the ownership of a substantial portion of the assets of Company or otherwise, would constitute a "parachute payment" as defined in Section 280G of the Code or any successor provision thereto, such lump sum payment and/or such other benefits and payments shall be reduced (but not below zero) to the largest aggregate amount as will result in no portion thereof being subject to the 6 -------------------------------------------------------------------------------- excise tax imposed under Section 4999 of the Code (or any successor provision thereto) or being non-deductible to Company for federal income tax purposes pursuant to Section 280G of the Code (or any successor provision thereto). The Executive in good faith shall determine the amount of any reduction to be made pursuant to this Section 4(d)(v) and shall select from among the foregoing benefits and payments those which shall be reduced. No modification of, or successor provision to, Section 280G or Section 4999 subsequent to the date of this Agreement shall, however, reduce the benefits to which the Executive would be entitled under this Agreement in the absence of this Section 4(d)(v) to a greater extent than they would have been reduced if Section 280G and Section 4999 had not been modified or superseded subsequent to the date of this Agreement, notwithstanding anything to the contrary provided in the first sentence of this Section 4(d)(v).     (e) The Executive 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 the Executive as the result of employment by another employer or by retirement benefits after the Date of Termination, or otherwise except as specifically provided in this Section 4.     (f)  In addition to all other amounts payable to the Executive under this Section 4, the Executive shall be entitled to receive all benefits payable to the Executive under any other plan or agreement relating to retirement benefits except as specifically provided in this Section 4.     (g) If Company fails to make any payment at the times and in the amounts specified herein, or with respect to any fringe benefits, fails to provide such benefit as specified herein, within 10 days from the date of written notice from the Executive to Company of such failure, Company shall be deemed to have waived any right to enforce any restriction on employment or non-competition provision contained in any agreement between Company and the Executive then in existence which limits the ability of the Executive to accept other employment and, thereafter, the Executive may work or consult for any person or business organization which is engaged in the design, development, assembly, manufacture, marketing or sale of any product which competes with any product of Company, or for any person or business organization which is in competition with Company, without liability to Company for such acts. A waiver of such restrictive covenant or non-competition provision shall not in any way restrict or limit the Executive's right to enforce the provisions of this Agreement, including any legal or equitable action to enforce any and all payments, rights or benefits under this Agreement, it being the intention of this subsection that such waiver shall be in addition to, not in substitution of, any other rights to which the Executive is entitled hereunder. Once waived, any such restrictive covenant or non-competition provision shall not thereafter be enforceable even though the Executive may later receive the payment, right or benefit which was the basis of the waiver of such restrictive covenant or non-competition provision.     5.  Funding of Payments.  In order to assure the performance of Company or its successor of its obligations under this Agreement, Company may deposit in trust an amount equal to the maximum payment that will be due the Executive under the terms hereof. Under a written trust instrument, the Trustee shall be instructed to pay to the Executive (or the Executive's legal representative, as the case may be) the amount to which the Executive shall be entitled under the terms hereof, and the balance, if any, of the trust not so paid or reserved for payment shall be repaid to Company. If Company deposits funds in trust, payment shall be made no later than the occurrence of the first Change in Control described in Section 2(a)(i), 2(a)(ii), 2(a)(iii) or 2(a)(iv). Company shall give notice of such a Change in Control to any such trustee upon any occurrence as defined herein. If and to the extent that the Executive becomes a beneficiary of any such funds deposited in trust, Company shall give prompt notice to the Executive, which shall include a copy of the trust instrument and amendments from time to time. The rights of the Executive under such trust instrument shall be enforceable against Company and any trustees named therein, as though the provisions of said trust were incorporated into this 7 -------------------------------------------------------------------------------- Agreement. If and to the extent there are not amounts in trust sufficient to pay the Executive under this Agreement, Company shall remain liable for any and all payments due to the Executive. In accordance with the terms of such trust, at all times during the term of this Agreement, the Executive shall have no rights, other than as an unsecured general creditor of Company, to any amounts held in trust and all trust assets shall be general assets of Company and subject to the claims of creditors of Company.     6.  Successors; Binding Agreement.       (a) 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 Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that Company would be required to perform it if no such succession had taken place. Failure of 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 the Executive to compensation from Company in the same amount and on the same terms as he would be entitled hereunder if he terminated his employment for Good Reason following a Change in Control, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination.     (b) This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, successors, heirs, and designated beneficiaries. If the Executive should die while any amount would still be payable to the Executive hereunder if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive's designated beneficiaries, or, if there is no such designated beneficiary, to the Executive's estate.     7.  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 or certified mail, return receipt requested, postage pre-paid, addressed to the last known residence address of the Executive or in the case of Company, to its principal executive office to the attention of each of the then directors of Company with a copy to its Secretary, 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.     8.  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 the parties. No waiver by either party hereto at any time of any breach by the other party to this Agreement 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 to similar time. No legally binding or enforceable agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof that remain in effect 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 Minnesota.     9.  Validity.  The invalidity or unenforceability or 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. MINNTECH CORPORATION   EXECUTIVE:   By       /s/ Louis C. Cosentino       /s/ Paul E. Helms     --------------------------------------------------------------------------------   --------------------------------------------------------------------------------     Its President   Paul E. Helms 8 -------------------------------------------------------------------------------- AMENDMENT TO MANAGEMENT AGREEMENT     This AMENDMENT made as of this 1st day of April, 1997, by and between Minntech Corporation, a Minnesota corporation (the "Company") and Paul E. Helms, a Minnesota resident (the "Executive"), as an amendment to the Management Agreement dated as of September 1, 1996, between the Company and the Executive.     WHEREAS, the Company and the Executive entered into the Management Agreement for the reasons set forth in the recitals to the Management Agreement; and     WHEREAS, for the reasons set forth in the recitals to the Management Agreement, the Company has determined that it is in the best interests of the Company and its shareholders to provide for increased payments to the Executive upon the termination of the Executive's employment in certain circumstances following a Change in Control of the Company or as otherwise set forth in the lead-in sentence to Section 4 of the Management Agreement.     THEREFORE, in consideration of the foregoing, the parties hereto agree to amend Section 4(d)(ii) of the Management Agreement in its entirety to read as follows:     (ii) In lieu of any further salary payments for periods subsequent to the Date of Termination, Company shall pay as a severance payment (the "Severance Payment") an amount equal to (A) three (3) times (subject to reduction pursuant to Section 3(d) in the event of a termination of employment by the Executive pursuant to Section 3(d)) the average of the annual compensation which was paid to the Executive by Company (or any corporation affiliated with Company within the meaning of Section 1504 of the Internal Revenue Code of 1986, as amended (the "Code")) and includible in the Executive's gross income for federal income tax purposes for the shorter of the period consisting of (1) the five most recently completed taxable years of the Executive ending before the earlier of the first Change in Control (for which purpose the first Change in Control shall not be deemed to be a Change in Control pursuant to Section 2(a)(v) unless the Executive's termination of employment with Company occurs prior to the first Change in Control pursuant to Section 2(a)(i), 2(a)(ii), 2(a)(iii) or 2(a)(iv)) or (2) that portion of such five-year period during which the Executive was employed by Company (for which purpose compensation for a partial year shall be annualized before determining average annual compensation for the period in accordance with temporary or final regulations promulgated under Section 280G(d) of the Code or any successor provision thereto), less (B) $1.00. Such average shall be determined in accordance with temporary or final regulations promulgated under Section 280G(d) of the Code or any successor provision thereto. The Severance Payment shall be made in full within 60 days after termination of employment. Such Severance Payment shall be reduced by any severance pay that the Executive receives from Company, any subsidiary of Company or any successor thereof under any other policy or agreement of Company in the event of involuntary termination of the Executive's employment.     The Management Agreement, subject only to this Amendment and any other amendments entered into in accordance with Section 8 of the Management Agreement, shall remain in full force and effect without modification. All references in the Management Agreement to "this Agreement" shall be deemed to be references to the Management Agreement as amended by this Amendment. All terms used in this Amendment which are not defined in this Amendment shall have the meanings set forth in the Management Agreement.     IN WITNESS WHEREOF, the parties hereto have signed this Amendment as of the date above written. MINNTECH CORPORATION   EXECUTIVE:   By       /s/ Thomas J. McGoldrick       /s/ Paul E. Helms     --------------------------------------------------------------------------------   --------------------------------------------------------------------------------     Its President   Paul E. Helms -------------------------------------------------------------------------------- QUICKLINKS MANAGEMENT AGREEMENT AMENDMENT TO MANAGEMENT AGREEMENT

QuickLinks -- Click here to rapidly navigate through this document Exhibit 10.4—Lease Agreement LEASE AGREEMENT     THIS LEASE AGREEMENT, hereinafter referred to as Lease, entered into this 1st day of January, 2000, between Sheldon Homedale Family L.P., hereinafter called the Lessor and T.J.T., Inc., a Washington Corporation, hereinafter referred to as Lessee: WITNESSETH:     That the Lessor does hereby lease to Lessee and Lessee does hereby hire from Lessor the following described premises situated in Gem County, Idaho as described on Exhibit "A" attached hereto:     Together with all appurtenances thereto and with easements of ingress and egress necessary and adequate for the conduct of Lessee's business, for the term of four (4) years, running from and including the 1st day of January, 2000, up to and including the 31st day of December, 2003, for use in Lessee's regular business, or any other legitimate business, subject to the terms and conditions of this Lease. 1.Lessee covenants to pay to Lessor at T.J.T., Inc. office in Emmett, Idaho, or at such other place in Emmett, Idaho as Lessor shall designate in writing as rent for such premises, the monthly sum of Two Thousand and Sixty Dollars ($2,060), payable in advance commencing January 1, 2000. Lease payment shall increase three percent (3%) annually for the duration of this Lease.     In addition to the above, Lessor and Lessee mutually covenant and agree as follows: 2.Lessee may, at its own expense, either at the commencement of or during the term of this Lease, make such additions to the leased premises including, without prejudice to the generality of the foregoing, alterations in the water, gas and the electric wiring systems, as may be necessary to fit the same for its business, upon first obtaining the written approval of Lessor as to the materials to be used and the manner of making such alterations and/or additions. Lessor covenants not to unreasonably withhold approval of alterations and/or additions proposed to be made by Lessee. At any time prior to the expiration or earlier termination of the lease, Lessee may remove any or all such alterations, additions or installations in such a manner as will not substantially injure the leased premises. In the event Lessee shall elect to make any such removal, Lessee shall restore the premises, or the portion or portions affected by such removal, to the same condition as existed prior to the making of such alteration, addition or installation, ordinary wear and tear excepted. All alterations, additions or installations not so removed by Lessee shall become the property of the Lessor without liability on Lessor's part to pay for the same. 3.Lessee shall, during the term of this Lease, maintain and make all necessary repairs to any structures and improvements located on the leased premises. 4.Lessee shall pay all charges for water, gas and electricity consumed by Lessee upon the leased premises. 5.Lessee shall duly obey and comply with all public laws, ordinances, rules or regulations related to the use of the leased premises. 6.Lessee shall not assign, transfer, sublease, mortgage, pledge or otherwise encumber or dispose of this Lease or any portion thereof without written approval of Lessor. If any assignment is made without said specific written permission, it shall be declared void and the Lessor, at its option, may cancel this Lease. 47 -------------------------------------------------------------------------------- 7.Lessee shall be responsible for the payment of all real estate taxes assessed against the leased premises during the term of this Lease, and shall be responsible for an other expenses associated with this property during the term of this Lease. 8.Lessee shall insure the improvements on the leased premises against loss by fire, flood, civil commotion or other casualty, and shall maintain such insurance in amounts sufficient to repair or replace any structures so damaged to as good a condition existing at the beginning of this Lease. Lessee shall provide the Lessor with proof of such insurance and failure to provide such proof shall be a default by the terms of this lease agreement. Lessee shall also maintain a good and sufficient liability insurance policy and hold Lessor harmless from all liability associated with the use of the leased premises. 9.In the event that the leased. premises shall be taken for public use by the city, state, federal government, public authority or other corporation having the power of eminent domain, then this Lease shall terminate as of the date on which possession thereof shall be taken for such public use, or at the option of Lessee, as of the date on which the, premises shall become unsuitable for Lessee's regular business by reason of such taking; provided, however, that if only a part of the leased premises shall be so taken, such termination shall be at the option of the Lessee only. If such a taking of only a part of the leased premises occurs, a proportionate reduction of the rent is to be paid from and after the date such possession is taken for public use. Lessee shall have the right to participate, directly or indirectly, an any award for such public taking to the extent that it may have suffered compensatable damages as a Lessee on account of such public taking. 10.Either party has the right to terminate this Lease with ninety (90) days' notice.     And it is mutually understood and agreed that the covenants and agreements herein contained shall inure to the benefit of and shall be equally binding upon the respective executors, administrators, heirs and assigns of the parties hereto. IN WITNESS WHEREOF, the parties hereto have executed this Lease. /s/ TERRENCE J. SHELDON    -------------------------------------------------------------------------------- Terrence J. Sheldon, Partner Sheldon-Homedale Family L.P.   Date 1/11/00 /s/ LARRY B. PRESCOTT    -------------------------------------------------------------------------------- Larry B. Prescott, Senior Vice President and Chief Financial Officer, T.J.T., Inc.   Date 1/11/00 LEGAL DESCRIPTION (EXHIBIT A TO THE LEASE AGREEMENT)     From the East quarter corner of Section 6, Township 6 North, Range 1 West, B.M., Gem County, Idaho; thence West on quarter section line 1974.15 feet, to the West line of the State Highway; thence South on said West line of Highway 384.5 feet, for a REAL POINT OF BEGINNING; thence West 152.2 feet, more or less, to the East line of the Old County Road; thence Southerly on said East line of County Road, 483 feet, more or less, to where said County Road turns East; thence Easterly 110 feet along the North side of said County Road to the West side of the right of way of the State Highway; thence Northerly on the West line of said right of way 483 feet, more or less, to said REAL POINT OF BEGINNING.     Except that portion of Deed to the State of Idaho for Highway in Warranty Deed dated February 26, 1970, recorded April 10, 1970 as Instrument No. 99549, records of Gem County, Idaho. 48 -------------------------------------------------------------------------------- QuickLinks LEASE AGREEMENT WITNESSETH: LEGAL DESCRIPTION (EXHIBIT A TO THE LEASE AGREEMENT)

EXHIBIT 10.1 Agreement This Agreement is entered into as of this 18th day of May, 2000, between Parametric Technology Corporation, a Massachusetts corporation (the "Company"), and James P. Baum ("Baum"). WHEREAS, Baum is the Executive Vice President, General Manager - Windchill; and WHEREAS, to provide incentive for Baum to maintain employment with the Company, the Company desires to make the following arrangements with Baum concerning his termination of employment. NOW, THEREFORE, the Company and Baum hereby agree as follows: 1. Termination Notice. The Company agrees that it may not terminate the employment of Baum unless (i) such termination is for Cause (as defined below) or (ii) the Company has delivered to Baum a written notice of such termination (the "Termination Notice") at least six months in advance of the termination date. The duties of Baum during the period from the date of delivery of a Termination Notice until the termination of his employment shall be as determined by the Board of Directors or the Chief Executive Officer. 2. Salary. During the period from the date of delivery of the Termination Notice (the "Notice Date") until the earlier of (i) the date six months after the Notice Date or (ii) the date Baum commences employment with another company or organization, the Company shall pay to Baum a salary that is equal, on an annualized basis, to the highest annual salary (excluding any bonuses) in effect with respect to Baum during the six-month period immediately preceding the Termination Notice. 3. Stock Options. Effective upon a Change in Control (as defined below) of the Company, all stock options granted to Baum and then outstanding under any Stock Option Plan (as defined below) of the Company shall become exercisable in full, notwithstanding any vesting schedule or other provisions to the contrary in the agreements evidencing such options; and the Company and Baum hereby agree that such option agreements are hereby and will be deemed amended to give effect to this provision. 4. Definitions. (a) A termination by the Company of Baum's employment for "Cause" shall mean termination (i) for Baum's willful and continued failure to substantially perform his duties to the Company (other than any such failure resulting from Baum's incapacity due to physical or mental illness), provided that (a) the Company has delivered a written demand for substantial performance to Baum specifically identifying the manner in which the Company believes that Baum has not substantially performed his duties, and (b) Baum has not cured such failure within 30 days after such demand, (ii) for willful conduct by Baum which is demonstrably and materially injurious to the Company, or (iii) for Baum's willful violation of any material provision of any confidentiality, nondisclosure, assignment of invention, noncompetition or similar agreement entered into by Baum in connection with his employment by the Company. For purposes of this paragraph, no act or failure to act on Baum's part shall be deemed "willful" unless done or omitted to be done by Baum not in good faith and without reasonable belief that his action or omission was in the best interests of the Company. (b) A "Change in Control" of the Company shall mean the occurrence of any of the following events: (i) any "person", as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (other than the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company, or any corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportion as their ownership of stock in the Company) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company's then outstanding securities (other than as a result of acquisitions of such securities from the Company); (ii) individuals who, as of the date hereof, constitute the Board of Directors of the Company (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the directors of the Company) shall be, for purposes of this Agreement, considered to be a member of the Incumbent Board; (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than (A) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation or (B) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no "person" (as defined above) acquires more than 20% of the combined voting power of the Company's then outstanding securities; or (iv) the stockholders of the Company approve a plan of complete liquidation of the Company. (c) A "Stock Option Plan" of the Company shall mean any stock option or equity compensation plan of the Company in effect at any time, including without limitation the 1987 Incentive Stock Option Plan, the 1997 Incentive Stock Option Plan 1997, the 1997 Non-statutory Stock Option Plan and the 2000 Equity Incentive Plan. 5. Term. This Agreement shall continue in effect until February 28, 2003, unless extended by the mutual written consent of the Company and Baum. 6. Successors. (a) This Agreement is personal to Baum and without the prior written consent of the Company shall not be assignable by Baum otherwise than by will or the laws of descent and distribution. (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. (c) The Company will require any successor (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 assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as defined above and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement. 7. Miscellaneous. (a) This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts, without reference to principles of conflict of laws. (b) This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. (c) All notices and other communications hereunder shall be in writing and shall be delivered by hand delivery, by a reputable overnight courier service, or by registered or certified mail, return receipt requested, postage prepaid, in each case addressed as follows: If to the Company: Parametric Technology Corporation 128 Technology Drive Waltham, MA 02453 Attention: Senior Vice President --General Counsel If to Baum: James P. Baum 95 Hager Lane Boxborough MA, 01719 or to such other address as either party shall have furnished to the other in writing in accordance herewith. Any notice or communication shall be deemed to be delivered upon the date of hand delivery, one day following delivery to such overnight courier service, or three days following mailing by registered or certified mail.        EXECUTED as of the date first written above.               PARAMETRIC TECHNOLOGY CORPORATION           By:  /s/ C. Richard Harrison     --------------------------------------------------------------------------------     C. Richard Harrison     President and Chief Executive Officer                 /s/ James P. Baum      --------------------------------------------------------------------------------     James P. Baum 

                                                                                &nb p;                 EXECUTION COPY                                                    AMENDMENT NO. 1                                                              TO                                ASSET PURCHASE AND SALE AGREEMENT                                                    DATED JUNE 7, 2000                                                    BY AND BETWEEN                                POTOMAC ELECTRIC POWER COMPANY                                                             AND                                              SOUTHERN ENERGY, INC.                                                              AMENDMENT NO. 1                                                                              TO                                       ASSET PURCHASE AND SALE AGREEMENT           THIS AMENDMENT NO. 1 TO ASSET PURCHASE AND SALE AGREEMENT (this "Amendment") is dated September 18, 2000 and is by and between POTOMAC ELECTRIC POWER COMPANY, a District of Columbia and Virginia corporation ("Seller"), and SOUTHERN ENERGY, INC., a Delaware corporation ("Buyer," collectively with Seller, the Parties).           WHEREAS, Buyer has agreed to purchase and assume, and Seller has agreed to sell and assign, the Auctioned Assets (as defined in the Purchase Agreement) and certain associated liabilities, on the terms and conditions set forth in that certain Asset Purchase and Sale Agreement, dated June 7, 2000 (the "Purchase Agreement"); and           WHEREAS, the parties hereto desire to amend the Purchase Agreement and the Exhibits and Schedules relating thereto set forth herein.           NOW, THEREFORE, in consideration of the mutual covenants and agreements herein set forth and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Buyer and Seller agree as follows:           1.      Defined Terms. Defined terms used in this Amendment and not defined herein shall have the meanings ascribed to them in the Purchase Agreement.           2.      Amendments to Schedule 2.2(a)(iv). Schedule 2.2(a)(iv) to the Purchase Agreement is hereby amended as follows:                     (a)      Item 1 under Section II (Assigned Contracts other than PPAs) is hereby deleted and replaced with the following: "Agreement for Sale of No. 2 Fuel Oil to M Street Terminal by and between Potomac Electric Power Company and BP Amoco, dated July 1, 2000."                     (b)      Item 2 under Section II (Assigned Contracts other than PPAs) is hereby deleted and replaced with the following: "Agreement for Sale of No. 2 Fuel Oil by and between Potomac Electric Power Company and BP Amoco, dated July 1, 2000."                     (c)     Item 3 under Section II (Assigned Contracts other than PPAs) is hereby deleted in its entirety.                     (d)      Item 4 under Section II (Assigned Contracts other than PPAs) is hereby deleted and replaced with the following: "Agreement for Sale of Fuel Oil by and between Potomac Electric Power Company and Amerada Hess Corporation, dated January 1, 2000."                     (e)      Item 20 under Section II (Assigned Contracts other than PPAs) is hereby deleted and replaced with the following: "Storage and Product Handling Agreement (49-00-07-582) by and between Potomac Electric Power Company and Support Terminals Operating Partnership, L.P., effective July 1, 2000."                     (f)      Item 23 under Section II (Assigned Contracts other than PPAs) is hereby deleted and replaced with the following: "Master Agreement for Purchase of Services by and between Potomac Electric Power Company and General Electric Company, effective April 10, 1984."                     (g)      Item 26 under Section II (Assigned Contracts other than PPAs) is hereby added to read as follows: "No. 2 Fuel Oil Transportation Agreement by and between Potomac Electric Power Company and Hardesty and Son, Incorporated, dated July 1, 2000."           (3)      Amendment to Schedule 2.2(b)(i).                     (a)      The lead in sentence in Section VIII is hereby deleted and replaced with the following: "Seller will retain the following equipment located on Buyer Real Estate and the Potomac River Real Property:"           (4)      Amendments to Schedule 5.3(a). Schedule 5.3(a) to the Purchase Agreement is hereby amended as follows:                     (a)      Item 4 is hereby deleted and replaced with the following: "Master Agreement for Purchase of Services by and between Potomac Electric Power Company and General Electric Company, effective April 10, 1984."                     (b)      Item 5 is hereby deleted and replaced with the following. "Delivery Service Agreement for Chalk Point Electric Generating Facilities by and between Potomac Electric Power Company and Washington Gas Light Company, effective October 28, 1993."                     (c)      Items 6, 10, 17 and 18 are hereby deleted in their entirety.                     (d)      Item 8 is hereby deleted and replaced with the following: "Storage and Product Handling Agreement (49-00-07-582) by and between Potomac Electric Power Company and Support Terminals Operating Partnership, L.P., effective July 1, 2000."                     (e)      Item 24 is hereby added to read as follows: "No. 2 Fuel Oil Transportation Agreement by and between Potomac Electric Power Company and Hardesty and Son, Incorporated, dated July 1, 2000."           5.      Amendments to Exhibits.                     (a)      Exhibits C-2 (form of Dickerson Easement Agreement), C-3 (form of Chalk Point Easement Agreement) and C-4 (form of Morgantown Easement Agreement) to the Purchase Agreement are hereby deleted in their entirety and replaced with the form of Easement Agreements attached as Exhibits A-1 (form of Dickerson Easement Agreement), A-2 (form of Chalk Point Easement Agreement) and A-3 (form of Morgantown Easement Agreement) hereto, respectively.                     (b)      Exhibits E-1 (form of Potomac River Interconnection Agreement), E-2 (form of Morgantown Interconnection Agreement), E-3 (form of Dickerson Interconnection Agreement) and E-4 (form of Chalk Point Interconnection Agreement) to the Purchase Agreement are hereby amended as follows:                               (i)      Schedule B to Exhibit E-1 (form of Potomac River Interconnection Agreement) is hereby amended by inserting the drawings attached hereto as Exhibit B-1.                               (ii)     Schedule B to Exhibit E-2 (form of Morgantown Interconnection Agreement) is hereby amended by inserting the drawings attached hereto as Exhibit B-2.                               (iii)    Schedule B to Exhibit E-3 (form of Dickerson Interconnection Agreement) is hereby amended by inserting the drawings attached hereto as Exhibit B-3.                               (iv)    Schedule B to Exhibit E-4 (form of Chalk Point Interconnection Agreement) is hereby amended by inserting the drawings attached hereto as Exhibit B-4.                               (v)       Schedules D and E of Exhibits E-1 (form of Potomac River Interconnection Agreement), E-2 (form of Morgantown Interconnection Agreement), E-3 (form of Dickerson Interconnection Agreement) and E-4 (form of Chalk Point Interconnection Agreement) are hereby amended by inserting (a) Attachments 2 and 3 to Schedule D attached hereto as Exhibit C-1 and (b) Schedule E (Pepco's Interconnection Standards) attached hereto as Exhibits C-2.                               (vi)     Schedule F to Exhibit E-3 (form of Dickerson Interconnection Agreement) is hereby replaced with the schedule attached hereto as Exhibit D.                               (vii)    The table of contents to Exhibit E-4 (form of Chalk Point Interconnection Agreement) is hereby amended as follows: deleting Item 3.16 and replacing it with "SMECO CT Units Status Notification."                               (viii)    Header 3.16 of Exhibits E-4 (form of Chalk Point Interconnection Agreement) is hereby amended by deleting it in its entirety and replacing it with the following: "SMECO CT Unit Status Notification."                               (ix)     Schedule G to Exhibit E-1 (form of Potomac River Interconnection Agreement) is hereby amended by replacing Schedule G thereto with the Schedule G attached hereto as Exhibit E.           6.      Governing Law. This Amendment is governed by, and shall be construed in accordance with, the laws of the District of Columbia without regard to principles of conflicts of law.           7.      Modifications and Amendments. This Amendment shall not be modified or amended except by a written instrument executed by both of the Parties.           8.      Entire Agreement; Severability. This Amendment and the Purchase Agreement constitute the entire agreement and understanding between the parties hereto with respect to the subject matter hereof. In the event that any portion of this Amendment or the Purchase Agreement shall be determined to be invalid or unenforceable, such portion of this Amendment or Purchase Agreement shall be severable from the other provisions of this Amendment or the Purchase Agreement which previsions shall be valid, binding upon and enforceable against the Parties.           9.      Effectiveness; Purchase Agreement. This Amendment shall be of full force and effect upon its execution and delivery by each of the Parties. Except as amended by this Amendment, all other terms of the Purchase Agreement shall continue in full force and effect and unchanged and are hereby confirmed in all respects.           10.      Counterparts. This Amendment may be executed in two counterparts, each of which shall be deemed an original, but both of which together shall constitute one and the same instrument.           IN WITNESS WHEREOF, Buyer and Seller have signed and delivered this Amendment on the day and year set forth above.     WITNESS/ATTEST: POTOMAC ELECTRIC POWER COMPANY __________________________________ By:  /S/  MARY M. SHARPE-HAYES            Name:  Mary Sharpe-Hayes Title:    Vice President       SOUTHERN ENERGY, INC.    /S/  SANDRA J. WILSON                 By:  /S/  ANNE M. CLEARY                      Name:  Anne M. Cleary Title:   Vice President                                                                                                                EXHIBIT A-1                                                                                       & bsp;                               EXECUTION COPY AFTER RECORDING PLEASE RETURN TO: Commercial Settlements, Inc. 1015 15th Street, N.W. Suite 300 Washington, D.C. 20005 Attention: David Nelson                  EASEMENT, LICENSE AND ATTACHMENT AGREEMENT                                                      (Dickerson Station)           THIS EASEMENT, LICENSE AND ATTACHMENT AGREEMENT (the "Agreement"), is dated as of December ___, 2000, and is entered into by and between SOUTHERN ENERGY MID-ATLANTIC, LLC, a limited liability company organized and existing under the laws of the State of Delaware and having an office at 8711 Westphalia Road, Upper Marlboro, MD 20774 ("Generator"), SOUTHERN ENERGY MD ASH MANAGEMENT, LLC, a limited liability company organized and existing under the laws of the State of Delaware and having an office at 8711 Westphalia Road, Upper Marlboro, M.D. 20774 ("SEAM") and POTOMAC ELECTRIC POWER COMPANY, a District of Columbia and Virginia corporation and having an office at 1900 Pennsylvania Avenue, N.W., Washington, DC 20068 ("Pepco") and The Bank of New York, a New York banking corporation organized and existing under the laws of the State of New York, as successor to The Riggs National Bank of Washington, D.C. as Trustee under the Bond Indenture dated July 1, 1936 made by Potomac Electric Power Company, as amended and supplemented (which original Mortgage and Deed of Trust is recorded among the Land Records of Montgomery County, Maryland in Liber CKW No. 547, Folio 415). Generator and Pepco may hereinafter be referred to individually as a "Party" and collectively as the "Parties."                                                                   RECITALS           A.     Southern Energy, Inc., a Delaware corporation (the "Buyer"), and Pepco have entered into an Asset Purchase and Sale Agreement for Generating and Related Assets (as amended from time to time, the "Asset Sale Agreement"), dated June 7, 2000, for the sale of Pepco's generating station known as the Dickerson Station (as defined in the Asset Sale Agreement). The Buyer has assigned certain of its rights and obligations under the Asset Sale Agreement relating to the Dickerson Station to Generator and to SEAM in accordance with Section 12.5 of the Asset Sale Agreement.           B.     The Dickerson Station is located on that certain parcel of real property which has been conveyed by Pepco to Generator pursuant to the Asset Sale Agreement by virtue of a deed recorded immediately prior hereto and is more particularly described in Exhibit "A" attached hereto, and PEPCO, by virtue of a deed recorded immediately prior hereto, has conveyed unto SEAM the fly ash site (the "Fly Ash Site") more particularly described in Exhibit A-1 attached hereto (collectively, the "Generator's Real Property").           C.     Pepco intends to continue to operate its transmission and distribution business on and from that certain parcel of real property adjoining the Generator's Real Property, which parcel has been retained by Pepco following the conveyances contemplated by the Asset Sale Agreement, and is more particularly described in Exhibit "B" attached hereto (the "Pepco Real Property").           D.     Pepco will continue to own and operate certain personal property assets used in the conduct of its transmission and distribution business which are located upon the Generator's Real Property, and Pepco requires Access (as defined below) to, and certain other rights with respect to, the Generator's Real Property in connection therewith. Generator, in the operation and conduct of its generation business, will require Access to, and certain other rights with respect to, the Pepco Real Property. Furthermore, Pepco and Generator have entered into an Interconnection Agreement (the "Connection Agreement"), dated as of December ___, 2000, pursuant to which Pepco has agreed to provide certain Interconnection Service to Generator required for Generator's conduct of its generation business at Dickerson Station.           E.     In order for the Parties each to (i) enjoy the full benefit of their respective property rights, real or personal, and conduct their respective businesses thereat (ii) fulfill legal requirements, and (iii) comply with their respective agreements under the Connection Agreement, each Party requires certain easements, licenses, rights-of-way and/or attachment rights in, on, over and above, or with respect to, real and or personal property of the other Party.                                                               AGREEMENT           NOW, THEREFORE, the Parties, in consideration of the mutual covenants and agreements contained herein and in the Asset Sale Agreement and the Connection Agreement, and for other good and valuable consideration, the receipt whereof and sufficiency of which are hereby acknowledged, each intending to be legally bound and to bind their respective successors and assigns, hereby mutually agree as follows:           1.     DEFINITIONS                  1.1     Definitions. Any capitalized terms which are used but not defined in the body of this Agreement shall have the meanings given to such terms in the attached Schedule 1.1.           2.     EASEMENTS                  2.1     Grant of Easements to Pepco. Generator does hereby give, grant, bargain, sell, assign and convey unto Pepco, the following easements on the Generator's Real Property for the following purposes:                          (a)     A utility easement, as more particularly described in Exhibit "C" attached hereto, for the installation, operation, repair and maintenance of above and/or below ground power and other utility lines utilized in connection with the transmission and distribution business of Pepco (as now or hereafter conducted) and other functions as Pepco may determine from time to time.                          (b)     An above ground easement as more particularly described in Exhibit "D" attached hereto, for connection of a 230kV circuit to Generator's start-up transformer and the operation, repair and maintenance of said connection.                          (c)     An easement in the vicinity of the Pyrite Storage Area on Generator's Real Property, as such area is more particularly described in Exhibit "E" attached hereto, to extend overhead and underground electric wires and associated facilities to interconnect future Pepco facilities on the Pepco Real Property with existing or future facilities of Pepco and/or other third parties.                          (d)     An easement for the Use, operation and maintenance of the Retained Assets (as described in the Asset Sale Agreement) located upon the Generator's Real Property and any other equipment of any nature or kind retained by Pepco and located upon the Generator's Real Property, together with any other equipment used in connection with the foregoing (together with replacements thereof and substitutions therefor).                          (e)     An easement which enables Pepco to keep and maintain in their present locations, and operate, any Transmission Facilities, Distribution Facilities and other assets owned by Pepco and located upon the Generator's Real Property, together with an easement for all purposes reasonably deemed necessary or convenient by Pepco to exercise any right or fulfill any obligation under the Connection Agreement, including the right to Use any improvements constructed, maintained or installed in connection therewith.                          (f)     An easement of Access to those certain generating buildings (and any replacements thereof) located upon the Generator's Real Property in and upon which certain of Pepco's Distribution Facilities and Transmission Facilities are located. Such easement shall include, without limitation, the right to have keys, access codes or other access methods necessary to enter any of such generating buildings. Furthermore, the exercise of the easement right set forth in this subparagraph shall be subject to the provisions of the Connection Agreement including, without limitation, Section 3.3 thereof.                          (g)     An easement of Access to the Generator's Real Property for the purposes of exercising any of the rights granted in this Section 2.l, in Section 2.3(b)(viii) hereof, in the Connection Agreement or the Asset Sale Agreement.                          (h)     An easement of Access to, and the right to use, the parking lots, access roads, driveways and other such facilities located upon the Generator's Real Property, together with the right to use the railroad lines and railroad spurs located upon the Generator's Real Property (such railroad lines and railroad spurs, "Generator's Rail Facilities") for the transportation of machinery and/or similar uses; provided, however, that the easement of Access to Generator's Rail Facilities shall require Generator's prior consent, such consent not to be unreasonably withheld.                          (i)     Pepco's exercise of the rights, easements, privileges and licenses granted to it pursuant to this Section 2.1 shall be limited to Qualified Personnel or employees of contractors employed by Pepco who, in either event, are under Pepco's and/or its contractors' direct supervision and whose duties include, or who are engaged for the purpose of, Use of the rights granted pursuant to this Section 2.1.                          (j)     The easements granted pursuant to this Section 2.1 shall expressly include Pepco's right to lease, license or otherwise permit Affiliates or third parties to use Pepco's facilities upon such terms and for such purposes as Pepco may determine from time to time, subject to the terms and conditions of this Agreement.                  2.2     Reservation by Generator of Certain Rights. Generator reserves to itself, from the easements granted pursuant to Section 2.1 hereof, the following rights, subject, however, to the provisions of subsections (c) and (d) of this Section 2.2:                          (a)     the right to (i) keep and maintain Generator's Real Property and all improvements and facilities owned by Generator and located upon the Generator's Real Property in their present locations, and (ii) operate and maintain all improvements and facilities owned by Generator and located upon the Generator's Real Property in a manner consistent with past practice; and                          (b)     the right to have Access to all portions of the Generator's Real Property for all purposes deemed reasonably necessary or convenient by Generator in the operation and conduct of its generation business or in order to perform any act permitted, or fulfill any obligation of Generator, under the Connection Agreement, including maintenance of the Generator's Real Property in the manner described in the Connection Agreement.                          (c)     Generator's exercise of the rights reserved to Generator in this Section 2.2, and the rights, privileges and licenses granted to Generator in Section 2.3 shall be exclusively limited to Qualified Personnel or employees of contractors employed by Generator who, in either event, are under Generator's and/or its contractors' direct supervision and whose duties include, or who are engaged for the purpose of, Use of the property described in clause (a) of this Section.                          (d)     Generator agrees that the maximum elevation of storage in or on the Pyrite Storage Area described in Exhibit "E" attached hereto shall at no time, in any location, exceed 405 feet above sea level.                  2.3     Grant of Easements, Right, Privilege and License from Pepco to Generator.                          (a)     Pepco does hereby grant to Generator (and to SEAM, but only as to the easement of Access for ingress and egress to the Fly Ash Site) the following easements, rights, privileges and licenses on and with respect to the Pepco Real Property:                                  (i)     An easement of Access to and upon the Pepco Real Property from Martinsburg Road (or other public right of way) for ingress and egress to Dickerson Station and the other Generating Facilities, and for ingress and egress to the Fly Ash Site.                                  (ii)    An easement which enables Generator to keep and maintain in their present locations, and operate, any Generating Facilities and other assets owned by Generator and located upon the Pepco Real Property, including, without limitation, an easement for a portion of the Generator's oil retention area located upon the Pepco Real Property in the area more particularly described in Exhibit "F" attached hereto.                                  (iii)   An easement of Access to and upon the Pepco Real Property for the purposes of exercising any of the rights granted in the Connection Agreement or the Asset Sale Agreement.                          (b)     In addition, but without limitation of Generator's rights pursuant to the Connection Agreement, Pepco agrees to make available to Generator (at no cost to Generator, except as provided below) Pepco's master station voltage control equipment (the "Equipment") located at Dickerson Station upon the Generator's Real Property during the term of this Agreement, subject to the following terms and conditions, and Generator agrees to comply with such terms and conditions:                                  (i)     Generator's operation of the Equipment shall at all times be subject to that certain Agreement of Sale and Lease dated as of November 30, 1994 between NationsBank Trust Company, National Association and Pepco (the "Control Center Lease"), and Generator shall comply with the terms and conditions thereof with respect to the use of the Equipment (including keeping the Equipment free and clear of any liens, claims or encumbrances of whatever nature, and identifying the Equipment as being owned by Pepco, and shall not modify, alter, remove or add to the Equipment);                                  (ii)    Generator shall operate and maintain the Equipment in accordance with Good Utility Practice;                                  (iii)   Generator shall be responsible for all operating, repair and maintenance costs, taxes and the like with respect to the Equipment, and shall reimburse Pepco promptly upon invoicing for any such costs paid by Pepco;                                  (iv)    Generator's Access to the Equipment shall be in accordance with this Agreement;                                  (v)     Generator's right to operate the Equipment shall terminate in the event of actual or constructive loss of the Equipment, damage rendering the Equipment beyond repair or unfit for normal use, the condemnation or seizure of the Equipment, the obsolescence of the Equipment or the material breach by Generator of any of its covenants in this Section 2.3(b);                                  (vi)    Pepco shall have no obligation to Generator with respect to the Equipment other than to permit Access to and operation of the Equipment in accordance with this Section 2.3(b);                                  (vii)   The obligations of Generator under Section 7.4 (maintenance of liability insurance coverage) and Section 7.1 (indemnification) shall be applicable to the Equipment; and                                  (viii)  Pepco shall have Access to the Equipment for purposes of complying with the terms and conditions of the Control Center Lease and as necessary to perform any of the obligations of Generator pursuant to this subparagraph (b) above to the extent the same are not timely performed by Generator.                  2.4     General Scope of Easements.                          (a)     Except as otherwise provided in Sections 2.2 and 2.3 above and Section 2.4(b) below, each easement and each right, privilege and license granted hereby is and shall be a perpetual grant, transfer, conveyance and right of Access to and Use (subject to the terms of this Agreement) to the Grantee thereof and to any future owner of the real property, improvements and facilities benefited thereby. Notwithstanding the foregoing, all easements, rights, privileges and licenses granted by this Agreement are and shall be subject to the terms and conditions of the Connection Agreement, and in the event of any inconsistency between the terms and conditions of the Connection Agreement and the terms of this Agreement, the terms of the Connection Agreement shall control.                          (b)     Any easement or right, privilege and license granted hereunder for purposes of enabling a Party to exercise any right or fulfill any obligation set forth in the Connection Agreement will continue for the term of the Connection Agreement, and thereafter if and to the extent that the right or obligation (i) shall by its express terms survive the termination or expiration of the Connection Agreement or (ii) is necessary for the conduct of business by Grantee. In the event of the termination or expiration of an easement or right, privilege and license granted hereunder for purposes of enabling a Grantee to exercise any right or fulfill any obligation set forth in the Connection Agreement, all equipment and facilities installed or maintained by such Grantee on the real property of the other Party pursuant to said terminated or expired easement or right, privilege and license shall, at the request of the other Party, be removed at the sole cost and expense of such Grantee, and such Grantee shall, at its sole cost and expense repair any damage to the real property and/or equipment and facilities of the other Party damaged as a result of such removal.                          (c)     All equipment and facilities installed or maintained by Grantee pursuant to an easement or right, privilege and license granted hereunder shall be maintained by Grantee in accordance with Good Utility Practice and the Connection Agreement, and Grantee shall make all repairs and replacements necessary to keep such equipment and facilities in such condition.                          (d)     Generator may not Use any portion of Generator's Real Property burdened by any easement, right or privilege granted to Pepco hereunder if such Use would materially adversely affect the Use and enjoyment by Pepco of the rights granted to it hereunder, or materially increase the costs or risks associated with such Use.                          (e)     All easements granted herein shall be deemed easements appurtenant to the parcel of real property benefited thereby and shall run with such real property and shall be deemed covenants running with the real property burdened thereby.                  2.5     Interpretation. The following shall apply in interpreting any easement and any right, privilege and license granted pursuant to this Agreement:                          (a)     Each easement and each right, privilege and license granted herein is irrevocable except by written agreement of the parties.                          (b)     With respect to any easement created by this Agreement, the words "in," "upon," "to," "on," "over," "above," "through" and/or "under" shall be interpreted to include all of such terms.                          (c)     Each easement and each right, privilege and license granted herein may be enjoyed without charge or fee to Grantee of the easement.                          (d)     Each easement and each right, privilege and license granted herein is also a grant of the additional right of Access over Grantor's property to accomplish the purpose of such easement or right, privilege and license, to perform any obligations hereunder or in the Connection Agreement, and to comply with any legal requirements affecting Grantee or its property and/or improvements.                          (e)     Exercise of any easement or any right, privilege and license granted hereunder permitting or requiring maintenance, repairs, alteration, restoration, rebuilding, construction, upgrading, cleaning, installation, removal, modification, replacement, expansion, or other work by Grantee upon the property or improvements of Grantor shall be subject to the following conditions:                                  (i)     Work upon the facilities and properties of either Party subject to this                                  Agreement shall be permitted only to each Party's Qualified Personnel,                                  and Access to such facilities and properties shall be permitted only to a                                  Party's Qualified Personnel and such consultants, agents, contractors,                                  subcontractors and invitees as any Party may select or permit; provided                                  that any consultant, agent, contractor, subcontractor or invitee shall                                  comply with all applicable provisions of this Agreement and the                                  Connection Agreement.                                  (ii)    Work shall be performed using reasonable precautions to avoid                                  unreasonable interference with the Use and enjoyment of Grantor's                                  property and improvements.                                  (iii)   Except only as may be specifically provided to the contrary herein,                                  Grantee shall not be liable for damage, if any, which may be caused by                                  Grantee's normal and reasonable Use of any easement, or right, privilege or                                  license granted hereunder.                                  (iv)    Following completion of the work, Grantee shall restore Grantor's                                  property and improvements to the same or as good a condition as existed                                  before the commencement of the work.                                  (v)     Any easement and any right, privilege and license granted herein                                  which permits a Grantee to maintain its property, equipment, facilities and                                  appurtenances on the property and improvements owned by Grantor also                                  includes the right to maintain in place on Grantor's property and                                  improvements any and all wires and cables connecting such property,                                  equipment, facilities, and appurtenances to (i) the devices, machinery and                                  equipment which they measure, regulate and/or control, and (ii) power                                  sources.                                  (vi)    Generator shall be solely responsible for the maintenance of any                                  roads, paths and other means of entry or exit located upon either the                                  Generator's Real Property or the Pepco Real Property that are commonly                                  utilized by Generator and Pepco, and their respective employees, agents                                  and contractors pursuant to this Agreement or the Connection                                  Agreement.                          (f)     Any easement granted pursuant to Section 2.1(a), (b), (c), (d) or (e) includes the right to (i) trim, cut, treat and/or remove, by manual, mechanical, and chemical means, any and all trees, brush, structures and other obstructions within the easement area, as well as such trees, brush, structures and vegetation outside of the easement area deemed reasonably necessary or desirable by Pepco for the safe and secure operation of its facilities; and (ii) obtain Access to Generator's Real Property for the purpose of performing the aforementioned acts.                  2.6     Rules and Regulations.           Each Party may promulgate rules regulating the conduct of the other Party in the exercise of rights under this Agreement provided such rules and regulations do not unreasonably interfere with or impede the affected Party's rights and easements as set forth herein or in the Connection Agreement.                  2.7     No Obstruction.                          (a)     No Party hereto shall obstruct the easements or the rights, privileges and licenses granted or created pursuant to this Agreement or render them impassable or unusable in any way or otherwise in any way interfere with the right to the Use and enjoyment of the easements or rights, privileges and licenses granted or created pursuant to this Agreement.                          (b)     No Party hereto shall make any changes to the topography or accesses on or to its respective property, including grading or drainage that could reasonably be expected to adversely affect another Party's facilities, common use drainage systems, or pollution control systems, or the exercise of any right or fulfillment of any obligation in this Agreement or in the Connection Agreement, without the prior written consent of the other Party which consent shall not unreasonably be withheld, delayed or conditioned.           3.     TAXES, ASSESSMENTS AND OTHER CHARGES                  3.1     Real Estate Taxes. Generator, with respect to the Generator's Real Property and Pepco, with respect to the Pepco Real Property, shall pay and discharge all of the following ("Real Estate Taxes") whether or not now within the contemplation of the Parties hereto: (i) all real estate taxes, assessments (both general and special), other governmental impositions and charges, taxes, rents, levies and sums of every kind or nature whatsoever, extraordinary as well as ordinary, as shall at any time be imposed by any governmental or public authority on, or become a lien in respect of, the Generator's Real Property or the Pepco Real Property, as the case may be, or any part thereof, or which may become due and payable with respect thereto, and any and all taxes assessments and charges levied, assessed or imposed upon the Generator's Real Property or the Pepco Real Property, as the case may be, in lieu of or in addition to, the foregoing, under or by virtue of any present or future laws, rules, requirements, orders, directives, ordinances or regulations of the United States of America or of the State or of any subdivision thereof, or of any lawful governmental authority whatsoever, and any interest or penalties thereon, and (ii) all other taxes (excluding gains, sales and income taxes but including occupancy taxes which are measured by income) measured by ownership of the Generator's Real Property or the Pepco Real Property, as the case may be. Generator shall pay and discharge all levies and assessments for water, water meter (including any expenses incident to the installation, repair or replacement of any water meter) and sewer and all rents with respect to water and sewer which provide service to the Generator's Real Property.                  3.2     Personal Property Taxes. Generator and Pepco shall, respectively, pay and discharge all of the following ("Personal Property Taxes") whether or not now within the contemplation of the Parties hereto: all taxes and assessments which shall or may be charged, levied, assessed or imposed upon, or become a lien upon, the personal property of Generator or Pepco, as the case may be, Used in the operation or in connection with the business conducted at the Generator's Real Property or the Pepco Real Property, as the case may be.                  3.3     Timing of Payment. Subject to the provisions of Section 3.5, Generator and Pepco shall each comply with its covenant to pay and discharge all Real Estate Taxes and Personal Property Taxes by paying all such taxes directly to the appropriate taxing authorities prior to the expiration of the period within which payment is permitted without penalty or interest. Generator and Pepco shall within twenty (20) days of written request of the other Party, produce the most recent official receipts from the appropriate taxing authorities evidencing such payment certified by Generator or Pepco, as the case may be, to the other Party hereto.                  3.4     Cooperation with Respect to Tax Statements. Generator and Pepco will cooperate with each other in obtaining and/or retaining any tax abatement for which the Generator's Real Property or Pepco Real Property may be eligible. Upon written request of the Party seeking an abatement, the other Party or Parties hereto will execute and file any and all documents and instruments reasonably necessary to obtain and retain such abatement, without the assumption of any liabilities or obligations, provided that the Party seeking such abatement shall reimburse the cooperating Party or Parties for any reasonable expenses that such cooperating Party or Parties may incur in connection therewith.                  3.5     Tax Contests. Generator, with respect to the Generator's Real Property, and Pepco, with respect to the Pepco Real Property:                          (a)     May contest in good faith by appropriate proceedings diligently and continuously conducted, at its or their sole cost and expense, any Real Estate Tax or charge or Personal Property Tax or charge, or similar tax or charge and, where permitted by law, pay the same under protest.                          (b)     Shall pay and discharge such contested items as finally adjudicated or settled, with interest and penalties, and all other charges directed to be paid in or by any such adjudication or settlement.                          (c)     May, in its or their sole discretion, consolidate any proceeding to obtain a reduction in the assessed valuation with any similar proceeding or proceedings brought by it or them relating to any one or more other tax years.                          (d)     Shall indemnify and hold the non-contesting Party harmless from and against all liability, loss, cost or expense arising out of the contest.                  3.6     Refunds. Any refunds from any contest undertaken pursuant to Section 3.5 shall belong wholly to the Party or Parties that paid the tax.           4.     MECHANICS' LIENS                  4.1     Notice Regarding Labor and Material. Notice is hereby given that no Party hereto shall be liable for any labor or materials furnished or to be furnished to or for another Party hereto or to any other persons or entities claiming under such other Party on credit, and that no mechanics' or other lien for any such labor or material furnished to a Party or such other persons or entities shall attach to or affect any property interest of any other Party.                  4.2     Disposition of Liens.                          (a)     Pepco shall forthwith take such action necessary to discharge, remove or satisfy any lien filed against the Generator's Real Property or any portion thereof for any labor or materials furnished or to be furnished for or on behalf of Pepco, or any person or entity holding any portion thereof through or under Pepco.                          (b)     Generator shall forthwith take such action necessary to discharge, remove or satisfy any lien filed against the Pepco Real Property or any portion thereof for any labor or materials furnished or to be furnished for or on behalf of Generator, or any person or entity holding any portion thereof through or under Generator.                          (c)     If either Pepco or Generator, as the case may be, shall fail to discharge, remove or satisfy any such lien which it is obligated to discharge, remove or satisfy hereunder within ten (10) days after notice of the existence of the lien has been given to such defaulting Party, the non-defaulting Party or parties may pay the amount of such lien or discharge the same by deposit or bonding, and the amount so paid or deposited, or the premium paid for such bond, with interest at the rate provided for defaults in Section 6.3 hereof, shall be paid by the defaulting Party upon demand to the non-defaulting Party who effected such cure.                          (d)     The defaulting Party shall defend, indemnify and save harmless the non- defaulting Party from and against all liability, loss, cost or expense (including reasonable attorneys' fees) arising out of any liens which the defaulting Party is obligated to discharge, remove or satisfy.           5.     CONDEMNATION                  5.1     Right to Participate. In the event the Generator's Real Property or the Pepco Real Property, or any part thereof, shall be taken in condemnation proceedings or by exercise of any right of eminent domain or any agreement with those authorized to exercise such right (any such matter being hereinafter referred to as a "Taking" or property "Taken"), whether such Taking be a permanent taking or a temporary Taking, any person or entity having an interest in the award or awards shall have the right to participate in any such condemnation proceedings or agreement for the purpose of protecting its interest hereunder. Each Party so participating shall pay its own expenses.                  5.2     Total Taking. A "Total Taking" shall be deemed to have occurred as to the property of any Party (which means the Generator's Real Property, as to Generator, and the Pepco Real Property, as to Pepco) when the entire property of such Party shall be Taken or a substantial part of such property shall be Taken and the untaken portion of the property would, following the completion of restoration, be unsuitable for the operation and the Use thereof in the manner so operated and Used prior to the Taking. Upon a Total Taking, this Agreement shall terminate with respect to the property Taken except with respect to the disposition of the award and this Agreement shall continue with respect to the property not Taken.                  5.3     Disposition of Award. In the event of a Taking, each Party shall be entitled to share in the awards to the extent of its interest in the property subject to the Taking, and for consequential damages to and dilution of value of the relevant property not so Taken.                  5.4     Notice of Taking. In the event the Generator's Real Property or the Pepco Real Property, or any part thereof, shall be the subject of any condemnation proceedings or the subject of any eminent domain proceedings, and if any Party shall receive actual notice of such proceedings, the Party receiving such notice shall notify the other Party of the existence of such proceedings. Such notification shall occur within thirty (30) days of the receipt of such actual notice.           6.     DEFAULTS                  6.1     Events of Default. Each and every one of the following events shall constitute an Event of Default ("Event of Default') under this Agreement:                          (a)     If a Party fails to make any payment due to the other Party hereto within twenty (20) days of written demand for such payment;                          (b)     If a Party fails, within twenty (20) days of written notice from a Party, to make any payment due from such Party to any third party and such failure could result in the imposition of a lien or other encumbrance on the property or improvements of a Party, unless the payment of such amount is contested in accordance with Section 3.5 hereof, in which case, the provisions of Section 3.5 shall control; and                          (c)     If a Party fails to perform any material non-monetary obligations hereunder, and said Party fails to cure such default within thirty (30) days of receipt of written notice stating with particularity the nature of the default; provided, however, if such default is of such a nature that it cannot be cured within thirty (30) days following receipt of such notice, an Event of Default shall not have occurred if the defaulting Party shall within such thirty (30) days commence the necessary cure and shall at all times thereafter diligently and continuously prosecute such cure to completion.                  6.2     Right of Self Help. A non-defaulting Party may at its election following the occurrence of a non-monetary Event of Default and the thirtieth (30th) day after the receipt of the written notice specified in paragraph 6.1(c) hereof, undertake the cure of such default on behalf of the defaulting Party. A non-defaulting Party is granted an easement to enter upon, through or under the property or improvements of the defaulting Party to effect such cure. Following the occurrence of an Event of Default involving the payment of money to a person or entity not Party to this Agreement, a non-defaulting Party may make such payment on behalf of the defaulting Party. All monies paid by the non-defaulting Party and all reasonable costs and expenses (including, reasonable attorneys' fees) incurred by it, as the case may be, in effecting such cure or payment, shall be paid by the defaulting Party upon written demand, together with interest from the date of such demand at the rate set forth in Section 6.3. This Section 6.2 shall not limit Pepco's self-help rights pursuant to Section 2.3(b).                  6.3     Interest. Following the occurrence of an Event of Default involving the nonpayment of money by the defaulting Party to the non-defaulting Party, all monies owed to the non-defaulting party shall bear interest at the rate equal to one and one-half percent (1.5%) per month accruing on the due date, provided, however, that such late payment charge shall not exceed the maximum charge which may be collected under State law.                  6.4     Enforcement Rights. In addition to any other rights expressly set forth in this Agreement, but without limitation, enforcement of this Agreement may be had by legal or equitable proceedings against any defaulting Party either to specifically enforce, restrain or enjoin the violation of any restriction, covenant, agreement, term, representation or warranty herein contained or to recover damages. The above notwithstanding, termination of this Agreement shall not be available as a remedy in any proceedings against any defaulting Party.                  6.5     No Forfeiture. Except by enforcement of a judgment lien against such property, nothing contained in this Agreement shall create any reversion, condition or right of re-entry or other provisions for forfeiture under which any Party can be cut off, subordinated or otherwise disturbed in the possession of its property.                  6.6     Independent Covenants. None of the rights and easement granted by this Agreement and none of the performances required by this Agreement shall be dependent, upon the performance of any other term, promise, or condition of this Agreement or any documents executed concurrently or in connection with this Agreement, and such rights, easement and requirements or performance shall continue in effect irrespective of whether anything else in this Agreement or such other documents has been breached or has been terminated. The separateness and independent survival of the right, easements and requirements of performance under this Agreement are essential terms hereof without which this Agreement would not have been made.           7.     INDEMNIFICATION AND INSURANCE                  7.1     Generator's Indemnification. Generator shall indemnify, hold harmless, and defend Pepco and its Affiliates, as the case may be, and their respective officers, directors, employees, agents, contractors, subcontractors, invitees, successors and permitted assigns from and against any and all claims, liabilities, costs, damages, and expenses (including, without limitation, reasonable attorney and expert fees, and disbursements incurred by any of them in any action or proceeding between Pepco and a third party or Generator) for damage to property of unaffiliated third parties, injury to or death of any person, including Pepco's employees or any third parties, to the extent caused, by the breach of this Agreement by Generator or the negligence or willful misconduct of Generator and/or its officers, directors, employees, agents, contractors, subcontractors or invitees arising out of or connected with Generator's performance of this Agreement, or the exercise by Generator of its rights hereunder.                  7.2     Pepco's Indemnification. Pepco shall indemnify, hold harmless, and defend Generator and its Affiliates, as the case may be, and their respective officers, directors, employees, agents, contractors, subcontractors, invitees, successors and permitted assigns from and against any and all claims, liabilities, costs, damages, and expenses (including, without limitation, reasonable attorney and expert fees, and disbursements incurred by any of them in any action or proceeding between Generator and a third party or Pepco) for damage to property of unaffiliated third parties, injury to or death of any person, including Generator's employees or any third parties, to the extent caused by the breach of this Agreement by Pepco or the negligence or willful misconduct of Pepco and/or its officers, directors, employees, agents, contractors, subcontractors or invitees arising out of or connected with Pepco's performance of this Agreement, or the exercise by Pepco of its rights hereunder.                  7.3     Survival. The provisions of Sections 7.1 and 7.2 shall survive termination, cancellation, suspension, completion or expiration of this Agreement.                  7.4     Insurance Coverage. The Parties shall maintain at their own cost the following insurance: (a) standard Commercial General Liability insurance with limitations not less than One Hundred Million Dollars ($100,000,000.00) in the aggregate; (b) All-Risk Property insurance in amounts not less than one hundred percent (100%) of the full replacement cost of the improvements located upon each Party's real property; (c) Worker's compensation insurance as required by prevailing law and Employer's liability insurance with limits of not less than Twenty-five Million Dollars ($25,000,000.00); and (d) such other insurance as is customary in the electric utility industry.                  7.5     Certificate of Insurance. The Parties agree to furnish each other with certificates of insurance evidencing the insurance coverage obtained in accordance with this Article 7, and the Parties agree to notify and send copies to the other of any policies maintained hereunder upon written request by a Party. Each Party must notify the other Party within five (5) business days of receiving notice of cancellation, change, amendment or renewal of any insurance policy required pursuant to Section 7.4 above.                  7.6     Additional Insureds and Waiver. Each Party and its affiliates shall be named as additional insureds on the general liability insurance policies obtained in accordance with Section 7.4, above, as regards liability under this Agreement; and each general liability insurance policy shall contain a waiver of subrogation and each Party shall waive its rights of recovery against the other for any loss or damage covered by such policy.           8.     MISCELLANEOUS                  8.1     Effective Date. This Agreement will be effective on the Closing Date pursuant to the Asset Sale Agreement (the "Effective Date").                  8.2     Exhibits. All exhibits attached to this Agreement are part of this Agreement and the material contained in such exhibits shall be construed and interpreted as if contained within the text of the Agreement.                  8.3     Headings. The Article and Section headings of this Agreement are for convenience and reference only and in no way define, limit or describe the scope and intent of this Agreement, nor in any way affect this Agreement.                  8.4     Interpretation. When a reference is made in this Agreement to an Article, Section, Schedule or Exhibit, such reference shall be to an Article or Section of, or Schedule or Exhibit to, this Agreement unless otherwise indicated. The table of contents and 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" or equivalent words. 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. 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. Any agreement, instrument, statute, regulation, rule or order defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement, instrument, statute, regulation, rule or order 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, regulations, rules or orders) by succession of comparable successor statutes, regulations, rules or orders and references to all attachments thereto and instruments incorporated therein. References to a person are also to its permitted successors and assigns. Each Party acknowledges that it has been represented by counsel in connection with the review and execution of this Agreement and, accordingly, there shall be no presumption that this Agreement or any provision hereof be construed against the Party that drafted this Agreement.                  8.5     GOVERNING LAW. EXCEPT WITH RESPECT TO THE CREATION, PERFECTION AND ENFORCEMENT OF THE REAL PROPERTY INTERESTS CREATED HEREUNDER, WHICH SHALL BE GOVERNED AND CONSTRUED BY THE LAWS OF THE STATE, THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE DISTRICT OF COLUMBIA EXCLUSIVE OF ITS CHOICE OF LAW RULES.                  8.6     Entire Agreement. This Agreement, the Asset Sale Agreement, the Confidentiality Agreement (as defined in the Asset Sale Agreement) and the Ancillary Agreements (as defined in the Asset Sale Agreement) including the Exhibits, Schedules, documents, certificates and instruments referred to herein or therein and other contracts, agreements and instruments contemplated hereby or thereby, embody the entire agreement and understanding of the Parties in respect of the transactions contemplated by this Agreement. There are no restrictions, promises, representations, warranties, covenants or undertakings other than those expressly set forth or referred to herein or therein.                  8.7     Amendment and Modification, Extension, Waiver. This Agreement may be amended, modified or supplemented only by an instrument in writing signed on behalf of each of the Parties. Either Party may (i) extend the time for the performance of any of the obligations or other acts of the other Party, (ii) waive any inaccuracies in the representations and warranties of the other Party contained in this Agreement or (iii) waive compliance by the other Party with any of the agreements or conditions contained in this Agreement. Any agreement on the part of a Party to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such Party. The failure of a Party to this Agreement to assert any of its rights under this Agreement or otherwise shall not constitute a waiver of such rights.                  8.8     Binding Effect. The covenants, conditions, restrictions, encumbrances, easements, license and agreements set forth in this Agreement shall attach to, burden, and run with the land and the Generator's Real Property and the Pepco Real Property or the applicable portion or portions thereof, and shall be appurtenant to the Generator's Real Property or the Pepco Real Property, as appropriate and, together with the remainder of this Agreement, shall be binding upon the Parties hereto and their respective successors, assigns, grantees, transferees and tenants and, together with the remainder of this Agreement, shall inure to the benefit and Use of the Parties hereto and their respective heirs, successors, assigns, grantees, transferees and tenants. Each Grantee of any portion of or interest in the property and each mortgagee which succeeds to the fee simple ownership of any portion of the property shall be deemed, by the acceptance of the deed conveying fee simple title to such person, to have agreed to perform each and every undertaking created hereunder attributable to the portion of the property in which such Grantee or mortgagee has acquired an interest.                  8.9     Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.                  8.10    Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties 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.                  8.11    Notices. All notices and other communications hereunder shall be in writing and shall be deemed given (as of the time of delivery or, in the case of a telecopied communication, of confirmation) if delivered personally, telecopied (which is confirmed) or sent by overnight courier (providing proof of delivery) to the Parties at the following addresses (or at such other address for a Party as shall be specified by like notice):                     if to Pepco, to:                                     Potomac Electric Power Company                                1900 Pennsylvania Avenue, N.W.                                Washington, D.C. 20068                                     Telecopier: (202) 261-7889                                Attention: William T. Torgerson, General Counsel                     with a copy to:                                     Dickstein Shapiro Morin & Oshinsky LLP                                     2101 L Street, N.W.                                     Washington, D.C. 20037                                     Telecopy No.: (202) 887-0689                                     Attention: Kenneth M. Simon, Esq.                     if to Generator, to:                                     c/o Production Service Center                                     8711 Westphalia Road                                     Upper Marlboro, MD 20774                                     Telecopier: (301) 669-8030                                     Attention: Richard Koch, Chief Operations Officer                     with a copy to:                                     Troutman Sanders LLP                                     401 9th Street, N.W.                                     Suite 1000                                     Washington, DC 20004                                     Telecopier: (202) 274-2994                                     Attention: Benjamin L. Israel, Esq. The names, titles and addresses of either Party in this section may be changed by written notification to the other Party.                  8.12    Independent Contractor Status. Nothing in this Agreement shall be construed as creating any relationship between Pepco and Generator other than that of independent contractors.                  8.13    Conflicts. Except with respect to the amendments, indemnification, liability, default and remedies provisions contained herein or as otherwise expressly provided herein, in the event of any conflict or inconsistency between the terms of this Agreement and the terms of the Asset Sale Agreement, the terms of the Asset Sale Agreement shall prevail.           The representations, covenants and warranties, if any, made by Pepco herein are made solely by Potomac Electric Power Company, and not by The Bank of New York, as Trustee, and The Bank of New York, as Trustee, joins in the execution and delivery hereof solely in order to effect the release of the above-described rights upon the Pepco Real Property from the lien of the Bond Indenture dated July 1, 1936, as amended and supplemented. Pursuant to that certain Agreement of Resignation, Appointment and Acceptance dated as of September 27, 1997, by and among Pepco, The Riggs National Bank of Washington, D.C. ("Riggs") and the Trustee, the Trustee is the successor to Riggs, the original trustee under the Bond Indenture.           IN WITNESS WHEREOF, Pepco and Generator have caused this Agreement to be signed by their respective duly authorized officers as of the date first above written.                                                              POTOMAC ELECTRIC POWER COMPANY                                                              By:_______________________________                                                                        Name:                                                                        Title:                                                              SOUTHERN ENERGY MID-ATLANTIC, LLC                                                              By:_______________________________                                                                        Name:                                                                        Title:                                                              SOUTHERN ENERGY MD ASH                                                              MANAGEMENT, LLC                                                              By:_______________________________                                                                        Name:                                                                        Title:                                                              THE BANK OF NEW YORK                                                              By:_______________________________                                                                        Name:                                                                        Title: STATE OF                              )                                                   ) SS: COUNTY OF                          )           BEFORE ME, a Notary Public in and for said County and State, personally appeared ____________________________, an ________________________, by _____________________, its ________ who _________ is personally known to me/________ and who acknowledged before me that he did sign the foregoing instrument and that the same is the free act and deed of said _________________, and his free act and deed personally and as such officer.           IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal at __________, __________, this ____ day of _________, ____.                                                              __________________________________                                                              Notary Public                                                              My Commission Expires: STATE OF                              )                                                   ) SS: COUNTY OF                          )           BEFORE ME, a Notary Public in and for said County and State, personally appeared ____________________________, an ________________________, by _____________________, its ________ who _________ is personally known to me/________ and who acknowledged before me that he did sign the foregoing instrument and that the same is the free act and deed of said _________________, and his free act and deed personally and as such officer.           IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal at __________, __________, this ____ day of _________, ____.                                                              __________________________________                                                              Notary Public                                                              My Commission Expires: STATE OF                              )                                                   ) SS: COUNTY OF                          )           BEFORE ME, a Notary Public in and for said County and State, personally appeared ____________________________, an ________________________, by _____________________, its ________ who _________ is personally known to me/________ and who acknowledged before me that he did sign the foregoing instrument and that the same is the free act and deed of said _________________, and his free act and deed personally and as such officer.           IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal at __________, __________, this ____ day of _________, ____.                                                              __________________________________                                                              Notary Public                                                              My Commission Expires: STATE OF                              )                                                   ) SS: COUNTY OF                          )           BEFORE ME, a Notary Public in and for said County and State, personally appeared ____________________________, an ________________________, by _____________________, its ________ who _________ is personally known to me/________ and who acknowledged before me that he did sign the foregoing instrument and that the same is the free act and deed of said _________________, and his free act and deed personally and as such officer.           IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal at __________, __________, this ____ day of _________, ____.                                                              __________________________________                                                              Notary Public                                                              My Commission Expires: STATE OF                              )                                                   ) SS: COUNTY OF                          )           BEFORE ME, a Notary Public in and for said County and State, personally appeared ____________________________, an ________________________, by _____________________, its ________ who _________ is personally known to me/________ and who acknowledged before me that he did sign the foregoing instrument and that the same is the free act and deed of said _________________, and his free act and deed personally and as such officer.           IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal at __________, __________, this ____ day of _________, ____.                                                              __________________________________                                                              Notary Public                                                              My Commission Expires:                                                        Schedule 1.1                                                         Definitions           "Access" means, subject to the conditions set forth in this Agreement and a Party's right to impose reasonable security and safety restrictions protecting its officers, employees, agents, consultants, contractors, subcontractors, invitees, property and confidential information, full and unimpeded access, in common with Grantor over and through existing roads, paths, walkways, corridors, hallways, doorways, and other means of entry or exit, as exist now and from time to time on Grantor's property or, where no means of access exists, over and through those areas of Grantor's property or improvements which are (i) reasonably necessary or convenient for achieving Grantee's underlying purposes, and (ii) least likely, out of the alternatives reasonably available, to impede or damage the property or operation of any Party hereto. Access shall also include access and right-of-way for Grantee's employees, agents, consultants, contractors, subcontractors, vehicles, trucks, trailers, heavy machinery, equipment, materials, and all other items reasonably necessary or convenient for achieving Grantee's underlying purposes.           "Affiliate" has the meaning set forth in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934.           "Agreement" means this Easement, License and Attachment Agreement.           "Asset Sale Agreement" has the meaning set forth in the first recital of this Agreement, as such Asset Sale Agreement may be amended or modified.           "Connection Agreement" means the Interconnection Agreement (Dickerson), dated as of December ___, 2000, between Pepco and Generator.           "Distribution of Electric Current" means local transmission and distribution of electricity to Pepco's end users.           "Distribution Facilities" means towers, lines of towers, poles, lines of poles, supporting structures, cables, crossarms, overhead and underground wires, guys, braces, ducts, conduits, cables, anchors, lightning protective wires, and all related above-ground and underground facilities, appurtenances and equipment, including all additions, replacements and expansions thereto, now or hereafter installed or located on the Generator's Real Property for Distribution of Electric Current. Distribution Facilities do not include Transmission Facilities.           "Effective Date" has the meaning set forth in Section 8.l.           "FERC" means the Federal Energy Regulatory Commission or its successors.           "Generating Facilities" means the Station and any additional generating plants, turbines or other generating facilities constructed by Generator after the Effective Date at the site of the Station.           "Generator" shall have the meaning set forth in the introductory paragraph of this Agreement and shall include its permitted successors and assigns.           "Generator's Real Property" means the real property described in Exhibit A, and any improvements or betterments thereto now or hereinafter situated thereon           "Good Utility Practice" shall have the meaning given it by the Connection Agreement.           "Grantee" means the Party or Parties who enjoy the principal benefit of the referenced easement, license, right (including attachment rights) privilege or right-of-way.           "Grantor" means the owner or owners of the property and/or improvement granting the referenced easement, license, right (including attachment rights), privilege or right-of-way.           "Interconnection Service" shall have the meaning given it by the Connection Agreement.           "Party" or "Parties" shall have the meaning set forth in the introductory paragraph of this Agreement.           "Pepco" shall have the meaning set forth in the introductory paragraph of this Agreement and shall include its permitted successors and assigns.           "Pepco Real Property" means the real property described in Exhibit B, and any improvements or betterments thereto now or hereinafter situated thereon.           "Qualified Personnel" means individuals who possess any required licenses and trained for their positions and duties by Generator and/or Pepco pursuant to Good Utility Practice.           "State" means the State of Maryland.           "Station" means the Dickerson Station as defined in the Asset Sale Agreement.           "Transmission of Electric Current" means the transmission of such current typically over long distances and at voltages not commonly used for service to end use customers.           "Transmission Facilities" means towers, lines of towers, poles, lines of poles, supporting structures, cables, crossarms, overhead and underground wires, guys, braces, ducts, conduits, cables, anchors, lightning protective wires, and all related above-ground and underground facilities, appurtenances and equipment, including all additions, replacements and expansions thereto, now or hereafter installed or located on the Generator's Real Property and/or which Pepco may reasonably require now and from time to time on the Generator's Real Property for the Transmission of Electric Current. Transmission Facilities do not include Distribution Facilities.           "Transmission System" shall have the meaning set forth in the Connection Agreement.           "Use" means to operate, maintain, repair, upgrade, clean, install, add to, alter, remove, inspect, construct, modify, restore, rebuild, replace, relocate and expand (but if any such addition, relocation or expansion would unreasonably or materially burden Grantor's Property, in each case, the express, prior written consent of Grantor shall be required, which consent shall not unreasonably be withheld, delayed or conditioned) (all of the foregoing to be in accordance with Good Utility Practice).                                                LIST OF EXHIBITS Exhibit A - Generator's Real Property Exhibit B - Pepco Real Property Exhibit C - Utility Easement Exhibit D - Easement for Connection of 230kV Circuit Exhibit E - Pyrite Storage Area Exhibit F - Easement on Pepco Real Property for a portion                of Generator's Oil Retention Area                                                        EXHIBIT A-2                                                                                       nbsp;    EXECUTION COPY AFTER RECORDING PLEASE RETURN TO Commercial Settlements, Inc. 1015 15th Street, N.W. Suite 300 Washington, D.C. 20005 Attention:  David Nelson   EASEMENT, LICENSE AND ATTACHMENT AGREEMENT (Chalk Point Station)   THIS EASEMENT, LICENSE AND ATTACHMENT AGREEMENT (the "Agreement"), is dated as of December ___, 2000, and is entered into by and between SOUTHERN ENERGY CHALK POINT, LLC, a limited liability company organized and existing under the laws of the State of Delaware and having an office at 8711 Westphalia Road, Upper Marlboro, MD 20774 ("Generator"), SOUTHERN ENERGY PINEY POINT , LLC, a limited liability company organized and existing under the laws of the State of Delaware and having an office at 8711 Westphalia Road, Upper Marlboro, MD 20774 ("SEPP") and POTOMAC ELECTRIC POWER COMPANY, a District of Columbia and Virginia corporation and having an office at 1900 Pennsylvania Avenue, N.W., Washington, DC 20068 ("Pepco") and The Bank of New York, a New York banking corporation organized and existing under the laws of the State of New York, as successor to The Riggs National Bank of Washington, D.C. as Trustee under: (i) _________ certain Mortgage Bonds dated July 1, 1936 made by Potomac Electric Power Company, as amended and supplemented (which original Mortgage Bonds are recorded among the Land Records of Prince George's County, Maryland in Liber 452, Folio 1), (ii) that certain Mortgage and Deed of Trust dated July 1, 1936 made by Potomac Electric Power Company, as amended and supplemented (which original Mortgage and Deed of Trust is recorded among the Land Records of Charles County, Maryland in Liber No. 77, Folio 1); and (iii) that certain Mortgage and Deed of Trust dated July 1, 1936 made by Potomac Electric Power Company, as amended and supplemented (which original Mortgage and Deed of Trust is recorded among the Land Records of St. Mary's County, Maryland at Liber 69, Folio 214). Generator and Pepco may hereinafter be referred to individually as a "Party" and collectively as the "Parties."                                                                  RECITALS                A.     Southern Energy, Inc., a Delaware corporation (the "Buyer"), and Pepco have entered into an Asset Purchase and Sale Agreement for Generating and Related Assets (as amended from time to time, the "Asset Sale Agreement"), dated June 7, 2000, for the sale of Pepco's generating station known as the Chalk Point Station (as defined in the Asset Sale Agreement). The Buyer has assigned certain of its rights and obligations under the Asset Sale Agreement relating to the Chalk Point Station to Generator and to SEPP in accordance with Section 12.5 of the Asset Sale Agreement.                B.     The Chalk Point Station is located on that certain parcel of real property which has been conveyed by Pepco to Generator pursuant to the Asset Sale Agreement by virtue of a deed recorded immediately prior hereto and is more particularly described in Exhibit "A" attached hereto (the "Generator's Real Property"). SEPP owns the oil pipeline referenced in Section 2.3(a)(i) and (ii) hereof.                C.     Pepco intends to continue to operate its transmission and distribution business on and from that certain parcel of real property adjoining the Generator's Real Property, which parcel has been retained by Pepco following the conveyances contemplated by the Asset Sale Agreement, and is more particularly described in Exhibit "B" attached hereto (the "Pepco Real Property").                D.     Pepco will continue to own and operate certain personal property assets used in the conduct of its transmission and distribution business which are located upon the Generator's Real Property, and Pepco requires Access (as defined below) to, and certain other rights with respect to, the Generator's Real Property in connection therewith. Generator, in the operation and conduct of its generation business, will require Access to, and certain other rights with respect to, the Pepco Real Property. Furthermore, Pepco and Generator have entered into an Interconnection Agreement (the "Connection Agreement"), dated as of December ___, 2000, pursuant to which Pepco has agreed to provide certain Interconnection Service to Generator required for Generator's conduct of its generation business at Chalk Point Station.                E.     In order for the Parties each to (i) enjoy the full benefit of their respective property rights, real or personal, and conduct their respective businesses thereat (ii) fulfill legal requirements, and (iii) comply with their respective agreements under the Connection Agreement, each Party requires certain easements, licenses, rights-of-way and/or attachment rights in, on, over and above, or with respect to, real and or personal property of the other Party.                                                                      AGREEMENT NOW, THEREFORE, the Parties, in consideration of the mutual covenants and agreements contained herein and in the Asset Sale Agreement and the Connection Agreement, and for other good and valuable consideration, the receipt whereof and sufficiency of which are hereby acknowledged, each intending to be legally bound and to bind their respective successors and assigns, hereby mutually agree as follows:                1.     DEFINITIONS                        1.1     Definitions. Any capitalized terms which are used but not defined in the body of this Agreement shall have the meanings given to such terms in the attached Schedule 1.1.                2.     EASEMENTS                        2.1     Grant of Easements to Pepco. Generator does hereby give, grant, bargain, sell, assign and convey unto Pepco, the following easements on the Generator's Real Property for the following purposes:                                  (a)        An above ground and underground easement, as more particularly described in Exhibit "C" attached hereto, for the installation, operation, repair and maintenance of electrical connections and other facilities between the existing switchyard on Pepco Real Property and the existing combustion turbine-generator area on Generator's Real Property.                                  (b)        An easement as more particularly described in Exhibit "D" attached hereto, for two (2) 69kV overhead transmission lines from Pepco's switchyard area on Pepco Real Property to an existing Southern Maryland Electrical Cooperative switchyard on Generator's Real Property and the operation, repair and maintenance of said transmission lines.                                  (c)        An easement for the Use, operation and maintenance of the Retained Assets (as described in the Asset Sale Agreement) located upon the Generator's Real Property and any other equipment of any nature or kind retained by Pepco and located upon the Generator's Real Property, together with any other equipment used in connection with the foregoing (together with replacements thereof and substitutions therefor).                                  (d)        An easement which enables Pepco to keep and maintain in their present locations, and operate, any Transmission Facilities, Distribution Facilities and other assets owned by Pepco and located upon the Generator's Real Property, together with an easement for all purposes reasonably deemed necessary or convenient by Pepco to exercise any right or fulfill any obligation under the Connection Agreement, including the right to Use any improvements constructed, maintained or installed in connection therewith.                                  (e)        An easement of Access to those certain generating buildings (and any replacements thereof) located upon the Generator's Real Property in and upon which certain of Pepco's Distribution Facilities and Transmission Facilities are located. Such easement shall include, without limitation, the right to have keys, access codes or other access methods necessary to enter any of such generating buildings. Furthermore, the exercise of the easement right set forth in this subparagraph shall be subject to the provisions of the Connection Agreement including, without limitation, Section 3.3 thereof.                                  (f)        An easement of Access to the Generator's Real Property for the purposes of exercising any of the rights granted in this Section 2.l, in Section 2.3(b)(viii) hereof, in the Connection Agreement or the Asset Sale Agreement, and for the purpose of fulfilling any obligation under the Asset Sale Agreement, including, without limitations, obligations associated with the Retained Liabilities (as defined in the Asset Sale Agreement).                                  (g)        An easement of Access to, and the right to use, the parking lots, access roads, driveways and other such facilities located upon the Generator's Real Property, together with the right to use the railroad lines and railroad spurs located upon the Generator's Real Property (such railroad lines and railroad spurs, "Generator's Rail Facilities") for the transportation of machinery and/or similar uses; provided, however, that the easement of Access to Generator's Rail Facilities shall require Generator's prior consent, such consent not to be unreasonably withheld.                                  (h)         Pepco's exercise of the rights, easements, privileges and licenses granted to it pursuant to this Section 2.1 shall be limited to Qualified Personnel or employees of contractors employed by Pepco who, in either event, are under Pepco's and/or its contractors' direct supervision and whose duties include, or who are engaged for the purpose of, Use of the rights granted pursuant to this Section 2.1.                                  (i)        The easements granted pursuant to this Section 2.1 shall expressly include Pepco's right to lease, license or otherwise permit Affiliates or third parties to use Pepco's facilities upon such terms and for such purposes as Pepco may determine from time to time, subject to the terms and conditions of this Agreement.                        2.2     Reservation by Generator of Certain Rights. Generator reserves to itself, from the easements granted pursuant to Section 2.1 hereof, the following rights, subject, however, to the provisions of the final paragraph of this Section 2.2:                                  (a)        the right to (i) keep and maintain Generator's Real Property and all improvements and facilities owned by Generator and located upon the Generator's Real Property in their present locations, and (ii) operate and maintain all improvements and facilities owned by Generator and located upon the Generator's Real Property in a manner consistent with past practice; and                                  (b)        the right to have Access to all portions of the Generator's Real Property for all purposes deemed reasonably necessary or convenient by Generator in the operation and conduct of its generation business or in order to perform any act permitted, or fulfill any obligation of Generator, under the Connection Agreement, including maintenance of the Generator's Real Property in the manner described in the Connection Agreement.                                  (c)         Generator's exercise of the rights reserved to Generator in this Section 2.2, and the rights, privileges and licenses granted to Generator in Section 2.3 shall be exclusively limited to Qualified Personnel or employees of contractors employed by Generator who, in either event, are under Generator's and/or its contractors' direct supervision and whose duties include, or who are engaged for the purpose of, Use of the property described in clause (a) of this Section.                        2.3     Grant of Easements, Right, Privilege and License from Pepco to Generator.                                  (a)        Pepco does hereby grant to Generator (and to SEPP, but only as to the easement for the operation and maintenance of the existing oil pipeline on, under and across the Pepco Real Property and the Retained Assets referenced in subparagraphs (i) and (ii) below) the following easements, rights, privileges and licenses on and with respect to the Pepco Real Property:                                               (i)     An easement, as described on Exhibit "E" attached hereto, for the operation and maintenance of an existing oil pipeline (to be used solely for the transmission of oil) on, under and across Pepco Real Property at two (2) locations.                                               (ii)     An easement, as described on Exhibit "F" attached hereto, for the operation and maintenance of an existing oil pipeline (to be used solely for the transmission of oil) on, under and across the Retained Assets.                                               (iii)     An easement which enables Generator to keep and maintain in their present locations, and operate, any Generating Facilities and other assets owned by Generator and located upon the Pepco Real Property.                                               (iv)     An easement of Access to and upon the Pepco Real Property for the purposes of exercising any of the rights granted in the Connection Agreement or the Asset Sale Agreement.                                               (v)     An easement, as described in Exhibit "G" attached hereto, for the operation and maintenance of an existing railroad track on and across the Pepco Real Property.                                  (b)        In addition, but without limitation of Generator's rights pursuant to the Connection Agreement, Pepco agrees to make available to Generator (at no cost to Generator, except as provided below) Pepco's master station voltage control equipment (the "Equipment") located at Chalk Point Station upon the Generator's Real Property during the term of this Agreement, subject to the following terms and conditions, and Generator agrees to comply with such terms and conditions:                                               (i)     Generator's operation of the Equipment shall at all times be subject to that certain Agreement of Sale and Lease dated as of November 30, 1994 between NationsBank Trust Company, National Association and Pepco (the "Control Center Lease"), and Generator shall comply with the terms and conditions thereof with respect to the use of the Equipment (including keeping the Equipment free and clear of any liens, claims or encumbrances of whatever nature, and identifying the Equipment as being owned by Pepco, and shall not modify, alter, remove or add to the Equipment);                                               (ii)     Generator shall operate and maintain the Equipment in accordance with Good Utility Practice;                                               (iii)     Generator shall be responsible for all operating, repair and maintenance costs, taxes and the like with respect to the Equipment, and shall reimburse Pepco promptly upon invoicing for any such costs paid by Pepco;                                               (iv)     Generator's Access to the Equipment shall be in accordance with this Agreement;                                               (v)     Generator's right to operate the Equipment shall terminate in the event of actual or constructive loss of the Equipment, damage rendering the Equipment beyond repair or unfit for normal use, the condemnation or seizure of the Equipment, the obsolescence of the Equipment or the material breach by Generator of any of its covenants in this Section 2.3(b);                                               (vi)     Pepco shall have no obligation to Generator with respect to the Equipment other than to permit Access to and operation of the Equipment in accordance with this Section 2.3(b);                                               (vii)     The obligations of Generator under Section 7.4 (maintenance of liability insurance coverage) and Section 7.1 (indemnification) shall be applicable to the Equipment; and                                               (vii)     Pepco shall have Access to the Equipment for purposes of complying with the terms and conditions of the Control Center Lease and as necessary to perform any of the obligations of Generator pursuant to this subparagraph (b) above to the extent the same are not timely performed by Generator.                        2.4     General Scope of Easements.                                  (a)        Except as otherwise provided in Sections 2.2 and 2.3 above and Section 2.4(b) below, each easement and each right, privilege and license granted hereby is and shall be a perpetual grant, transfer, conveyance and right of Access to and Use (subject to the terms of this Agreement) to the Grantee thereof and to any future owner of the real property, improvements and facilities benefited thereby. Notwithstanding the foregoing, all easements, rights, privileges and licenses granted by this Agreement are and shall be subject to the terms and conditions of the Connection Agreement, and in the event of any inconsistency between the terms and conditions of the Connection Agreement and the terms of this Agreement, the terms of the Connection Agreement shall control.                                  (b)        Any easement or right, privilege and license granted hereunder for purposes of enabling a Party to exercise any right or fulfill any obligation set forth in the Connection Agreement will continue for the term of the Connection Agreement, and thereafter if and to the extent that the right or obligation (i) shall by its express terms survive the termination or expiration of the Connection Agreement or (ii) is necessary for the conduct of business by Grantee. In the event of the termination or expiration of an easement or right, privilege and license granted hereunder for purposes of enabling a Grantee to exercise any right or fulfill any obligation set forth in the Connection Agreement, all equipment and facilities installed or maintained by such Grantee on the real property of the other Party pursuant to said terminated or expired easement or right, privilege and license shall, at the request of the other Party, be removed at the sole cost and expense of such Grantee, and such Grantee shall, at its sole cost and expense repair any damage to the real property and/or equipment and facilities of the other Party damaged as a result of such removal.                                  (c)        All equipment and facilities installed or maintained by Grantee pursuant to an easement or right, privilege and license granted hereunder shall be maintained by Grantee in accordance with Good Utility Practice and the Connection Agreement, and Grantee shall make all repairs and replacements necessary to keep such equipment and facilities in such condition.                                  (d)         Generator may not Use any portion of Generator's Real Property burdened by any easement, right or privilege granted to Pepco hereunder if such Use would materially adversely affect the Use and enjoyment by Pepco of the rights granted to it hereunder, or materially increase the costs or risks associated with such Use.                                  (e)        All easements granted herein shall be deemed easements appurtenant to the parcel of real property benefited thereby and shall run with such real property and shall be deemed covenants running with the real property burdened thereby.                        2.5     Interpretation. The following shall apply in interpreting any easement and any right, privilege and license granted pursuant to this Agreement:                                  (a)        Each easement and each right, privilege and license granted herein is irrevocable except by written agreement of the parties.                                  (b)        With respect to any easement created by this Agreement, the words "in," "upon," "to," "on," "over," "above," "through" and/or "under" shall be interpreted to include all of such terms.                                  (c)        Each easement and each right, privilege and license granted herein may be enjoyed without charge or fee to Grantee of the easement.                                  (d)        Each easement and each right, privilege and license granted herein is also a grant of the additional right of Access over Grantor's property to accomplish the purpose of such easement or right, privilege and license, to perform any obligations hereunder or in the Connection Agreement, and to comply with any legal requirements affecting Grantee or its property and/or improvements.                                  (e)         Exercise of any easement or any right, privilege and license granted hereunder permitting or requiring maintenance, repairs, alteration, restoration, rebuilding, construction, upgrading, cleaning, installation, removal, modification, replacement, expansion, or other work by Grantee upon the property or improvements of Grantor shall be subject to the following conditions:                                     (i)     Work upon the facilities and properties of either Party subject                                               to this Agreement shall be permitted only to each Party's Qualified                                                Personnel, and Access to such facilities and properties shall be                                               permitted only to a Party's Qualified Personnel and such consultants,                                               agents, contractors, subcontractors and invitees as any Party may                                               select or permit; provided that any consultant, agent, contractor,                                               subcontractor or invitee shall comply with all applicable provisions of                                               this Agreement and the Connection Agreement.                                     (ii)    Work shall be performed using reasonable precautions to avoid                                               unreasonable interference with the Use and enjoyment of Grantor's                                               property and improvements.                                      (iii)  Except only as may be specifically provided to the contrary herein,                                               Grantee shall not be liable for damage, if any, which may be caused                                               by Grantee's normal and reasonable Use of any easement, or right,                                               privilege or license granted hereunder.                                       (iv) Following completion of the work, Grantee shall restore Grantor's                                               property and improvements to the same or as good a condition as                                               existed before the commencement of the work.                                       (v)  Any easement and any right, privilege and license granted herein                                               which permits a Grantee to maintain its property, equipment,                                               facilities and appurtenances on the property and improvements                                               owned by Grantor also includes the right to maintain in place on                                               Grantor's property and improvements any and all wires and cables                                               connecting such property, equipment, facilities, and appurtenances                                               to (i) the devices, machinery and equipment which they measure,                                               regulate and/or control, and (ii) power sources.                                       (vi) Generator shall be solely responsible for the maintenance of any                                               roads, paths and other means of entry or exit located upon either the                                               Generator's Real Property or the Pepco Real Property that are                                               commonly utilized by Generator and Pepco, and their respective                                               employees, agents and contractors pursuant to this Agreement or the                                               Connection Agreement.                                  (f)        Any easement granted pursuant to Section 2.1(a), (b), (c) or (d) includes the right to (i) trim, cut, treat and/or remove, by manual, mechanical, and chemical means, any and all trees, brush, structures and other obstructions within the easement area, as well as such trees, brush, structures and vegetation outside of the easement area deemed reasonably necessary or desirable by Pepco for the safe and secure operation of its facilities; and (ii) obtain Access to Generator's Real Property for the purpose of performing the aforementioned acts.                        2.6     Rules and Regulations. Each Party may promulgate rules regulating the conduct of the other Party in the exercise of rights under this Agreement provided such rules and regulations do not unreasonably interfere with or impede the affected Party's rights and easements as set forth herein or in the Connection Agreement.                        2.7     No Obstruction.                                  (a)        No Party hereto shall obstruct the easements or the rights, privileges and licenses granted or created pursuant to this Agreement or render them impassable or unusable in any way or otherwise in any way interfere with the right to the Use and enjoyment of the easements or rights, privileges and licenses granted or created pursuant to this Agreement.                                  (b)        No Party hereto shall make any changes to the topography or accesses on or to its respective property, including grading or drainage that could reasonably be expected to adversely affect another Party's facilities, common use drainage systems, or pollution control systems, or the exercise of any right or fulfillment of any obligation in this Agreement or in the Connection Agreement, without the prior written consent of the other Party which consent shall not unreasonably be withheld, delayed or conditioned.                3.     TAXES, ASSESSMENTS AND OTHER CHARGES                        3.1     Real Estate Taxes. Generator, with respect to the Generator's Real Property and Pepco, with respect to the Pepco Real Property, shall pay and discharge all of the following ("Real Estate Taxes") whether or not now within the contemplation of the Parties hereto: (i) all real estate taxes, assessments (both general and special), other governmental impositions and charges, taxes, rents, levies and sums of every kind or nature whatsoever, extraordinary as well as ordinary, as shall at any time be imposed by any governmental or public authority on, or become a lien in respect of, the Generator's Real Property or the Pepco Real Property, as the case may be, or any part thereof, or which may become due and payable with respect thereto, and any and all taxes assessments and charges levied, assessed or imposed upon the Generator's Real Property or the Pepco Real Property, as the case may be, in lieu of or in addition to, the foregoing, under or by virtue of any present or future laws, rules, requirements, orders, directives, ordinances or regulations of the United States of America or of the State or of any subdivision thereof, or of any lawful governmental authority whatsoever, and any interest or penalties thereon, and (ii) all other taxes (excluding gains, sales and income taxes but including occupancy taxes which are measured by income) measured by ownership of the Generator's Real Property or the Pepco Real Property, as the case may be. Generator shall pay and discharge all levies and assessments for water, water meter (including any expenses incident to the installation, repair or replacement of any water meter) and sewer and all rents with respect to water and sewer which provide service to the Generator's Real Property.                        3.2     Personal Property Taxes. Generator and Pepco shall, respectively, pay and discharge all of the following ("Personal Property Taxes") whether or not now within the contemplation of the Parties hereto: all taxes and assessments which shall or may be charged, levied, assessed or imposed upon, or become a lien upon, the personal property of Generator or Pepco, as the case may be, Used in the operation or in connection with the business conducted at the Generator's Real Property or the Pepco Real Property, as the case may be.                        3.3     Timing of Payment. Subject to the provisions of Section 3.5, Generator and Pepco shall each comply with its covenant to pay and discharge all Real Estate Taxes and Personal Property Taxes by paying all such taxes directly to the appropriate taxing authorities prior to the expiration of the period within which payment is permitted without penalty or interest. Generator and Pepco shall within twenty (20) days of written request of the other Party, produce the most recent official receipts from the appropriate taxing authorities evidencing such payment certified by Generator or Pepco, as the case may be, to the other Party hereto.                        3.4     Cooperation with Respect to Tax Statements. Generator and Pepco will cooperate with each other in obtaining and/or retaining any tax abatement for which the Generator's Real Property or Pepco Real Property may be eligible. Upon written request of the Party seeking an abatement, the other Party or Parties hereto will execute and file any and all documents and instruments reasonably necessary to obtain and retain such abatement, without the assumption of any liabilities or obligations, provided that the Party seeking such abatement shall reimburse the cooperating Party or Parties for any reasonable expenses that such cooperating Party or Parties may incur in connection therewith.                        3.5     Tax Contests. Generator, with respect to the Generator's Real Property, and Pepco, with respect to the Pepco Real Property:                                  (a)        May contest in good faith by appropriate proceedings diligently and continuously conducted, at its or their sole cost and expense, any Real Estate Tax or charge or Personal Property Tax or charge, or similar tax or charge and, where permitted by law, pay the same under protest.                                  (b)        Shall pay and discharge such contested items as finally adjudicated or settled, with interest and penalties, and all other charges directed to be paid in or by any such adjudication or settlement.                                  (c)        May, in its or their sole discretion, consolidate any proceeding to obtain a reduction in the assessed valuation with any similar proceeding or proceedings brought by it or them relating to any one or more other tax years.                                  (d)        Shall indemnify and hold the non-contesting Party harmless from and against all liability, loss, cost or expense arising out of the contest.                        3.6     Refunds. Any refunds from any contest undertaken pursuant to Section 3.5 shall belong wholly to the Party or Parties that paid the tax.                4.     MECHANICS' LIENS                        4.1     Notice Regarding Labor and Material. Notice is hereby given that no Party hereto shall be liable for any labor or materials furnished or to be furnished to or for another Party hereto or to any other persons or entities claiming under such other Party on credit, and that no mechanics' or other lien for any such labor or material furnished to a Party or such other persons or entities shall attach to or affect any property interest of any other Party.                        4.2     Disposition of Liens.                                  (a)        Pepco shall forthwith take such action necessary to discharge, remove or satisfy any lien filed against the Generator's Real Property or any portion thereof for any labor or materials furnished or to be furnished for or on behalf of Pepco, or any person or entity holding any portion thereof through or under Pepco.                                  (b)         Generator shall forthwith take such action necessary to discharge, remove or satisfy any lien filed against the Pepco Real Property or any portion thereof for any labor or materials furnished or to be furnished for or on behalf of Generator, or any person or entity holding any portion thereof through or under Generator.                                  (c)        If either Pepco or Generator, as the case may be, shall fail to discharge, remove or satisfy any such lien which it is obligated to discharge, remove or satisfy hereunder within ten (10) days after notice of the existence of the lien has been given to such defaulting Party, the non-defaulting Party or parties may pay the amount of such lien or discharge the same by deposit or bonding, and the amount so paid or deposited, or the premium paid for such bond, with interest at the rate provided for defaults in Section 6.3 hereof, shall be paid by the defaulting Party upon demand to the non-defaulting Party who effected such cure.                                  (d)        The defaulting Party shall defend, indemnify and save harmless the non-defaulting Party from and against all liability, loss, cost or expense (including reasonable attorneys' fees) arising out of any liens which the defaulting Party is obligated to discharge, remove or satisfy.                5.     CONDEMNATION                        5.1     Right to Participate. In the event the Generator's Real Property or the Pepco Real Property, or any part thereof, shall be taken in condemnation proceedings or by exercise of any right of eminent domain or any agreement with those authorized to exercise such right (any such matter being hereinafter referred to as a "Taking" or property "Taken"), whether such Taking be a permanent taking or a temporary Taking, any person or entity having an interest in the award or awards shall have the right to participate in any such condemnation proceedings or agreement for the purpose of protecting its interest hereunder. Each Party so participating shall pay its own expenses.                        5.2     Total Taking. A "Total Taking" shall be deemed to have occurred as to the property of any Party (which means the Generator's Real Property, as to Generator, and the Pepco Real Property, as to Pepco) when the entire property of such Party shall be Taken or a substantial part of such property shall be Taken and the untaken portion of the property would, following the completion of restoration, be unsuitable for the operation and the Use thereof in the manner so operated and Used prior to the Taking. Upon a Total Taking, this Agreement shall terminate with respect to the property Taken except with respect to the disposition of the award and this Agreement shall continue with respect to the property not Taken.                        5.3     Disposition of Award. In the event of a Taking, each Party shall be entitled to share in the awards to the extent of its interest in the property subject to the Taking, and for consequential damages to and dilution of value of the relevant property not so Taken.                        5.4     Notice of Taking. In the event the Generator's Real Property or the Pepco Real Property, or any part thereof, shall be the subject of any condemnation proceedings or the subject of any eminent domain proceedings, and if any Party shall receive actual notice of such proceedings, the Party receiving such notice shall notify the other Party of the existence of such proceedings. Such notification shall occur within thirty (30) days of the receipt of such actual notice.                6.    DEFAULTS                        6.1     Events of Default. Each and every one of the following events shall constitute an Event of Default ("Event of Default') under this Agreement:                                  (a)        If a Party fails to make any payment due to a party hereto within twenty (20) days of written demand for such payment;                                  (b)        If a Party fails, within twenty (20) days of written notice from a Party, to make any payment due from such Party to any third party and such failure could result in the imposition of a lien or other encumbrance on the property or improvements of a Party, unless the payment of such amount is contested in accordance with Section 3.5 hereof, in which case, the provisions of Section 3.5 shall control; and                                  (c)        If a Party fails to perform any material non-monetary obligations hereunder, and said Party fails to cure such default within thirty (30) days of receipt of written notice stating with particularity the nature of the default; provided, however, if such default is of such a nature that it cannot be cured within thirty (30) days following receipt of such notice, an Event of Default shall not have occurred if the defaulting Party shall within such thirty (30) days commence the necessary cure and shall at all times thereafter diligently and continuously prosecute such cure to completion.                        6.2     Right of Self Help. A non-defaulting Party may at its election following the occurrence of a non-monetary Event of Default and the thirtieth (30th) day after the receipt of the written notice specified in paragraph 6.1(c) hereof, undertake the cure of such default on behalf of the defaulting Party. A non-defaulting Party is granted an easement to enter upon, through or under the property or improvements of the defaulting Party to effect such cure. Following the occurrence of an Event of Default involving the payment of money to a person or entity not Party to this Agreement, a non-defaulting Party may make such payment on behalf of the defaulting Party. All monies paid by the non-defaulting Party and all reasonable costs and expenses (including, reasonable attorneys' fees) incurred by it, as the case may be, in effecting such cure or payment, shall be paid by the defaulting Party upon written demand, together with interest from the date of such demand at the rate set forth in Section 6.3. This Section 6.2 shall not limit Pepco's self-help rights pursuant to Section 2.3(b).                        6.3     Interest. Following the occurrence of an Event of Default involving the nonpayment of money by the defaulting Party to the non-defaulting Party, all monies owed to the non-defaulting party shall bear interest at the rate equal to one and one-half percent (1.5%) per month accruing on the due date, provided, however, that such late payment charge shall not exceed the maximum charge which may be collected under State law.                        6.4     Enforcement Rights. In addition to any other rights expressly set forth in this Agreement, but without limitation, enforcement of this Agreement may be had by legal or equitable proceedings against any defaulting Party either to specifically enforce, restrain or enjoin the violation of any restriction, covenant, agreement, term, representation or warranty herein contained or to recover damages. The above notwithstanding, termination of this Agreement shall not be available as a remedy in any proceedings against any defaulting Party.                        6.5     No Forfeiture. Except by enforcement of a judgment lien against such property, nothing contained in this Agreement shall create any reversion, condition or right of re-entry or other provisions for forfeiture under which any Party can be cut off, subordinated or otherwise disturbed in the possession of its property.                        6.6     Independent Covenants. None of the rights and easement granted by this Agreement and none of the performances required by this Agreement shall be dependent, upon the performance of any other term, promise, or condition of this Agreement or any documents executed concurrently or in connection with this Agreement, and such rights, easement and requirements or performance shall continue in effect irrespective of whether anything else in this Agreement or such other documents has been breached or has been terminated. The separateness and independent survival of the right, easements and requirements of performance under this Agreement are essential terms hereof without which this Agreement would not have been made.                7.    INDEMNIFICATION AND INSURANCE                        7.1     Generator's Indemnification. Generator shall indemnify, hold harmless, and defend Pepco and its Affiliates, as the case may be, and their respective officers, directors, employees, agents, contractors, subcontractors, invitees, successors and permitted assigns from and against any and all claims, liabilities, costs, damages, and expenses (including, without limitation, reasonable attorney and expert fees, and disbursements incurred by any of them in any action or proceeding between Pepco and a third party or Generator) for damage to property of unaffiliated third parties, injury to or death of any person, including Pepco's employees or any third parties, to the extent caused, by the breach of this Agreement by Generator or the negligence or willful misconduct of Generator and/or its officers, directors, employees, agents, contractors, subcontractors or invitees arising out of or connected with Generator's performance of this Agreement, or the exercise by Generator of its rights hereunder.                        7.2     Pepco's Indemnification. Pepco shall indemnify, hold harmless, and defend Generator and its Affiliates, as the case may be, and their respective officers, directors, employees, agents, contractors, subcontractors, invitees, successors and permitted assigns from and against any and all claims, liabilities, costs, damages, and expenses (including, without limitation, reasonable attorney and expert fees, and disbursements incurred by any of them in any action or proceeding between Generator and a third party or Pepco) for damage to property of unaffiliated third parties, injury to or death of any person, including Generator's employees or any third parties, to the extent caused by the breach of this Agreement by Pepco or the negligence or willful misconduct of Pepco and/or its officers, directors, employees, agents, contractors, subcontractors or invitees arising out of or connected with Pepco's performance of this Agreement, or the exercise by Pepco of its rights hereunder.                        7.3     Survival. The provisions of Sections 7.1 and 7.2 shall survive termination, cancellation, suspension, completion or expiration of this Agreement.                        7.4     Insurance Coverage. The Parties shall maintain at their own cost the following insurance: (a) standard Commercial General Liability insurance with limitations not less than One Hundred Million Dollars ($100,000,000.00) in the aggregate; (b) All-Risk Property insurance in amounts not less than one hundred percent (100%) of the full replacement cost of the improvements located upon each Party's real property; (c) Worker's compensation insurance as required by prevailing law and Employer's liability insurance with limits of not less than Twenty-five Million Dollars ($25,000,000.00); and (d) such other insurance as is customary in the electric utility industry.                        7.5     Certificate of Insurance. The Parties agree to furnish each other with certificates of insurance evidencing the insurance coverage obtained in accordance with this Article 7, and the Parties agree to notify and send copies to the other of any policies maintained hereunder upon written request by a Party. Each Party must notify the other Party within five (5) business days of receiving notice of cancellation, change, amendment or renewal of any insurance policy required pursuant to Section 7.4 above.                        7.6     Additional Insureds and Waiver. Each Party and its affiliates shall be named as additional insureds on the general liability insurance policies obtained in accordance with Section 7.4, above, as regards liability under this Agreement; and each general liability insurance policy shall contain a waiver of subrogation and each Party shall waive its rights of recovery against the other for any loss or damage covered by such policy.                8.    MISCELLANEOUS                        8.1     Effective Date. This Agreement will be effective on the Closing Date pursuant to the Asset Sale Agreement (the "Effective Date").                        8.2     Exhibits. All exhibits attached to this Agreement are part of this Agreement and the material contained in such exhibits shall be construed and interpreted as if contained within the text of the Agreement.                        8.3     Headings. The Article and Section headings of this Agreement are for convenience and reference only and in no way define, limit or describe the scope and intent of this Agreement, nor in any way affect this Agreement.                        8.4     Interpretation. When a reference is made in this Agreement to an Article, Section, Schedule or Exhibit, such reference shall be to an Article or Section of, or Schedule or Exhibit to, this Agreement unless otherwise indicated. The table of contents and 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" or equivalent words. 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. 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. Any agreement, instrument, statute, regulation, rule or order defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement, instrument, statute, regulation, rule or order 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, regulations, rules or orders) by succession of comparable successor statutes, regulations, rules or orders and references to all attachments thereto and instruments incorporated therein. References to a person are also to its permitted successors and assigns. Each Party acknowledges that it has been represented by counsel in connection with the review and execution of this Agreement and, accordingly, there shall be no presumption that this Agreement or any provision hereof be construed against the Party that drafted this Agreement.                        8.5     GOVERNING LAW. EXCEPT WITH RESPECT TO THE CREATION, PERFECTION AND ENFORCEMENT OF THE REAL PROPERTY INTERESTS CREATED HEREUNDER, WHICH SHALL BE GOVERNED AND CONSTRUED BY THE LAWS OF THE STATE, THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE DISTRICT OF COLUMBIA EXCLUSIVE OF ITS CHOICE OF LAW RULES.                        8.6     Entire Agreement. This Agreement, the Asset Sale Agreement, the Confidentiality Agreement (as defined in the Asset Sale Agreement) and the Ancillary Agreements (as defined in the Asset Sale Agreement) including the Exhibits, Schedules, documents, certificates and instruments referred to herein or therein and other contracts, agreements and instruments contemplated hereby or thereby, embody the entire agreement and understanding of the Parties in respect of the transactions contemplated by this Agreement. There are no restrictions, promises, representations, warranties, covenants or undertakings other than those expressly set forth or referred to herein or therein.                        8.7     Amendment and Modification, Extension, Waiver. This Agreement may be amended, modified or supplemented only by an instrument in writing signed on behalf of each of the Parties. Either Party may (i) extend the time for the performance of any of the obligations or other acts of the other Party, (ii) waive any inaccuracies in the representations and warranties of the other Party contained in this Agreement or (iii) waive compliance by the other Party with any of the agreements or conditions contained in this Agreement. Any agreement on the part of a Party to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such Party. The failure of a Party to this Agreement to assert any of its rights under this Agreement or otherwise shall not constitute a waiver of such rights.                        8.8     Binding Effect. The covenants, conditions, restrictions, encumbrances, easements, license and agreements set forth in this Agreement shall attach to, burden, and run with the land and the Generator's Real Property and the Pepco Real Property or the applicable portion or portions thereof, and shall be appurtenant to the Generator's Real Property or the Pepco Real Property, as appropriate and, together with the remainder of this Agreement, shall be binding upon the Parties hereto and their respective successors, assigns, grantees, transferees and tenants and, together with the remainder of this Agreement, shall inure to the benefit and Use of the Parties hereto and their respective heirs, successors, assigns, grantees, transferees and tenants. Each Grantee of any portion of or interest in the property and each mortgagee which succeeds to the fee simple ownership of any portion of the property shall be deemed, by the acceptance of the deed conveying fee simple title to such person, to have agreed to perform each and every undertaking created hereunder attributable to the portion of the property in which such Grantee or mortgagee has acquired an interest.                        8.9     Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.                        8.10     Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties 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.                        8.11     Notices. All notices and other communications hereunder shall be in writing and shall be deemed given (as of the time of delivery or, in the case of a telecopied communication, of confirmation) if delivered personally, telecopied (which is confirmed) or sent by overnight courier (providing proof of delivery) to the Parties at the following addresses (or at such other address for a Party as shall be specified by like notice):                         if to Pepco, to:                                    Potomac Electric Power Company                                    1900 Pennsylvania Avenue, N.W.                                    Washington, D.C. 20068                                    Telecopier: (202) 261-7889                                    Attention: William T. Torgerson, General Counsel                         with a copy to:                                    Dickstein Shapiro Morin & Oshinsky LLP                                    2101 L Street, N.W.                                    Washington, D.C. 20037                                    Telecopy No.: (202) 887-0689                                    Attention: Kenneth M. Simon, Esq.                          if to Generator, to:                                    c/o Production Service Center                                    8711 Westphalia Road                                    Upper Marlboro, MD 20774                                    Telecopier: (301) 669-8030                                    Attention: Richard Koch, Chief Operations Officer                          with a copy to:                                    Troutman Sanders LLP                                    401 9th Street, N.W., Suite 1000                                    Washington, DC 20004                                    Telecopier: (202) 274-2994                                    Attention: Benjamin L. Israel, Esq. The names, titles and addresses of either Party in this section may be changed by written notification to the other Party.                        8.12     Independent Contractor Status. Nothing in this Agreement shall be construed as creating any relationship between Pepco and Generator other than that of independent contractors.                        8.13     Conflicts. Except with respect to the amendments, indemnification, liability, default and remedies provisions contained herein or as otherwise expressly provided herein, in the event of any conflict or inconsistency between the terms of this Agreement and the terms of the Asset Sale Agreement, the terms of the Asset Sale Agreement shall prevail.               The representations, covenants and warranties, if any, made by Pepco herein are made solely by Potomac Electric Power Company, and not by The Bank of New York, as Trustee, and The Bank of New York, as Trustee, joins in the execution and delivery hereof solely in order to effect the release of the above-described rights upon the Pepco Real Property and the Retained Assets from the lien of the Mortgage Bonds and the Mortgages and Deeds of Trust, each dated July 1, 1936, as amended and supplemented. Pursuant to that certain Agreement of Resignation, Appointment and Acceptance dated as of September 29, 1997, by and among Pepco, The Riggs National Bank of Washington, D.C. ("Riggs") and the Trustee, the Trustee is the successor to Riggs, the original trustee under the Mortgage Bonds and Mortgages and Deeds of Trust.                IN WITNESS WHEREOF, Pepco and Generator have caused this Agreement to be signed by their respective duly authorized officers as of the date first above written.                                                                   POTOMAC ELECTRIC POWER COMPANY                                                                   By:_________________________________                                                                   Name:______________________________                                                                   Title:_______________________________                                                                   SOUTHERN ENERGY CHALK POINT, LLC                                                                   By:_________________________________                                                                   Name: ______________________________                                                                   Title:________________________________                                                                   SOUTHERN ENERGY PINEY POINT, LLC                                                                   By:_________________________________                                                                   Name: ______________________________                                                                   Title:_______________________________                                                                   THE BANK OF NEW YORK                                                                   By:________________________________                                                                   Name:______________________________                                                                   Title:_______________________________ STATE OF                            )                                                 ) SS: COUNTY OF                        ) BEFORE ME, a Notary Public in and for said County and State, personally appeared ____________________________, an ________________________, by _____________________, its ________ who _________ is personally know to me/________ and who acknowledged before me that he did sign the foregoing instrument and that the same is the free act and deed of said _________________, and his free act and deed personally and as such officer. IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal at __________, __________, this ____ day of _________, ____. ____________________________                                                                                   Notary Public                                                                                   My Commission Expires: STATE OF                            )                                                 ) SS: COUNTY OF                        ) BEFORE ME, a Notary Public in and for said County and State, personally appeared ____________________________, an ________________________, by _____________________, its ________ who _________ is personally know to me/________ and who acknowledged before me that he did sign the foregoing instrument and that the same is the free act and deed of said _________________, and his free act and deed personally and as such officer. IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal at __________, __________, this ____ day of _________, ____. ____________________________                                                                                   Notary Public                                                                                   My Commission Expires: STATE OF                            )                                                 ) SS: COUNTY OF                        ) BEFORE ME, a Notary Public in and for said County and State, personally appeared ____________________________, an ________________________, by _____________________, its ________ who _________ is personally know to me/________ and who acknowledged before me that he did sign the foregoing instrument and that the same is the free act and deed of said _________________, and his free act and deed personally and as such officer. IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal at __________, __________, this ____ day of _________, ____. ____________________________                                                                                   Notary Public                                                                                   My Commission Expires: STATE OF                            )                                                 ) SS: COUNTY OF                        ) BEFORE ME, a Notary Public in and for said County and State, personally appeared ____________________________, an ________________________, by _____________________, its ________ who _________ is personally know to me/________ and who acknowledged before me that he did sign the foregoing instrument and that the same is the free act and deed of said _________________, and his free act and deed personally and as such officer. IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal at __________, __________, this ____ day of _________, ____. ____________________________                                                                                   Notary Public                                                                                   My Commission Expires: STATE OF                            )                                                 ) SS: COUNTY OF                        ) BEFORE ME, a Notary Public in and for said County and State, personally appeared ____________________________, an ________________________, by _____________________, its ________ who _________ is personally know to me/________ and who acknowledged before me that he did sign the foregoing instrument and that the same is the free act and deed of said _________________, and his free act and deed personally and as such officer. IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal at __________, __________, this ____ day of _________, ____. ____________________________                                                                                   Notary Public                                                                                   My Commission Expires: STATE OF                            )                                                 ) SS: COUNTY OF                        ) BEFORE ME, a Notary Public in and for said County and State, personally appeared ____________________________, an ________________________, by _____________________, its ________ who _________ is personally know to me/________ and who acknowledged before me that he did sign the foregoing instrument and that the same is the free act and deed of said _________________, and his free act and deed personally and as such officer. IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal at __________, __________, this ____ day of _________, ____. ____________________________                                                                                   Notary Public                                                                                   My Commission Expires: STATE OF                            )                                                 ) SS: COUNTY OF                        ) BEFORE ME, a Notary Public in and for said County and State, personally appeared ____________________________, an ________________________, by _____________________, its ________ who _________ is personally know to me/________ and who acknowledged before me that he did sign the foregoing instrument and that the same is the free act and deed of said _________________, and his free act and deed personally and as such officer. IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal at __________, __________, this ____ day of _________, ____. ____________________________                                                                                   Notary Public                                                                                   My Commission Expires:                                                                      Schedule 1.1                                                                        Definitions "Access" means, subject to the conditions set forth in this Agreement and a Party's right to impose reasonable security and safety restrictions protecting its officers, employees, agents, consultants, contractors, subcontractors, invitees, property and confidential information, full and unimpeded access, in common with Grantor over and through existing roads, paths, walkways, corridors, hallways, doorways, and other means of entry or exit, as exist now and from time to time on Grantor's property or, where no means of access exists, over and through those areas of Grantor's property or improvements which are (i) reasonably necessary or convenient for achieving Grantee's underlying purposes, and (ii) least likely, out of the alternatives reasonably available, to impede or damage the property or operation of any Party hereto. Access shall also include access and right-of-way for Grantee's employees, agents, consultants, contractors, subcontractors, vehicles, trucks, trailers, heavy machinery, equipment, materials, and all other items reasonably necessary or convenient for achieving Grantee's underlying purposes. "Affiliate" has the meaning set forth in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934. "Agreement" means this Easement, License and Attachment Agreement. "Asset Sale Agreement" has the meaning set forth in the first recital of this Agreement, as such Asset Sale Agreement may be amended or modified. "Connection Agreement" means the Interconnection Agreement (Chalk Point), dated as of December ____, 2000, between Pepco and Generator. "Distribution of Electric Current" means local transmission and distribution of electricity to Pepco's end users. "Distribution Facilities" means towers, lines of towers, poles, lines of poles, supporting structures, cables, crossarms, overhead and underground wires, guys, braces, ducts, conduits, cables, anchors, lightning protective wires, and all related above-ground and underground facilities, appurtenances and equipment, including all additions, replacements and expansions thereto, now or hereafter installed or located on the Generator's Real Property for Distribution of Electric Current. Distribution Facilities do not include Transmission Facilities. "Effective Date" has the meaning set forth in Section 8.l. "FERC" means the Federal Energy Regulatory Commission or its successors. "Generating Facilities" means the Station and any additional generating plants, turbines or other generating facilities constructed by Generator after the Effective Date at the site of the Station. "Generator" shall have the meaning set forth in the introductory paragraph of this Agreement and shall include its permitted successors and assigns. "Generator's Real Property" means the real property described in Exhibit A, and any improvements or betterments thereto now or hereinafter situated thereon "Good Utility Practice" shall have the meaning given it by the Connection Agreement. "Grantee" means the Party or Parties who enjoy the principal benefit of the referenced easement, license, right (including attachment rights) privilege or right-of-way. "Grantor" means the owner or owners of the property and/or improvement granting the referenced easement, license, right (including attachment rights), privilege or right-of-way. "Interconnection Service" shall have the meaning given it by the Connection Agreement. "Party" or "Parties" shall have the meaning set forth in the introductory paragraph of this Agreement. "Pepco" shall have the meaning set forth in the introductory paragraph of this Agreement and shall include its permitted successors and assigns. "Pepco Real Property" means the real property described in Exhibit B, and any improvements or betterments thereto now or hereinafter situated thereon. "Qualified Personnel" means individuals who possess any required licenses and trained for their positions and duties by Generator and/or Pepco pursuant to Good Utility Practice. "State" means the State of Maryland. "Station" means the Chalk Point Station as defined in the Asset Sale Agreement. "Transmission of Electric Current" means the transmission of such current typically over long distances and at voltages not commonly used for service to end use customers. "Transmission Facilities" means towers, lines of towers, poles, lines of poles, supporting structures, cables, crossarms, overhead and underground wires, guys, braces, ducts, conduits, cables, anchors, lightning protective wires, and all related above-ground and underground facilities, appurtenances and equipment, including all additions, replacements and expansions thereto, now or hereafter installed or located on the Generator's Real Property and/or which Pepco may reasonably require now and from time Property for the Transmission of Electric Current. Transmission Facilities do not include Distribution Facilities. "Transmission System" shall have the meaning set forth in the Connection Agreement. "Use" means to operate, maintain, repair, upgrade, clean, install, add to, alter, remove, inspect, construct, modify, restore, rebuild, replace, relocate and expand (but if any such addition, relocation or expansion would unreasonably or materially burden Grantor's Property, in each case, the express, prior written consent of Grantor shall be required, which consent shall not unreasonably be withheld, delayed or conditioned) (all of the foregoing to be in accordance with Good Utility Practice).   LIST OF EXHIBITS Exhibit A - Generator's Real Property Exhibit B - Pepco Real Property Exhibit C - Easement for Electrical Connections between Switchyard and Combustion Turbine-Generator Exhibit D - Easement for 69 kV Lines Exhibit E - Easement for Oil Pipeline on Pepco Real Property Exhibit F - Easement for Oil Pipeline on Retained Assets Exhibit G - Easement for Railroad Track Crossing Area                                                                                                                      EXHIBIT A-3                                                                                                                      EXECUTION COPY AFTER RECORDING PLEASE RETURN TO: Commercial Settlements, Inc. Suite 300 Washington, D.C. 20005 Attention: David Nelson EASEMENT, LICENSE AND ATTACHMENT AGREEMENT (Morgantown Station)   THIS EASEMENT, LICENSE AND ATTACHMENT AGREEMENT (the "Agreement"), is dated as of December ___, 2000, and is entered into by and between SOUTHERN ENERGY MID-ATLANTIC, LLC, a limited liability company organized and existing under the laws of the State of Delaware and having an office at 8711 Westphalia Road, Upper Marlboro, MD 20774 ("Generator"), SOUTHERN ENERGY PINEY POINT, LLC, a limited liability company organized and existing under the laws of the State of Delaware and having an office at 8711 Westphalia Road, Upper Marlboro, MD 20774 ("SEPP) and POTOMAC ELECTRIC POWER COMPANY, a District of Columbia and Virginia corporation and having an office at 1900 Pennsylvania Avenue, N.W., Washington, DC 20068 ("Pepco") and The Bank of New York, a New York banking corporation organized and existing under the laws of the State of New York, as successor to The Riggs National Bank of Washington, D.C. as Trustee under the Mortgage and Deed of Trust dated July 1, 1936 made by Potomac Electric Power Company, as amended and supplemented (which original Mortgage and Deed of Trust is recorded among the Land Records of Charles County, Maryland in Liber No. 77, Folio 1). Generator and Pepco may hereinafter be referred to individually as a "Party" and collectively as the "Parties." RECITALS               A.     Southern Energy, Inc., a Delaware corporation (the "Buyer"), and Pepco have entered into an Asset Purchase and Sale Agreement for Generating and Related Assets (as amended from time to time, the "Asset Sale Agreement"), dated June 7, 2000, for the sale of Pepco's generating station known as the Morgantown Station (as defined in the Asset Sale Agreement). The Buyer has assigned certain of its rights and obligations under the Asset Sale Agreement relating to the Morgantown Station to Generator and to SEPP in accordance with Section 12.5 of the Asset Sale Agreement.               B.     The Morgantown Station is located on that certain parcel of real property which has been conveyed by Pepco to Generator pursuant to the Asset Sale Agreement by virtue of a deed recorded immediately prior hereto and is more particularly described in Exhibit "A" attached hereto (the "Generator's Real Property"). SEPP owns the oil pipeline referenced in Section 2.3(a)(i) and (ii) hereof.               C.     Pepco intends to continue to operate its transmission and distribution business on and from that certain parcel of real property adjoining the Generator's Real Property, which parcel has been retained by Pepco following the conveyances contemplated by the Asset Sale Agreement, and is more particularly described in Exhibit "B" attached hereto (the "Pepco Real Property").               D.     Pepco will continue to own and operate certain personal property assets used in the conduct of its transmission and distribution business which are located upon the Generator's Real Property, and Pepco requires Access (as defined below) to, and certain other rights with respect to, the Generator's Real Property in connection therewith. Generator, in the operation and conduct of its generation business, will require Access to, and certain other rights with respect to, the Pepco Real Property. Furthermore, Pepco and Generator have entered into an Interconnection Agreement (the "Connection Agreement"), dated as of December ___, 2000, pursuant to which Pepco has agreed to provide certain Interconnection Service to Generator required for Generator's conduct of its generation business at Morgantown Station.               E.     In order for the Parties each to (i) enjoy the full benefit of their respective property rights, real or personal, and conduct their respective businesses thereat (ii) fulfill legal requirements, and (iii) comply with their respective agreements under the Connection Agreement, each Party requires certain easements, licenses, rights-of-way and/or attachment rights in, on, over and above, or with respect to, real and or personal property of the other Party. AGREEMENT               NOW, THEREFORE, the Parties, in consideration of the mutual covenants and agreements contained herein and in the Asset Sale Agreement and the Connection Agreement, and for other good and valuable consideration, the receipt whereof and sufficiency of which are hereby acknowledged, each intending to be legally bound and to bind their respective successors and assigns, hereby mutually agree as follows:               1.     DEFINITIONS                      1.1      Definitions. Any capitalized terms which are used but not defined in the body of this Agreement shall have the meanings given to such terms in the attached Schedule 1.1.               2.     EASEMENTS                      2.1      Grant of Easements to Pepco. Generator does hereby give, grant, bargain, sell, assign and convey unto Pepco, the following easements on the Generator's Real Property for the following purposes:                               (a)     A ten (10) foot wide easement, as more particularly described in Exhibit "C" attached hereto, for the connection and extension of overhead and underground utility facilities and other equipment and facilities utilized in connection with the transmission and distribution business of Pepco (as now or hereafter conducted) and other functions as Pepco may determine from time to time.                               (b)     An easement for the Use, operation and maintenance of the Retained Assets (as described in the Asset Sale Agreement) located upon the Generator's Real Property and any other equipment of any nature or kind retained by Pepco and located upon the Generator's Real Property, together with any other equipment used in connection with the foregoing (together with replacements thereof and substitutions therefor).                               (c)     An easement which enables Pepco to keep and maintain in their present locations, and operate, any Transmission Facilities, Distribution Facilities and other assets owned by Pepco and located upon the Generator's Real Property, together with an easement for all purposes reasonably deemed necessary or convenient by Pepco to exercise any right or fulfill any obligation under the Connection Agreement, including the right to Use any improvements constructed, maintained or installed in connection therewith.                               (d)     An easement of Access to those certain generating buildings (and any replacements thereof) located upon the Generator's Real Property in and upon which certain of Pepco's Distribution Facilities and Transmission Facilities are located. Such easement shall include, without limitation, the right to have keys, access codes or other access methods necessary to enter any of such generating buildings. Furthermore, the exercise of the easement right set forth in this subparagraph shall be subject to the provisions of the Connection Agreement including, without limitation, Section 3.3 thereof.                               (e)     An easement of Access to the Generator's Real Property for the purposes of exercising any of the rights granted in this Section 2.l, in Section 2.3(b)(viii) hereof, in the Connection Agreement or the Asset Sale Agreement.                               (f)     An easement of Access to, and the right to use, the parking lots, access roads, driveways and other such facilities located upon the Generator's Real Property, together with the right to use the railroad lines and railroad spurs located upon the Generator's Real Property (such railroad lines and railroad spurs, "Generator's Rail Facilities") for the transportation of machinery and/or similar uses; provided, however, that the easement of access to Generator's Rail Facilities shall require Generator's prior consent, such consent not to be unreasonably withheld.                               (g)     Pepco's exercise of the rights, easements, privileges and licenses granted to it pursuant to this Section 2.1 shall be limited to Qualified Personnel or employees of contractors employed by Pepco who, in either event, are under Pepco's and/or its contractors' direct supervision and whose duties include, or who are engaged for the purpose of, Use of the rights granted pursuant to this Section 2.1.                               (h)     The easements granted pursuant to this Section 2.1 shall expressly include Pepco's right to lease, license or otherwise permit Affiliates or third parties to use Pepco's facilities upon such terms and for such purposes as Pepco may determine from time to time, subject to the terms and conditions of this Agreement.                      2.2     Reservation by Generator of Certain Rights. Generator reserves to itself, from the easements granted pursuant to Section 2.1 hereof, the following rights, subject, however, to the provisions of the final paragraph of this Section 2.2:                               (a)     the right to (i) keep and maintain Generator's Real Property and all improvements and facilities owned by Generator and located upon the Generator's Real Property in their present locations, and (ii) operate and maintain all improvements and facilities owned by Generator and located upon the Generator's Real Property in a manner consistent with past practice; and                               (b)     the right to have Access to all portions of the Generator's Real Property for all purposes deemed reasonably necessary or convenient by Generator in the operation and conduct of its generation business or in order to perform any act permitted, or fulfill any obligation of Generator, under the Connection Agreement, including maintenance of the Generator's Real Property in the manner described in the Connection Agreement.                               (c)     Generator's exercise of the rights reserved to Generator in this Section 2.2, and the rights, privileges and licenses granted to Generator in Section 2.3 shall be exclusively limited to Qualified Personnel or employees of contractors employed by Generator who, in either event, are under Generator's and/or its contractors' direct supervision and whose duties include, or who are engaged for the purpose of, Use of the property described in clause (a) of this Section.                      2.3     Grant of Easements, Right, Privilege and License from Pepco to Generator.                               (a)     Pepco does hereby grant to Generator (and to SEPP, but only as to the easement for the operation and maintenance of the existing oil pipeline on, under and across the Retained Assets referenced in subparagraphs (i) and (ii) below) the following easements, rights, privileges and licenses on and with respect to the Pepco Real Property:                                        (i)      An easement, as described on Exhibit "D" attached hereto, for the operation and maintenance of an existing oil pipeline (to be used solely for the transmission of oil) on, under and across Pepco Real Property at two (2) locations.                                         (ii)    An easement, as described on Exhibit "E" attached hereto, for the operation and maintenance of an existing oil pipeline (to be used solely for the transmission of oil) on, under and across the Retained Assets.                                        (iii)   An easement which enables Generator to keep and maintain in their present locations, and operate, any Generating Facilities and other assets owned by Generator and located upon the Pepco Real Property.                                        (iv)    An easement of Access to and upon the Pepco Real Property for the purposes of exercising any of the rights granted in the Connection Agreement or the Asset Sale Agreement.                                        (v)     An easement, as described in Exhibit "F" attached hereto, for the operation and maintenance of an existing railroad track on and across the Pepco Real Property at two (2) locations.                               (b)     In addition, but without limitation of Generator's rights pursuant to the Connection Agreement, Pepco agrees to make available to Generator (at no cost to Generator, except as provided below) Pepco's master station voltage control equipment (the "Equipment") located at Morgantown Station upon the Generator's Real Property during the term of this Agreement, subject to the following terms and conditions, and Generator agrees to comply with such terms and conditions:                                        (i)      Generator's operation of the Equipment shall at all times be subject to that certain Agreement of Sale and Lease dated as of November 30, 1994 between NationsBank Trust Company, National Association and Pepco (the "Control Center Lease"), and Generator shall comply with the terms and conditions thereof with respect to the use of the Equipment (including keeping the Equipment free and clear of any liens, claims or encumbrances of whatever nature, and identifying the Equipment as being owned by Pepco, and shall not modify, alter, remove or add to the Equipment);                                        (ii)     Generator shall operate and maintain the Equipment in accordance with Good Utility Practice;                                        (iii)   Generator shall be responsible for all operating, repair and maintenance costs, taxes and the like with respect to the Equipment, and shall reimburse Pepco promptly upon invoicing for any such costs paid by Pepco;                                        (iv)    Generator's Access to the Equipment shall be in accordance with this Agreement;                                        (v)     Generator's right to operate the Equipment shall terminate in the event of actual or constructive loss of the Equipment, damage rendering the Equipment beyond repair or unfit for normal use, the condemnation or seizure of the Equipment, the obsolescence of the Equipment or the material breach by Generator of any of its covenants in this Section 2.3(b);                                        (vi)    Pepco shall have no obligation to Generator with respect to the Equipment other than to permit Access to and operation of the Equipment in accordance with this Section 2.3(b);                                        (vii)   The obligations of Generator under Section 7.4 (maintenance of liability insurance coverage) and Section 7.1 (indemnification) shall be applicable to the Equipment; and                                        (viii)   Pepco shall have Access to the Equipment for purposes of complying with the terms and conditions of the Control Center Lease and as necessary to perform any of the obligations of Generator pursuant to this subparagraph (b) above to the extent the same are not timely performed by Generator.                      2.4     General Scope of Easements.                               (a)     Except as otherwise provided in Sections 2.2 and 2.3 above and Section 2.4(b) below, each easement and each right, privilege and license granted hereby is and shall be a perpetual grant, transfer, conveyance and right of Access to and Use (subject to the terms of this Agreement) to the Grantee thereof and to any future owner of the real property, improvements and facilities benefited thereby. Notwithstanding the foregoing, all easements, rights, privileges and licenses granted by this Agreement are and shall be subject to the terms and conditions of the Connection Agreement, and in the event of any inconsistency between the terms and conditions of the Connection Agreement and the terms of this Agreement, the terms of the Connection Agreement shall control.                               (b)     Any easement or right, privilege and license granted hereunder for purposes of enabling a Party to exercise any right or fulfill any obligation set forth in the Connection Agreement will continue for the term of the Connection Agreement, and thereafter if and to the extent that the right or obligation (i) shall by its express terms survive the termination or expiration of the Connection Agreement or (ii) is necessary for the conduct of business by Grantee. In the event of the termination or expiration of an easement or right, privilege and license granted hereunder for purposes of enabling a Grantee to exercise any right or fulfill any obligation set forth in the Connection Agreement, all equipment and facilities installed or maintained by such Grantee on the real property of the other Party pursuant to said terminated or expired easement or right, privilege and license shall, at the request of the other Party, be removed at the sole cost and expense of such Grantee, and such Grantee shall, at its sole cost and expense repair any damage to the real property and/or equipment and facilities of the other Party damaged as a result of such removal.                               (c)     All equipment and facilities installed or maintained by Grantee pursuant to an easement or right, privilege and license granted hereunder shall be maintained by Grantee in accordance with Good Utility Practice and the Connection Agreement, and Grantee shall make all repairs and replacements necessary to keep such equipment and facilities in such condition.                               (d)     Generator may not Use any portion of Generator's Real Property burdened by any easement, right or privilege granted to Pepco hereunder if such Use would materially adversely affect the Use and enjoyment by Pepco of the rights granted to it hereunder, or materially increase the costs or risks associated with such Use.                               (e)     All easements granted herein shall be deemed easements appurtenant to the parcel of real property benefited thereby and shall run with such real property and shall be deemed covenants running with the real property burdened thereby.                      2.5      Interpretation. The following shall apply in interpreting any easement and any right, privilege and license granted pursuant to this Agreement:                               (a)     Each easement and each right, privilege and license granted herein is irrevocable except by written agreement of the parties.                               (b)     With respect to any easement created by this Agreement, the words "in," "upon," "to," "on," "over," "above," "through" and/or "under" shall be interpreted to include all of such terms.                               (c)     Each easement and each right, privilege and license granted herein may be enjoyed without charge or fee to Grantee of the easement.                               (d)     Each easement and each right, privilege and license granted herein is also a grant of the additional right of Access over Grantor's property to accomplish the purpose of such easement or right, privilege and license, to perform any obligations hereunder or in the Connection Agreement, and to comply with any legal requirements affecting Grantee or its property and/or improvements.                               (e)     Exercise of any easement or any right, privilege and license granted hereunder permitting or requiring maintenance, repairs, alteration, restoration, rebuilding, construction, upgrading, cleaning, installation, removal, modification, replacement, expansion, or other work by Grantee upon the property or improvements of Grantor shall be subject to the following conditions:                                        (i)      Work upon the facilities and properties of either Party                                        subject to this Agreement shall be permitted only to each                                        Party's Qualified Personnel, and Access to such facilities and                                        properties shall be permitted only to a Party's Qualified                                        Personnel and such consultants, agents, contractors,                                        subcontractors and invitees as any Party may select or permit;                                        provided that any consultant, agent, contractor, subcontractor or                                          invitee shall comply with all applicable provisions of this                                        Agreement and the Connection Agreement.                                        (ii)    Work shall be performed using reasonable precautions to avoid                                        unreasonable interference with the Use and enjoyment of Grantor's                                        property and improvements.                                        (iii)   Except only as may be specifically provided to the contrary                                        herein, Grantee shall not be liable for damage, if any, which may be                                        caused by Grantee's normal and reasonable Use of any easement, or                                        right, privilege or license granted hereunder.                                        (iv)    Following completion of the work, Grantee shall restore Grantor's                                        property and improvements to the same or as good a condition as existed                                        before the commencement of the work.                                        (v)     Any easement and any right, privilege and license granted herein                                        which permits a Grantee to maintain its property, equipment, facilities                                        and appurtenances on the property and improvements owned by Grantor                                        also includes the right to maintain in place on Grantor's property and                                        improvements any and all wires and cables connecting such property,                                        equipment, facilities, and appurtenances to (i) the devices, machinery                                        and equipment which they measure, regulate and/or control, and (ii)                                        power sources.                                        (vi)    Generator shall be solely responsible for the maintenance of any                                        roads, paths and other means of entry or exit located upon either the                                        Generator's Real Property or the Pepco Real Property that are commonly                                        utilized by Generator and Pepco, and their respective employees, agents                                        and contractors pursuant to this Agreement or the Connection                                        Agreement.                               (f)      Any easement granted pursuant to Section 2.1(a), (b) or (c) includes the right to (i) trim, cut, treat and/or remove, by manual, mechanical, and chemical means, any and all trees, brush, structures and other obstructions within the easement area, as well as such trees, brush, structures and vegetation outside of the easement area deemed reasonably necessary or desirable by Pepco for the safe and secure operation of its facilities; and (ii) obtain Access to Generator's Real Property for the purpose of performing the aforementioned acts.                      2.6      Rules and Regulations.           Each Party may promulgate rules regulating the conduct of the other Party in the exercise of rights under this Agreement provided such rules and regulations do not unreasonably interfere with or impede the affected Party's rights and easements as set forth herein or in the Connection Agreement.                      2.7     No Obstruction.                               (a)      No Party hereto shall obstruct the easements or the rights, privileges and licenses granted or created pursuant to this Agreement or render them impassable or unusable in any way or otherwise in any way interfere with the right to the Use and enjoyment of the easements or rights, privileges and licenses granted or created pursuant to this Agreement.                               (b)No Party hereto shall make any changes to the topography or accesses on or to its respective property, including grading or drainage that could reasonably be expected to adversely affect another Party's facilities, common use drainage systems, or pollution control systems, or the exercise of any right or fulfillment of any obligation in this Agreement or in the Connection Agreement, without the prior written consent of the other Party which consent shall not unreasonably be withheld, delayed or conditioned.              3.      TAXES, ASSESSMENTS AND OTHER CHARGES                     3.1     Real Estate Taxes. Generator, with respect to the Generator's Real Property and Pepco, with respect to the Pepco Real Property, shall pay and discharge all of the following ("Real Estate Taxes") whether or not now within the contemplation of the Parties hereto: (i) all real estate taxes, assessments (both general and special), other governmental impositions and charges, taxes, rents, levies and sums of every kind or nature whatsoever, extraordinary as well as ordinary, as shall at any time be imposed by any governmental or public authority on, or become a lien in respect of, the Generator's Real Property or the Pepco Real Property, as the case may be, or any part thereof, or which may become due and payable with respect thereto, and any and all taxes assessments and charges levied, assessed or imposed upon the Generator's Real Property or the Pepco Real Property, as the case may be, in lieu of or in addition to, the foregoing, under or by virtue of any present or future laws, rules, requirements, orders, directives, ordinances or regulations of the United States of America or of the State or of any subdivision thereof, or of any lawful governmental authority whatsoever, and any interest or penalties thereon, and (ii) all other taxes (excluding gains, sales and income taxes but including occupancy taxes which are measured by income) measured by ownership of the Generator's Real Property or the Pepco Real Property, as the case may be. Generator shall pay and discharge all levies and assessments for water, water meter (including any expenses incident to the installation, repair or replacement of any water meter) and sewer and all rents with respect to water and sewer which provide service to the Generator's Real Property.                     3.2     Personal Property Taxes. Generator and Pepco shall, respectively, pay and discharge all of the following ("Personal Property Taxes") whether or not now within the contemplation of the Parties hereto: all taxes and assessments which shall or may be charged, levied, assessed or imposed upon, or become a lien upon, the personal property of Generator or Pepco, as the case may be, Used in the operation or in connection with the business conducted at the Generator's Real Property or the Pepco Real Property, as the case may be.                     3.3     Timing of Payment. Subject to the provisions of Section 3.5, Generator and Pepco shall each comply with its covenant to pay and discharge all Real Estate Taxes and Personal Property Taxes by paying all such taxes directly to the appropriate taxing authorities prior to the expiration of the period within which payment is permitted without penalty or interest. Generator and Pepco shall within twenty (20) days of written request of the other Party, produce the most recent official receipts from the appropriate taxing authorities evidencing such payment certified by Generator or Pepco, as the case may be, to the other Party hereto.                     3.4     Cooperation with Respect to Tax Statements. Generator and Pepco will cooperate with each other in obtaining and/or retaining any tax abatement for which the Generator's Real Property or Pepco Real Property may be eligible. Upon written request of the Party seeking an abatement, the other Party or Parties hereto will execute and file any and all documents and instruments reasonably necessary to obtain and retain such abatement, without the assumption of any liabilities or obligations, provided that the Party seeking such abatement shall reimburse the cooperating Party or Parties for any reasonable expenses that such cooperating Party or Parties may incur in connection therewith.                      3.5     Tax Contests. Generator, with respect to the Generator's Real Property, and Pepco, with respect to the Pepco Real Property:                              (a)     May contest in good faith by appropriate proceedings diligently and continuously conducted, at its or their sole cost and expense, any Real Estate Tax or charge or Personal Property Tax or charge, or similar tax or charge and, where permitted by law, pay the same under protest.                              (b)     Shall pay and discharge such contested items as finally adjudicated or settled, with interest and penalties, and all other charges directed to be paid in or by any such adjudication or settlement.                              (c)     May, in its or their sole discretion, consolidate any proceeding to obtain a reduction in the assessed valuation with any similar proceeding or proceedings brought by it or them relating to any one or more other tax years.                              (d)     Shall indemnify and hold the non-contesting Party harmless from and against all liability, loss, cost or expense arising out of the contest.                      3.6     Refunds. Any refunds from any contest undertaken pursuant to Section 3.5 shall belong wholly to the Party or Parties that paid the tax.              4.      MECHANICS' LIENS                      4.1     Notice Regarding Labor and Material. Notice is hereby given that no Party hereto shall be liable for any labor or materials furnished or to be furnished to or for another Party hereto or to any other persons or entities claiming under such other Party on credit, and that no mechanics' or other lien for any such labor or material furnished to a Party or such other persons or entities shall attach to or affect any property interest of any other Party.                      4.2     Disposition of Liens.                              (a)     Pepco shall forthwith take such action necessary to discharge, remove or satisfy any lien filed against the Generator's Real Property or any portion thereof for any labor or materials furnished or to be furnished for or on behalf of Pepco, or any person or entity holding any portion thereof through or under Pepco.                              (b)     Generator shall forthwith take such action necessary to discharge, remove or satisfy any lien filed against the Pepco Real Property or any portion thereof for any labor or materials furnished or to be furnished for or on behalf of Generator, or any person or entity holding any portion thereof through or under Generator.                              (c)     If either Pepco or Generator, as the case may be, shall fail to discharge, remove or satisfy any such lien which it is obligated to discharge, remove or satisfy hereunder within ten (10) days after notice of the existence of the lien has been given to such defaulting Party, the non-defaulting Party or parties may pay the amount of such lien or discharge the same by deposit or bonding, and the amount so paid or deposited, or the premium paid for such bond, with interest at the rate provided for defaults in Section 6.3 hereof, shall be paid by the defaulting Party upon demand to the non-defaulting Party who effected such cure.                              (d)     The defaulting Party shall defend, indemnify and save harmless the non-defaulting Party from and against all liability, loss, cost or expense (including reasonable attorneys' fees) arising out of any liens which the defaulting Party is obligated to discharge, remove or satisfy.              5.      CONDEMNATION                      5.1     Right to Participate. In the event the Generator's Real Property or the Pepco Real Property, or any part thereof, shall be taken in condemnation proceedings or by exercise of any right of eminent domain or any agreement with those authorized to exercise such right (any such matter being hereinafter referred to as a "Taking" or property "Taken"), whether such Taking be a permanent taking or a temporary Taking, any person or entity having an interest in the award or awards shall have the right to participate in any such condemnation proceedings or agreement for the purpose of protecting its interest hereunder. Each Party so participating shall pay its own expenses.                      5.2     Total Taking. A "Total Taking" shall be deemed to have occurred as to the property of any Party (which means the Generator's Real Property, as to Generator, and the Pepco Real Property, as to Pepco) when the entire property of such Party shall be Taken or a substantial part of such property shall be Taken and the untaken portion of the property would, following the completion of restoration, be unsuitable for the operation and the Use thereof in the manner so operated and Used prior to the Taking. Upon a Total Taking, this Agreement shall terminate with respect to the property Taken except with respect to the disposition of the award and this Agreement shall continue with respect to the property not Taken.                      5.3     Disposition of Award. In the event of a Taking, each Party shall be entitled to share in the awards to the extent of its interest in the property subject to the Taking, and for consequential damages to and dilution of value of the relevant property not so Taken.                      5.4     Notice of Taking. In the event the Generator's Real Property or the Pepco Real Property, or any part thereof, shall be the subject of any condemnation proceedings or the subject of any eminent domain proceedings, and if any Party shall receive actual notice of such proceedings, the Party receiving such notice shall notify the other Party of the existence of such proceedings. Such notification shall occur within thirty (30) days of the receipt of such actual notice.              6.      DEFAULTS                      6.1     Events of Default. Each and every one of the following events shall constitute an Event of Default ("Event of Default') under this Agreement:                              (a)     If a Party fails to make any payment due to the other Party hereto within twenty (20) days of written demand for such payment;                              (b)     If a Party fails, within twenty (20) days of written notice from a Party, to make any payment due from such Party to any third party and such failure could result in the imposition of a lien or other encumbrance on the property or improvements of a Party, unless the payment of such amount is contested in accordance with Section 3.5 hereof, in which case, the provisions of Section 3.5 shall control; and                              (c)     If a Party fails to perform any material non-monetary obligations hereunder, and said Party fails to cure such default within thirty (30) days of receipt of written notice stating with particularity the nature of the default; provided, however, if such default is of such a nature that it cannot be cured within thirty (30) days following receipt of such notice, an Event of Default shall not have occurred if the defaulting Party shall within such thirty (30) days commence the necessary cure and shall at all times thereafter diligently and continuously prosecute such cure to completion.                      6.2     Right of Self Help. A non-defaulting Party may at its election following the occurrence of a non-monetary Event of Default and the thirtieth (30th) day after the receipt of the written notice specified in paragraph 6.1(c) hereof, undertake the cure of such default on behalf of the defaulting Party. A non-defaulting Party is granted an easement to enter upon, through or under the property or improvements of the defaulting Party to effect such cure. Following the occurrence of an Event of Default involving the payment of money to a person or entity not Party to this Agreement, a non-defaulting Party may make such payment on behalf of the defaulting Party. All monies paid by the non-defaulting Party and all reasonable costs and expenses (including, reasonable attorneys' fees) incurred by it, as the case may be, in effecting such cure or payment, shall be paid by the defaulting Party upon written demand, together with interest from the date of such demand at the rate set forth in Section 6.3. This Section 6.2 shall not limit Pepco's self-help rights pursuant to Section 2.3(b).                      6.3     Interest. Following the occurrence of an Event of Default involving the nonpayment of money by the defaulting Party to the non-defaulting Party, all monies owed to the non-defaulting party shall bear interest at the rate equal to one and one-half percent (1.5%) per month accruing on the due date, provided, however, that such late payment charge shall not exceed the maximum charge which may be collected under State law.                      6.4     Enforcement Rights. In addition to any other rights expressly set forth in this Agreement, but without limitation, enforcement of this Agreement may be had by legal or equitable proceedings against any defaulting Party either to specifically enforce, restrain or enjoin the violation of any restriction, covenant, agreement, term, representation or warranty herein contained or to recover damages. The above notwithstanding, termination of this Agreement shall not be available as a remedy in any proceedings against any defaulting Party.                      6.5     No Forfeiture. Except by enforcement of a judgment lien against such property, nothing contained in this Agreement shall create any reversion, condition or right of re-entry or other provisions for forfeiture under which any Party can be cut off, subordinated or otherwise disturbed in the possession of its property.                      6.6     Independent Covenants. None of the rights and easement granted by this Agreement and none of the performances required by this Agreement shall be dependent, upon the performance of any other term, promise, or condition of this Agreement or any documents executed concurrently or in connection with this Agreement, and such rights, easement and requirements or performance shall continue in effect irrespective of whether anything else in this Agreement or such other documents has been breached or has been terminated. The separateness and independent survival of the right, easements and requirements of performance under this Agreement are essential terms hereof without which this Agreement would not have been made.              7.      INDEMNIFICATION AND INSURANCE                      7.1     Generator's Indemnification. Generator shall indemnify, hold harmless, and defend Pepco and its Affiliates, as the case may be, and their respective officers, directors, employees, agents, contractors, subcontractors, invitees, successors and permitted assigns from and against any and all claims, liabilities, costs, damages, and expenses (including, without limitation, reasonable attorney and expert fees, and disbursements incurred by any of them in any action or proceeding between Pepco and a third party or Generator) for damage to property of unaffiliated third parties, injury to or death of any person, including Pepco's employees or any third parties, to the extent caused, by the breach of this Agreement by Generator or the negligence or willful misconduct of Generator and/or its officers, directors, employees, agents, contractors, subcontractors or invitees arising out of or connected with Generator's performance of this Agreement, or the exercise by Generator of its rights hereunder.                      7.2     Pepco's Indemnification. Pepco shall indemnify, hold harmless, and defend Generator and its Affiliates, as the case may be, and their respective officers, directors, employees, agents, contractors, subcontractors, invitees, successors and permitted assigns from and against any and all claims, liabilities, costs, damages, and expenses (including, without limitation, reasonable attorney and expert fees, and disbursements incurred by any of them in any action or proceeding between Generator and a third party or Pepco) for damage to property of unaffiliated third parties, injury to or death of any person, including Generator's employees or any third parties, to the extent caused by the breach of this Agreement by Pepco or the negligence or willful misconduct of Pepco and/or its officers, directors, employees, agents, contractors, subcontractors or invitees arising out of or connected with Pepco's performance of this Agreement, or the exercise by Pepco of its rights hereunder.                      7.3     Survival. The provisions of Sections 7.1 and 7.2 shall survive termination, cancellation, suspension, completion or expiration of this Agreement.                      7.4     Insurance Coverage. The Parties shall maintain at their own cost the following insurance: (a) standard Commercial General Liability insurance with limitations not less than One Hundred Million Dollars ($100,000,000.00) in the aggregate; (b) All-Risk Property insurance in amounts not less than one hundred percent (100%) of the full replacement cost of the improvements located upon each Party's real property; (c) Worker's compensation insurance as required by prevailing law and Employer's liability insurance with limits of not less than Twenty-five Million Dollars ($25,000,000.00); and (d) such other insurance as is customary in the electric utility industry.                      7.5     Certificate of Insurance. The Parties agree to furnish each other with certificates of insurance evidencing the insurance coverage obtained in accordance with this Article 7, and the Parties agree to notify and send copies to the other of any policies maintained hereunder upon written request by a Party. Each Party must notify the other Party within five (5) business days of receiving notice of cancellation, change, amendment or renewal of any insurance policy required pursuant to Section 7.4 above.                      7.6     Additional Insureds and Waiver. Each Party and its affiliates shall be named as additional insureds on the general liability insurance policies obtained in accordance with Section 7.4, above, as regards liability under this Agreement; and each general liability insurance policy shall contain a waiver of subrogation and each Party shall waive its rights of recovery against the other for any loss or damage covered by such policy.              8.      MISCELLANEOUS                      8.1     Effective Date. This Agreement will be effective on the Closing Date pursuant to the Asset Sale Agreement (the "Effective Date").                      8.2     Exhibits. All exhibits attached to this Agreement are part of this Agreement and the material contained in such exhibits shall be construed and interpreted as if contained within the text of the Agreement.                      8.3     Headings. The Article and Section headings of this Agreement are for convenience and reference only and in no way define, limit or describe the scope and intent of this Agreement, nor in any way affect this Agreement.                      8.4     Interpretation. When a reference is made in this Agreement to an Article, Section, Schedule or Exhibit, such reference shall be to an Article or Section of, or Schedule or Exhibit to, this Agreement unless otherwise indicated. The table of contents and 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" or equivalent words. 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. 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. Any agreement, instrument, statute, regulation, rule or order defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement, instrument, statute, regulation, rule or order 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, regulations, rules or orders) by succession of comparable successor statutes, regulations, rules or orders and references to all attachments thereto and instruments incorporated therein. References to a person are also to its permitted successors and assigns. Each Party acknowledges that it has been represented by counsel in connection with the review and execution of this Agreement and, accordingly, there shall be no presumption that this Agreement or any provision hereof be construed against the Party that drafted this Agreement.                      8.5     GOVERNING LAW. EXCEPT WITH RESPECT TO THE CREATION, PERFECTION AND ENFORCEMENT OF THE REAL PROPERTY INTERESTS CREATED HEREUNDER, WHICH SHALL BE GOVERNED AND CONSTRUED BY THE LAWS OF THE STATE, THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE DISTRICT OF COLUMBIA EXCLUSIVE OF ITS CHOICE OF LAW RULES.                      8.6     Entire Agreement. This Agreement, the Asset Sale Agreement, the Confidentiality Agreement (as defined in the Asset Sale Agreement) and the Ancillary Agreements (as defined in the Asset Sale Agreement) including the Exhibits, Schedules, documents, certificates and instruments referred to herein or therein and other contracts, agreements and instruments contemplated hereby or thereby, embody the entire agreement and understanding of the Parties in respect of the transactions contemplated by this Agreement. There are no restrictions, promises, representations, warranties, covenants or undertakings other than those expressly set forth or referred to herein or therein.                      8.7     Amendment and Modification, Extension, Waiver. This Agreement may be amended, modified or supplemented only by an instrument in writing signed on behalf of each of the Parties. Either Party may (i) extend the time for the performance of any of the obligations or other acts of the other Party, (ii) waive any inaccuracies in the representations and warranties of the other Party contained in this Agreement or (iii) waive compliance by the other Party with any of the agreements or conditions contained in this Agreement. Any agreement on the part of a Party to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such Party. The failure of a Party to this Agreement to assert any of its rights under this Agreement or otherwise shall not constitute a waiver of such rights.                      8.8     Binding Effect. The covenants, conditions, restrictions, encumbrances, easements, license and agreements set forth in this Agreement shall attach to, burden, and run with the land and the Generator's Real Property and the Pepco Real Property or the applicable portion or portions thereof, and shall be appurtenant to the Generator's Real Property or the Pepco Real Property, as appropriate and, together with the remainder of this Agreement, shall be binding upon the Parties hereto and their respective successors, assigns, grantees, transferees and tenants and, together with the remainder of this Agreement, shall inure to the benefit and Use of the Parties hereto and their respective heirs, successors, assigns, grantees, transferees and tenants. Each Grantee of any portion of or interest in the property and each mortgagee which succeeds to the fee simple ownership of any portion of the property shall be deemed, by the acceptance of the deed conveying fee simple title to such person, to have agreed to perform each and every undertaking created hereunder attributable to the portion of the property in which such Grantee or mortgagee has acquired an interest.                      8.9     Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.                      8.10     Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties 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.                      8.11     Notices. All notices and other communications hereunder shall be in writing and shall be deemed given (as of the time of delivery or, in the case of a telecopied communication, of confirmation) if delivered personally, telecopied (which is confirmed) or sent by overnight courier (providing proof of delivery) to the Parties at the following addresses (or at such other address for a Party as shall be specified by like notice):                      if to Pepco, to:                          Potomac Electric Power Company                          1900 Pennsylvania Avenue, N.W.                          Washington, D.C. 20068                          Telecopier: (202) 261-7889                          Attention: William T. Torgerson, General Counsel                     with a copy to:                          Dickstein Shapiro Morin & Oshinsky LLP                          2101 L Street, N.W.                          Washington, D.C. 20037                          Telecopy No.: (202) 887-0689                          Attention: Kenneth M. Simon, Esq.                     if to Generator, to:                          c/o Production Service Center                          8711 Westphalia Road                          Upper Marlboro, MD 20774                          Telecopier: (301) 669-8030                          Attention: Richard Koch, Chief Operations Officer                     with a copy to:                          Troutman Sanders LLP                          401 9th Street, N.W.                          Suite 1000                          Washington, DC 20004                          Telecopier: (202) 274-2994                          Attention: Benjamin L. Israel, Esq. The names, titles and addresses of either Party in this section may be changed by written notification to the other Party.                      8.12     Independent Contractor Status. Nothing in this Agreement shall be construed as creating any relationship between Pepco and Generator other than that of independent contractors.                      8.13     Conflicts. Except with respect to the amendments, indemnification, liability, default and remedies provisions contained herein or as otherwise expressly provided herein, in the event of any conflict or inconsistency between the terms of this Agreement and the terms of the Asset Sale Agreement, the terms of the Asset Sale Agreement shall prevail.                The representations, covenants and warranties, if any, made by Pepco herein are made solely by Potomac Electric Power Company, and not by The Bank of New York, as Trustee, and The Bank of New York, as Trustee, joins in the execution and delivery hereof solely in order to effect the release of the above-described rights upon the Pepco Real Property from the lien of the Mortgage and Deed of Trust dated July 1, 1936, as amended and supplemented. Pursuant to that certain Agreement of Resignation, Appointment and Acceptance dated as of September 29, 1997, by and among Pepco, The Riggs National Bank of Washington, D.C. ("Riggs") and the Trustee, the Trustee is the successor to Riggs, the original trustee under the Mortgage and Deed of Trust.                IN WITNESS WHEREOF, Pepco and Generator have caused this Agreement to be signed by their respective duly authorized officers as of the date first above written.                                                        POTOMAC ELECTRIC POWER COMPANY                                                        By: ______________________________                                                        Name: ________________________                                                        Title: ________________________                                                        SOUTHERN ENERGY MID-ATLANTIC, LLC                                                        By: ______________________________                                                        Name: ___________________________                                                          Title: ________________________                                                        SOUTHERN ENERGY PINEY POINT, LLC                                                        By: _____________________________                                                        Name: __________________________                                                        Title: _______________________                                                        THE BANK OF NEW YORK                                                        By: _____________________________                                                        Name: _______________________                                                        Title: _______________________ STATE OF                                               )                                                                   ) SS: COUNTY OF                                           )                BEFORE ME, a Notary Public in and for said County and State, personally appeared ____________________________, an ________________________, by _____________________, its ________ who _________ is personally know to me/________ and who acknowledged before me that he did sign the foregoing instrument and that the same is the free act and deed of said _________________, and his free act and deed personally and as such officer.                IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal at __________, __________, this ____ day of _________, ____.                                                                Notary Public                                                                My Commission Expires: STATE OF                                               )                                                                   ) SS: COUNTY OF                                           ) BEFORE ME, a Notary Public in and for said County and State, personally appeared ___________________________, an ___________________, by ________________ its _____________________ who _______ is personally know to me/________ and who acknowledged before me that he did sign the foregoing instrument and that the same is the free act and deed of said corporation, and his free act and deed personally and as such officer. IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal at __________, __________, this ____ day of _________, ____.                                                                Notary Public                                                                My Commission Expires:     STATE OF                                               )                                                                   ) SS: COUNTY OF                                           ) BEFORE ME, a Notary Public in and for said County and State, personally appeared ____________________________, an ________________________, by _____________________, its ________ who _________ is personally know to me/________ and who acknowledged before me that he did sign the foregoing instrument and that the same is the free act and deed of said _________________, and his free act and deed personally and as such officer. IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal at __________, __________, this ____ day of _________, ____.                                                                Notary Public                                                                My Commission Expires: STATE OF                                               )                                                                   ) SS: COUNTY OF                                           ) BEFORE ME, a Notary Public in and for said County and State, personally appeared ___________________________, an ___________________, by ________________ its _____________________ who _______ is personally know to me/________ and who acknowledged before me that he did sign the foregoing instrument and that the same is the free act and deed of said corporation, and his free act and deed personally and as such officer. IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal at __________, __________, this ____ day of _________, ____.                                                                Notary Public                                                                My Commission Expires: STATE OF                                               )                                                                   ) SS: COUNTY OF                                           ) BEFORE ME, a Notary Public in and for said County and State, personally appeared ____________________________, an ________________________, by _____________________, its ________ who _________ is personally know to me/________ and who acknowledged before me that he did sign the foregoing instrument and that the same is the free act and deed of said _________________, and his free act and deed personally and as such officer. IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal at __________, __________, this ____ day of _________, ____.                                                                Notary Public                                                                My Commission Expires: STATE OF                                               )                                                                   ) SS: COUNTY OF                                           ) BEFORE ME, a Notary Public in and for said County and State, personally appeared ___________________________, an ___________________, by ________________ its _____________________ who _______ is personally know to me/________ and who acknowledged before me that he did sign the foregoing instrument and that the same is the free act and deed of said corporation, and his free act and deed personally and as such officer. IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal at __________, __________, this ____ day of _________, ____.                                                                Notary Public                                                                My Commission Expires: STATE OF                                               )                                                                   ) SS: COUNTY OF                                           ) BEFORE ME, a Notary Public in and for said County and State, personally appeared ____________________________, an ________________________, by _____________________, its ________ who _________ is personally know to me/________ and who acknowledged before me that he did sign the foregoing instrument and that the same is the free act and deed of said _________________, and his free act and deed personally and as such officer. IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal at __________, __________, this ____ day of _________, ____.                                                                Notary Public                                                                My Commission Expires: STATE OF                                               )                                                                   ) SS: COUNTY OF                                           ) BEFORE ME, a Notary Public in and for said County and State, personally appeared ___________________________, an ___________________, by ________________ its _____________________ who _______ is personally know to me/________ and who acknowledged before me that he did sign the foregoing instrument and that the same is the free act and deed of said corporation, and his free act and deed personally and as such officer. IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal at __________, __________, this ____ day of _________, ____.                                                                Notary Public                                                                My Commission Expires:                                                                         Schedule 1.1                                                                          Definitions "Access" means, subject to the conditions set forth in this Agreement and a Party's right to impose reasonable security and safety restrictions protecting its officers, employees, agents, consultants, contractors, subcontractors, invitees, property and confidential information, full and unimpeded access, in common with Grantor over and through existing roads, paths, walkways, corridors, hallways, doorways, and other means of entry or exit, as exist now and from time to time on Grantor's property or, where no means of access exists, over and through those areas of Grantor's property or improvements which are (i) reasonably necessary or convenient for achieving Grantee's underlying purposes, and (ii) least likely, out of the alternatives reasonably available, to impede or damage the property or operation of any Party hereto. Access shall also include access and right-of-way for Grantee's employees, agents, consultants, contractors, subcontractors, vehicles, trucks, trailers, heavy machinery, equipment, materials, and all other items reasonably necessary or convenient for achieving Grantee's underlying purposes. "Affiliate" has the meaning set forth in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934. "Agreement" means this Easement, License and Attachment Agreement. "Asset Sale Agreement" has the meaning set forth in the first recital of this Agreement, as such Asset Sale Agreement may be amended or modified. "Connection Agreement" means the Interconnection Agreement (Morgantown), dated as of December ___, 2000, between Pepco and Generator. "Distribution of Electric Current" means local transmission and distribution of electricity to Pepco's end users. "Distribution Facilities" means towers, lines of towers, poles, lines of poles, supporting structures, cables, crossarms, overhead and underground wires, guys, braces, ducts, conduits, cables, anchors, lightning protective wires, and all related above-ground and underground facilities, appurtenances and equipment, including all additions, replacements and expansions thereto, now or hereafter installed or located on the Generator's Real Property for Distribution of Electric Current. Distribution Facilities do not include Transmission Facilities. "Effective Date" has the meaning set forth in Section 8.l. "FERC" means the Federal Energy Regulatory Commission or its successors. "Generating Facilities" means the Station and any additional generating plants, turbines or other generating facilities constructed by Generator after the Effective Date at the site of the Station. "Generator" shall have the meaning set forth in the introductory paragraph of this Agreement and shall include its permitted successors and assigns. "Generator's Real Property" means the real property described in Exhibit A, and any improvements or betterments thereto now or hereinafter situated thereon "Good Utility Practice" shall have the meaning given it by the Connection Agreement. "Grantee" means the Party or Parties who enjoy the principal benefit of the referenced easement, license, right (including attachment rights) privilege or right-of-way. "Grantor" means the owner or owners of the property and/or improvement granting the referenced easement, license, right (including attachment rights), privilege or right-of-way. "Interconnection Service" shall have the meaning given it by the Connection Agreement. "Party" or "Parties" shall have the meaning set forth in the introductory paragraph of this Agreement. "Pepco" shall have the meaning set forth in the introductory paragraph of this Agreement and shall include its permitted successors and assigns. "Pepco Real Property" means the real property described in Exhibit B, and any improvements or betterments thereto now or hereinafter situated thereon. "Qualified Personnel" means individuals who possess any required licenses and trained for their positions and duties by Generator and/or Pepco pursuant to Good Utility Practice. "State" means the State of Maryland. "Station" means the Morgantown Station as defined in the Asset Sale Agreement. "Transmission of Electric Current" means the transmission of such current typically over long distances and at voltages not commonly used for service to end use customers. "Transmission Facilities" means towers, lines of towers, poles, lines of poles, supporting structures, cables, crossarms, overhead and underground wires, guys, braces, ducts, conduits, cables, anchors, lightning protective wires, and all related above-ground and underground facilities, appurtenances and equipment, including all additions, replacements and expansions thereto, now or hereafter installed or located on the Generator's Real Property and/or which Pepco may reasonably require now and from time to time on the Generator's Real Property for the Transmission of Electric Current. Transmission Facilities do not include Distribution Facilities. "Transmission System" shall have the meaning set forth in the Connection Agreement. "Use" means to operate, maintain, repair, upgrade, clean, install, add to, alter, remove, inspect, construct, modify, restore, rebuild, replace, relocate and expand (but if any such addition, relocation or expansion would unreasonably or materially burden Grantor's Property, in each case, the express, prior written consent of Grantor shall be required, which consent shall not unreasonably be withheld, delayed or conditioned) (all of the foregoing to be in accordance with Good Utility Practice).   LIST OF EXHIBITS Exhibit A - Generator's Real Property Exhibit B - Pepco Real Property Exhibit C - 10 Foot Electric Utility Easement Exhibit D - Easement for Oil Pipeline on Pepco Real Property Exhibit E - Easement for Oil Pipeline on Retained Assets Exhibit F - Easement for Railroad Track Crossing Areas  

QuickLinks -- Click here to rapidly navigate through this document CONSOLIDATED. RESTATED AND AMENDED LICENSE AGREEMENT     This Agreement entered into on June 9, 2000 but effective as of the 1st day of January, 1999, by and between North Carolina State University ("UNIVERSITY") and Michael Foods, Inc., a Minnesota corporation ("LICENSEE");     WHEREAS, UNIVERSITY is the owner by assignment of certain Patent Rights (as defined herein) relating to a method for the ultrapasteurization of liquid whole egg products and has the right to grant licenses under said Patent Rights;     WHEREAS, UNIVERSITY is authorized, in its own name, to license such Patent Rights consistent with its purpose as an educational institution, and desires to have the Patent Rights utilized in the public interest, and is willing to grant licenses thereunder; and     WHEREAS, UNIVERSITY and LICENSEE did previously enter into license agreements on April 22, 1988 (amended November 28, 1989; September 12, 1991 and December 18, 1996); November 28, 1989 (amended September 12, 1991 and December 18, 1996); and September 1, 1991 (amended December 18. 1996) (collectively, the "License Agreements"); and     WHEREAS, UNIVERSITY and LICENSEE assume that a product claim will be allowed by the United States Patent and Trademark Office and therefore that a patent will issue to the UNIVERSITY which includes such product claim and recognize that LICENSEE is also licensed to utilize an alternative method for the ultra pasteurization of liquid whole egg products under certain patent rights held by Raztek Corporation licensed to Papetti's Hygrade Egg Products, Inc., a subsidiary of Michael Foods, Inc. (the "Raztek Product"). UNIVERSITY and LICENSEE recognize that the Raztek Product will be a Defined Product (as defined herein) with royalties due hereunder in respect to sales thereof under any such patent issued to UNIVERSITY which includes a product claim.     WHEREAS, LICENSEE has covenanted to UNIVERSITY for good and sufficient consideration to utilize the method for ultra pasteurization of liquid whole egg products set forth in the Patent Rights in respect to the manufacture of extended shelf life liquid whole egg products for purposes of sale by LICENSEE on an exclusive basis for all such egg products except for a maximum of *** pounds of Raztek Product per calendar year in lieu of any other present methods and such covenant is material to this Agreement and an inducement to and a condition of the agreement by the UNIVERSITY to Section 4.2 hereof.     WHEREAS, UNIVERSITY and LICENSEE wish to consolidate, restate and amend the License Agreements.     NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, and for good and valuable consideration, the receipt and sufficiency of which is acknowledged, the parties hereto, intending to be legally bound, agree as follows: ARTICLE 1—DEFINITIONS     For the purposes of this Agreement, the following words and phrases shall have the following meanings:     1.1. "LICENSEE" shall mean Michael Foods, Inc., a Minnesota corporation, or a related company of Michael Foods, Inc., the voting stock of which is, directly or indirectly, at least fifty percent (50%) owned or controlled by Michael Foods, Inc., or an organization which, directly or indirectly, controls more than fifty percent (50%) of the voting stock of Michael Foods, Inc., or an organization, a majority ownership of which is, directly or indirectly, common to the ownership of Michael Foods, Inc. -------------------------------------------------------------------------------- *** Redacted text. 1 --------------------------------------------------------------------------------     1.2. "Subsidiary" shall mean any corporation, company or other entity fifty percent (50%) or more of whose voting stock is owned or controlled, directly or indirectly, by Michael Foods, Inc.     1.3. "Patent Rights" shall mean (a) United States Patent 4,808,425, issued February 28, 1989, entitled "Method for the Ultrapasteurization of Liquid Whole Egg Products"; (b) United States Patent 4,957,759, issued September 18, 1990, entitled "Ultra-Pasteurization of Liquid Whole Egg Products"; (c) United States Patent 4,994,291 issued February 19, 1991 entitled "Method for Pasteurizing Liquid Whole Egg Products"; (d) United States Patent 5,019,408 issued May 28, 1991, entitled "Method for Pasteurizing Liquid Whole Egg Products"; and (e) United States Patent 4.957,760 issued September 18, 1990 entitled "Ultrapasteurization of Liquid Whole Egg Products by Direct Heat" and any continuations, divisions, reissues, reexaminations and extensions thereof (collectively "Patent Rights Patents"); and all existing and later-filed U.S. or foreign patent applications corresponding to or claiming priority benefit of any of the foregoing, and any continuations, divisions, reissues, reexaminations and extensions thereof including without limitation the currently pending reissue application of United States Patent 5,019,408 which includes the product claim referred to in Section 1.4 (collectively "Patent Rights Patent Applications").     1.4. "Defined Product" shall mean any Licensed Product, or any product produced using any Licensed Process or containing a Licensed Product. UNIVERSITY and LICENSEE assume that a product claim will be allowed by the United States Patent and Trademark Office and therefore that United States Patent 5,019,408 will reissue with a product claim therein. LICENSEE agrees that any manufacture, use, or sale of the Raztek Product will infringe the aforesaid patent as reissued with a product claim contained therein and be a Defined Product hereunder.     1.5. "Licensed Product" shall mean any product which (a) is covered by a valid and unexpired claim contained in a Patent Rights Patent in the country in which such Licensed Product is made, used or sold; or (b) is covered by a claim which is contained in a pending Patent Rights Patent Application in the country in which such Licensed Product is made, used or sold.     1.6. "Licensed Process" shall mean any process which (a) is covered by a valid and unexpired claim contained in a Patent Rights Patent in the country in which such Licensed Process is used or practiced; or (b) is covered by a claim which is contained in a pending Patent Rights Patent Application in the country in which such Licensed Process is used or practiced.     1.7. "Net Sales Proceeds" shall mean LICENSEE's billings (or a sublicensees' billings) for the Defined Product(s) produced hereunder less the sum of the following: (a)Discounts allowed in amounts customary in the trade; (b)Sales, tariff duties and/or use taxes directly imposed and with reference to particular sales; (c)Outbound transportation prepaid or allowed; and (d)Amounts allowed or credited on returns.     No deductions shall be made for commissions paid to individuals whether they be with independent sales agencies or regularly employed by LICENSEE and on its payroll, or for costs of collection. Defined Product(s) shall be considered "sold" and Net Sales Proceeds "earned" when billed out or invoiced. ARTICLE 2—GRANT     2.1. UNIVERSITY hereby grants to LICENSEE the exclusive, worldwide right and license to make, have made, use and sell Defined Products and Licensed Processes until, as to any particular United States or Foreign patent which is or becomes part of the Patent Rights, the expiration of such 2 -------------------------------------------------------------------------------- patent (including any extension of the expiration date by the applicable governmental authority), unless sooner terminated as hereinafter provided.     2.2. LICENSEE shall have the right to sublicense any of the rights, privileges and licenses granted hereunder, with the prior written consent of UNIVERSITY, which consent shall not be unreasonably withheld.     2.3. LICENSEE agrees that any sublicenses granted by it shall provide that the obligations of this Agreement shall be binding upon the sublicensee as if it were a party to this Agreement.     2.4. LICENSEE agrees to inform UNIVERSITY of any and all fully executed sublicense agreements involving the Patent Rights licensed hereunder and, at UNIVERSITY's request, LICENSEE,,N-111 provide copies of such sublicense agreements to UNIVERSITY.     2.5. With the exception of those rights which UNIVERSITY may expressly grant to LICENSEE for the exclusive use of unpublished Know-How in respect to the Patent Rights, the licenses granted hereunder shall not be construed to confer any rights upon LICENSEE by implication, estoppel or otherwise as to any technology not part of the Patent Rights licensed hereunder. ARTICLE 3—BEST EFFORTS; USE OF PATENT RIGHTS     3.1. LICENSEE shall use best efforts to diligently continue commercialization of the Patent Rights licensed hereunder.     3.2. LICENSEE shall exclusively use the Licensed Process covered by the Patent Rights licensed hereunder in respect to the manufacture of all extended shelf life liquid whole egg products manufactured or sold by LICENSEE except for a maximum of *** pounds of Raztek Product per calendar year in lieu of any other present methods for the manufacture of extended shelf life liquid whole egg products. ARTICLE 4—ROYALTIES     4.1 For the rights, privileges and licenses granted hereunder, LICENSEE shall make royalty payments to UNIVERSITY in the manner hereinafter provided for so long as any of the licenses of Paragraph 2.1 is in effect and LICENSEE and its Subsidiaries do not use or practice the apparatus claims within the Patent Rights: (a)A royalty of *** on Net Sales Proceeds earned by LICENSEE and its Subsidiaries from sales of Defined Products covered by a valid and unexpired claim contained in a Patent Rights Patent or a Patent Rights Patent Application. (b)A royalty which shall be payable from each bona fide sublicensed activity which shall be the greater of *** of the Net Sales Proceeds earned by the sublicensee from the sales of Defined Products, *** of LICENSEE revenues derived from such sublicensed activity, but in no event shall the sublicensing royalties due UNIVERSITY exceed *** of the Net Sales Proceeds earned by a sublicensee. (c)The provisions of this Section 4.1 notwithstanding, in the event LICENSEE issues a sublicense in exchange for a fully paid-up sublicensing fee in lieu of a running royalty based on sublicensed sales of Defined Products, UNIVERSITY and LICENSEE, in good faith, shall negotiate a fair and reasonable alternative royalty and the terms of payment.     For the rights, privileges and licenses granted hereunder, LICENSEE shall make royalty payments to UNIVERSITY in the manner hereinafter provided for so long as any of the licenses of Paragraph 2.1 is in effect and LICENSEE and its Subsidiaries do use or practice the apparatus claims within the Patent Rights: -------------------------------------------------------------------------------- *** Redacted text. 3 -------------------------------------------------------------------------------- (a)A royalty of *** on Net Sales Proceeds earned by LICENSEE, and its Subsidiaries from sales of Defined Products covered by a valid and unexpired claim contained in a Patent Rights Patent or a Patent Rights Patent Application. (b)A royalty which shall be payable from each bona fide sublicensed activity which shall be the great of *** of the Net Sales Proceeds earned by the sublicensee from the sales of Defined Products, or *** of LICENSEE revenues derived from such sublicensed activity, but in no event shall the sublicensing royalties due UNIVERSITY exceed *** of the Net Sales Proceeds earned by a sublicensee.     The royalty payable to UNIVERSITY hereunder in respect to a product which is a Defined Product as defined under Section 1.4 solely because it contains a Licensed Product (and which otherwise would not constitute a Defined Product) will be determined on the basis of the Net Sales Proceeds earned in respect to such Defined Product which are attributable to the Licensed Product contained therein as determined on a fair and equitable basis rather than on the basis of the Net Sales Proceeds earned from such Defined Product as a whole. LICENSEE shall identify and account for Net Sales Proceeds earned and royalties payable under this Section 4.1 with respect to any such Defined Products.     4.2 The UNIVERSITY and LICENSEE have agreed to certain royalty limitations set forth in subparagraph (a) and (b) immediately below (the "Royalty Limitations") in respect to sales of Defined Products by LICENSEE under both subparagraphs (a), in Section 4.1 above as follows: (a)Prior to inclusion in the Patent Rights of an issued patent which includes a product claim: (i) royalties shall be paid on sales of Defined Products by LICENSEE as required under Section 4.1 above up to sales of a maximum of *** pounds of Defined Products per calendar year; and (ii) no royalties shall thereafter be payable by LICENSEE under Section 4.1 on sales of Defined Products by LICENSEE in excess of *** pounds in such calendar year. (b)From and after inclusion in the Patent Rights of an issued patent which includes a product claim: (i) royalties shall be paid by LICENSEE as required under Section 4.1 above on sales of up to *** pounds of Defined Products by LICENSEE during the calendar year; (ii) no royalties shall be payable by LICENSEE under Section 4.1 on sales of Defined Products by LICENSEE in excess of *** pounds until the sales of Defined Products by LICENSEE in such calendar year are *** pounds; and (iii) royalties shall thereafter be payable by LICENSEE as required under Section 4.1 above on sales by LICENSEE of Defined Products in excess of sales of *** pounds in such calendar year.     The covenants and agreements by LICENSEE under Sections 1.4, 3.2, and 9.3, are material to this Agreement including a material inducement to and a condition of the agreement by UNIVERSITY to the Royalty Limitations and such Royalty Limitations shall therefore be contingent on LICENSEE compliance therewith. Such Royalty Limitations have been agreed to by UNIVERSITY at the request of LICENSEE due to a market condition involving the present manufacture and sale by the manufacturers identified at Exhibit A of certain extended shelf life liquid whole egg competitive products which infringe the Patent Rights. Accordingly, the Royalty Limitations shall terminate in the event that such manufacturers as identified at Exhibit A withdraw such competitive products from the market in which infringement is occurring or are licensed by UNIVERSITY and/or LICENSEE to engage in the manufacture and/or sale of such infringing products in the market in which the infringement is occurring or otherwise cease to manufacture or sell such infringing products including through acquisition by LICENSEE. -------------------------------------------------------------------------------- *** Redacted text. 4 --------------------------------------------------------------------------------     The Royalty Limitations shall not apply in any manner whatsoever in respect to royalties payable in respect to sales of Defined Products by sublicensees.     The Royalty Limitations shall be calculated on a pro rated basis in respect to any change in the applicability thereof under subparagraph (a) or (b) or the termination thereof during a calendar year.     4.3 The minimum annual royalty payable by LICENSEE shall be *** which shall include royalties attributable to Net Sales Proceeds earned by LICENSEE and its sublicensees. Annual minimum royalties are intended to be a minimum royalty due UNIVERSITY each year without regard to the applicability of any of the Royalty Limitations. LICENSEE shall pay to UNIVERSITY those royalties earned as a result of direct and sublicensed sales of Defined Products to the extent they are in excess of the specified annual minimum royalty.     4.4 No multiple royalties shall be payable because any Defined Product or Licensed Process is covered by more than one patent of the Patent Rights licensed under this Agreement.     4.5 Royalty payments shall be paid in United States Dollars in Raleigh, North Carolina, or at such other place as UNIVERSITY may reasonably designate consistent with the laws and regulations controlling in any foreign country. If any currency conversion shall be required in connection with the payment of royalties hereunder, such conversion shall be made by using the exchange rate prevailing at the Chase Manhattan Bank (N.A.) or its successor on the last business day of the calendar quarterly reporting period to which such royalty payments relate. ARTICLE 5—PAYMENT, REPORTS AND RECORDS     5.1. LICENSEE shall keep full, true and accurate books of account containing all particulars that may be necessary for the purpose of showing the amounts payable to UNIVERSITY hereunder and LICENSEE'S compliance in other respects with this Agreement including the covenant of LICENSEE under Section 3.2 hereof. Said books of account shall be kept at LICENSEE's principal place of business of the appropriate division of LICENSEE to which this Agreement relates. Said books and the supporting data shall be open at all reasonable times for five (5) years following the end of the calendar year to which they pertain, to the inspection of UNIVERSITY or its agents for the purpose of verifying LICENSEE's royalty statement or compliance in other respects with this Agreement.     5.2. LICENSEE, within forty-five (45) days after March 31, June 30, September 30, and December 31 of each year, shall deliver to UNIVERSITY true and accurate reports, giving such particulars of the business conducted by LICENSEE and its sublicensees during the preceding three-month period under this Agreement as shall be pertinent to a royalty accounting hereunder. These shall include at least the following: (a)All Defined Product(s) manufactured and sold with Raztek Products manufactured and sold stated on a separate basis. (b)Total billings for Defined Product(s) sold. (c)All extended shelf life liquid whole egg products other than Defined Product(s) manufactured and sold and total billings in respect thereto. (d)The basis for and calculation of Royalty Limitations, if applicable. (e)Accounting for all sublicensing revenues. (f)Deductions applicable pursuant to the definition of "Net Sales Proceeds" as provided in Section 1.7. (g)Total royalties due. (h)Names and addresses of all Subsidiaries and sublicensees of LICENSEE. -------------------------------------------------------------------------------- *** Redacted text. 5 -------------------------------------------------------------------------------- (i)Legal fees actually incurred by LICENSEE and royalty set-offs in respect thereto under Article 9 of this Agreement and predecessor sections under the License Agreements on a cumulative and quarterly basis. (j)The details of any judgments or settlements of infringement matters under Article 8 or Article 9 or predecessor provisions under the License Agreements.     5.3. LICENSEE shall pay to UNIVERSITY at the time required for submission of the report for each such calendar quarter the royalties due and payable under Article 4 of this Agreement in respect to sublicenses.     LICENSEE shall also pay to UNIVERSITY at the time required for submission of the report for each such calendar quarter the royalties due and payable under Article 4 of this Agreement in respect to sales of Defined Products by LICENSEE. For purposes of calculating the amount of any Royalty Limitation to which LICENSEE may be entitled under Section 4.2, the average price per pound received by LICENSEE regarding LICENSEE sales of Defined Products during the entire calendar year with respect to which the royalties are payable shall be used. Within forty-five (45) days after December 31 of each calendar year, LICENSEE shall calculate and report to UNIVERSITY the actual amount of any Royalty Limitation to which LICENSEE is entitled for the preceding calendar year and reimburse UNIVERSITY if the Royalty Limitation taken by LICENSEE for the preceding calendar year exceeds the total Royalty Limitation to which LICENSEE is entitled for such calendar year based on such calculation. If the Royalty Limitation taken by LICENSEE for such calendar year is less than the Royalty Limitation to which LICENSEE is entitled for such calendar year based on such calculation, or LICENSEE has otherwise paid royalties in excess of royalties due for such calendar year in respect to sale of Defined Products by LICENSEE, such deficiency shall be carried forward and applied to the royalty payment required from LICENSEE in respect to LICENSEE'S sale of Defined Products for the calendar quarters of the succeeding calendar year.     5.4. On or before March 31 of each year, LICENSEE shall provide to UNIVERSITY, LICENSEE's certified financial statements for the LICENSEE's preceding fiscal year including, at a minimum, a Balance Sheet and Operating Statement. Upon appropriate marking by LICENSEE as "Confidential" and the treatment by LICENSEE of such information as confidential, UNIVERSITY agrees to hold such financial statements received from LICENSEE in confidence and will not release such reports to any third parties unless required under court order or unless LICENSEE's prior written permission is obtained. No such information or other information marked "Confidential" by LICENSEE shall, however, be treated as confidential hereunder if such information: (i) is known to UNIVERSITY at the time of disclosure of such information; (ii) is or becomes generally known to the public or is routinely disclosed to other persons through no breach of this Agreement; (iii) is received from a third party without restriction on disclosure and without, to the actual knowledge of, a breach of a confidential obligation of such third party; or (iv) has or is approved for release to the general public by authorization of LICENSEE.     5.5. The royalty payments set forth in this Agreement, if overdue, shall bear interest until payment at a per-annum rate four percent (4%) above the prime rate in effect at the Chase Manhattan Bank (N.A.) or its successor on the due date. However, in no event shall any penalties hereunder exceed eighteen percent (18%) per-annum (11/2% monthly). LICENSEE shall also pay all reasonable collection costs at any time incurred by UNIVERSITY in obtaining payment of amounts past due, including reasonable attorneys' fees, whether or not any suit was commenced against LICENSEE. The payment of interest as hereinabove provided shall not foreclose UNIVERSITY from exercising any other rights it may have as a consequence of the delinquency of any payment. 6 -------------------------------------------------------------------------------- ARTICLE 6—PATENT PROSECUTION     UNIVERSITY shall apply for, prosecute and maintain, during the term of this Agreement, the United States Patent Rights Patent Applications and Patents, and such foreign Patent Rights Patent Applications and Patents as the LICENSEE may direct. The application filings, prosecution, and maintenance relating to such United States and foreign Patent Rights Patent Applications and Patents shall be the responsibility of UNIVERSITY, provided that LICENSEE shall have reasonable opportunities to advise UNIVERSITY and shall cooperate with UNIVERSITY in such application filings, prosecution and maintenance. LICENSEE shall reimburse UNIVERSITY for all reasonable fees and expenses, including reasonable legal fees, incurred by UNIVERSITY in such application filings, prosecution, maintenance and any other proceedings before the United States Patent and Trademark Office (or equivalent foreign office) in respect to the Patent Rights including the product claim thereunder. LICENSEE shall be entitled to review and comment upon all actions undertaken in the prosecution of all patents and applications for which it bears expenses. ARTICLE 7—TERMINATION     7.1. In the event an order for relief is entered against LICENSEE under the Federal Bankruptcy Code, an order appointing a receiver for substantially all of LICENSEE's assets is entered by a court of competent jurisdiction, or LICENSEE makes an assignment for the benefit of creditors, or a levy of execution is made upon substantially all of the assets of LICENSEE and such levy is not quashed or dismissed within thirty (30) days, this Agreement shall automatically terminate effective the date of such order or assignment or, in the case of such levy, the expiration of such thirty (30) day period; provided, however, that such termination shall not impair or prejudice any right or remedy that UNIVERSITY might have under this Agreement.     Should LICENSEE fail to pay UNIVERSITY royalties or expense reimbursements due and payable hereunder, UNIVERSITY shall have the right to terminate this Agreement on thirty (30) days' notice, unless LICENSEE shall pay UNIVERSITY, within the thirty (30) day period, all such royalties and interest due and payable. Upon the expiration of the thirty (30) day period, if LICENSEE shall not have paid all such royalties and interest or expense reimbursements due and payable, the rights, privileges and licenses granted hereunder shall terminate.     7.3. Upon any material breach or default of this Agreement by LICENSEE, other than those occurrences set out in Section 7.1 or 7.2 hereinabove, which shall always take precedence over any material breach or default referred to in this Section 7.3, UNIVERSITY shall have the right to terminate this Agreement and the rights, privileges and licenses granted hereunder by ninety (90) days' notice to LICENSEE. Such termination shall become effective unless LICENSEE shall have cured any such breach or default prior to the expiration of the ninety (90) day period.     7.4. LICENSEE shall have the right to terminate this Agreement at any time on ninety (90) days' notice to UNIVERSITY, and upon payment of all royalties and expense reimbursements due and payable to UNIVERSITY.     7.5. Termination of this Agreement for any reason shall not be construed to release either party from any obligation that matured prior to the effective date of such termination. LICENSEE and any sublicensee thereof may, however, after the effective date of such termination, sell all Defined Product(s) completed and in inventory, provided that royalties are paid in accordance with the provisions of Article 4.     7.6. Within thirty (30) days of the termination of this Agreement under Section 7.1, 7.2, 7.3, 7.4, or 7.5, LICENSEE shall duly account to UNIVERSITY and transfer to UNIVERSITY all rights which LICENSEE may have in or to all trade names and trademarks used to identify Defined Products and/or Licensed Processes. Provided, however, that this Section 7.6 shall not apply to any trade name or trademark employing the terms "Easy Eggs," "Justin's Farm." "Table Ready" or any adaptation thereof, or any trademark or trade name belonging to LICENSEE. 7 --------------------------------------------------------------------------------     7.7. Upon termination of this Agreement for any reason, each sublicense then in effect of any of the rights, privileges and licenses granted hereunder shall automatically terminate. LICENSEE's rights under all sublicenses shall be deemed assigned to UNIVERSITY upon termination of this Agreement, and LICENSEE agrees to execute any instrument reasonably requested to confirm such assignment. Any sublicensee not in default upon termination of this Agreement for any reason may seek a license from the UNIVERSITY.     7.8. Unless sooner terminated in accordance with the provisions herein, all licenses granted under this Agreement shall automatically terminate with the last to expire of the Patent Rights (including any extension of the expiration date by the applicable governmental authority) as defined under Section 1.3. ARTICLE 8—INFRINGEMENT OF THIRD-PARTY RIGHTS     8.1. In the event that UNIVERSITY or LICENSEE is charged with infringement of a patent by a third party or is made a party in any lawsuit as a result of LICENSEE's or a sublicensee's practice of the Patent Rights under this Agreement, LICENSEE shall: (a)defend or settle any such claim of infringement or lawsuit; (b)assume all costs, expenses, damages, and other obligations for payments incurred as a consequence of such charges of infringement or lawsuit; (c)indemnify and hold UNIVERSITY harmless from any and all damages, losses, liability, and costs resulting from a charge of infringement or lawsuit which shall be brought against UNIVERSITY and attributable to technology added to Defined Product(s) by LICENSEE or a sublicensee or manufacturing processes utilized by LICENSEE or a sublicensee; or (d)if such claim of infringement or lawsuit shall be based on patent claims contained in Patent Rights Patent or Patent Rights Patent Application, LICENSEE may decline to defend such claim of infringement or lawsuit in which case UNIVERSITY may defend, or settle the claim at its own expense, or may terminate this License Agreement upon thirty (30) days notice to mitigate any infringement damages or to comply with the terms of a settlement agreement. LICENSEE's right to withhold royalties and the distribution of proceeds as set forth in Section 9.3 herein shall apply to this Section 8.1.     8.2. UNIVERSITY shall give LICENSEE assistance in the defense of any such infringement charge or lawsuit, as may be reasonably required. ARTICLE 9—INFRINGEMENT OF UNIVERSITY'S PATENT RIGHTS BY THIRD PARTIES     9.1. LICENSEE shall inform UNIVERSITY promptly in writing of any alleged infringement and of any available evidence of infringement by a third party of any patents within the Patent Rights.     9.2. If during the term of this Agreement, LICENSEE becomes aware of any alleged infringement by a third party, LICENSEE in its sole discretion shall have the right, but shall not be obligated, to either: (a)settle the infringement dispute by sublicensing the alleged infringer or by other means; or (b)prosecute at its own expense any infringement of the Patent Rights. In the event LICENSEE prosecutes such infringement, LICENSEE may, for such purposes, request to use the name of UNIVERSITY as party plaintiff, subject to coordination of its legal action with the Attorney General of the State of North Carolina in accordance with applicable statutory requirements. Subject to the approval of the Board of Governors of North Carolina State University, UNIVERSITY may agree to become a party plaintiff. 8 --------------------------------------------------------------------------------     9.3. In the event LICENSEE shall undertake the enforcement and/or defense of the Patent Rights by litigation, including any declaratory judgment action, LICENSEE may (subject to the limitations set forth below) withhold up to *** of all royalty payments payable by LICENSEE in respect to its sales of Defined Products otherwise due UNIVERSITY in any calendar quarter under Articles 4 and 5 of this Agreement. In no event shall LICENSEE'S withholding under Section 9.3 exceed *** of the legal expenses, including reasonable attorneys' fees incurred by LICENSEE in the enforcement and/or defense of the Patent Rights commencing from and after January 1, 1999 which have not been reimbursed or recovered plus *** of the balance of any such legal expenses which were incurred prior to January 1, 1999 in accordance with the License Agreements which have not been reimbursed or recovered.     All royalty payments withheld pursuant to this Section 9.3 shall be applied by LICENSEE to offset any legal expenses, including reasonable attorneys' fees, actually incurred in the enforcement or defense of the Patent Rights including all such expenses incurred prior to the effective date hereof. LICENSEE'S right to withhold royalties shall extend only until *** of LICENSEE'S unreimbursed and unrecovered legal expenses, including reasonable attorneys' fees, incurred in the enforcement or defense of the Patent Rights from and after January 1, 1999 are reimbursed and *** of any such unreimbursed and unrecovered legal fees incurred prior to January 1, 1999 in accordance with the License Agreements are reimbursed. Any and all sums recovered by LICENSEE as a result of the infringement, whether by judgment, settlement or otherwise (including licensing arrangements), shall be applied first in satisfaction of any unrecovered and unreimbursed legal expenses including reasonable attorneys' fees of LICENSEE; second, toward reimbursement of UNIVERSITY'S legal expenses, including reasonable attorneys' fees relating to the enforcement or defense of the Patent Rights, which have not been previously reimbursed or recovered; and third toward reimbursement of UNIVERSITY for any amounts past due or withheld in accordance with this Article 9 or predecessor provisions under the License Agreements. The balance, if any, remaining from any such recovery shall be distributed to LICENSEE; provided, that LICENSEE shall pay to UNIVERSITY *** of such balance within thirty (30) days of receipt thereof. Such payments to the UNIVERSITY or LICENSEE shall be independent for all purposes of the computation of royalties (including in respect to Royalty Limitations if applicable) otherwise payable under Article 4. LICENSEE shall be entitled to settle any such litigation by agreement, consent judgment, voluntary dismissal or otherwise, with the written consent of the UNIVERSITY, which shall not be unreasonably withheld; provided, however, that LICENSEE hereby agrees to advise UNIVERSITY as soon as practicable after it has entered into any settlement discussions so that UNIVERSITY has a reasonable opportunity to provide LICENSEE with its views on any proposed settlement of any such action or proceeding.     9.4. In the event LICENSEE does not undertake action to prevent the infringing activity within three (3) months of having been made aware and notified thereof, UNIVERSITY shall have the right, but shall not be obligated, to prosecute at its own expense any such infringements of the Patent Rights and, in furtherance of such right, LICENSEE may join UNIVERSITY as a party plaintiff in any such suit without expense to LICENSEE. The total cost of any such infringement action commenced or defended solely by UNIVERSITY shall be borne by UNIVERSITY. LICENSEE shall continue royalty payments to UNIVERSITY. Any recovery of damages by UNIVERSITY for any infringement shall be applied first in satisfaction of any unreimbursed expenses and attorneys' fees of UNIVERSITY relating to the suit, and second toward reimbursement of LICENSEE's reasonable expenses, including reasonable attorneys' fees, relating to the suit. The balance remaining from any such recovery shall be distributed to UNIVERSITY.     9.5. In any infringement suit as either party may institute to enforce the Patent Rights pursuant to this Agreement, the other party hereto shall, at the request of the party initiating such suit, cooperate in all respects and, to the extent possible, have its employees testify when requested and make available relevant records, papers, informations, samples, specimens, and the like. -------------------------------------------------------------------------------- *** Redacted text. 9 --------------------------------------------------------------------------------     9.6. LICENSEE shall have the sole right in accordance with the terms and conditions herein to sublicense any alleged infringer under the Patent Rights for future infringements.     9.7. Any of the foregoing notwithstanding, if, at any time during the term of this Agreement, any of the Patent Rights are held invalid or unenforceable, LICENSEE shall have no further obligation to UNIVERSITY with respect to its future use or sale of any product or process covered solely by such Patent Rights, including the obligation of paying royalties. Nevertheless, LICENSEE shall not have a damage claim or a claim for refund or reimbursement against the UNIVERSITY. ARTICLE 10—PRODUCT LIABILITY     10.1. LICENSEE shall at all times during the term of this Agreement indemnify, defend and hold UNIVERSITY, its trustees, officers, employees and affiliates, harmless against all claims and expenses, including legal expenses and reasonable attorneys' fees, arising out of the death of or injury to any person or persons or out of any damage to property and against any other claim, proceeding, demand, expense and liability of any kind whatsoever resulting from utilization of the Patent Rights or unpublished Know-How in the production, manufacture, sales, use, lease, consumption or advertisement of the Defined Products and/or Licensed Processes by LICENSEE and its sublicensees or arising from any obligations of LICENSEE hereunder, except for any claims or expenses arising out of the negligence or willful misconduct of UNIVERSITY or its officers, agents or employees. The parties acknowledge that the UNIVERSITY's liability under this paragraph shall be subject to the sovereign immunity of the State of North Carolina and the North Carolina Tort Claims Act, to the extent such Act applies.     10.2. LICENSEE shall maintain reasonable levels of product liability insurance. UNIVERSITY shall have the right to require such insurance policies to be made available for the UNIVERSITY's inspection and shall be listed as an additional insured party by the insurer under the pertinent insurance coverage.     10.3. Except as otherwise expressly set forth in Article 12 of this Agreement, UNIVERSITY MAKES NO REPRESENTATIONS AND EXTENDS NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE AND VALIDITY OF PATENT RIGHTS CLAIMS ISSUED OR PENDING. ARTICLE 11—ASSIGNMENT     This Agreement may not be assigned by LICENSEE except in connection with the sale or other transfer of LICENSEE's entire business or that part of LICENSEE's business to which the license granted hereby relates. LICENSEE shall give UNIVERSITY thirty (30) days' prior notice of such assignment or transfer. Any other assignment of this License Agreement without the prior written consent of UNIVERSITY shall be void. ARTICLE 12—REPRESENTATIONS AND WARRANTIES     UNIVERSITY represents and warrants to LICENSEE that UNIVERSITY either legally or beneficially owns or controls the entire right, title and interest in and to the Patent Rights licensed hereunder; there are no options or rights in any third party to acquire any of the Patent Rights licensed hereunder. Except as set forth at Exhibit B, UNIVERSITY further represents and warrants to LICENSEE that there is, to its knowledge, no action, suit, claim, proceeding or governmental investigation pending or threatened against UNIVERSITY with respect to the Patent Rights licensed hereunder, either at law or in equity, before any court or administrative agency or before any governmental department, commission, board, bureau, agency or instrumentality, whether United States or foreign. 10 --------------------------------------------------------------------------------     LICENSEE represents and warrants that the sales information set forth at Exhibit C and the information provided pursuant to Article S is and will be accurate in all material respects. ARTICLE 13—NON-USE OF NAMES     LICENSEE shall not use the name of North Carolina State University or of any of its employees in conjunction with such employees' positions with UNIVERSITY, or any adaptation thereof, in any advertising, promotional, or sales literature without prior written consent obtained from an authorized officer of UNIVERSITY in each case, except that LICENSEE may state that it is licensed by UNIVERSITY under one or more of the patents and/or applications comprising the Patent Rights. Failure by LICENSEE to comply with this restriction shall be deemed a material breach of this Agreement pursuant to Paragraph 7.3. Such material breach shall be deemed cured if the offending use is terminated within ninety (90) days of LICENSEE's receipt of a written notice from UNIVERSITY. ARTICLE 14—EXPORT CONTROLS     It is understood that UNIVERSITY is subject to United States laws and regulations controlling the export of technical data, computer software, laboratory prototypes and other commodities (including the Arms Export Control Act, as amended, and the Export Administration Act of 1979) and that its obligations hereunder are contingent on compliance with applicable United States export laws and regulations. The transfer of certain technical data and commodities may require a license from the cognizant agency of the United States Government and/or written assurances by LICENSEE that LICENSEE shall not export data or commodities to certain foreign countries without prior approval of such agency. UNIVERSITY neither represents that a license shall not be required nor that, if required, it shall be issued. ARTICLE 15—PAYMENTS, NOTICES AND OTHER COMMUNICATIONS     Any payment, notice or other communication pursuant to this Agreement shall be sufficiently made or given on the date of mailing if sent by one party to the other by certified, first-class mail. postage prepaid, to the address below or as may otherwise be designated in writing by the receiving party. In the case of UNIVERSITY: Mark Crowell Associate Vice Chancellor Technology Transfer and Industry Research North Carolina State University Box 7003 Raleigh, NC 27695-7003 In the case of LICENSEE: Chief Executive Officer Michael Foods, Inc. 324 Park National Bank Building 5353 Wayzata Boulevard Minneapolis, MN 55416 ARTICLE 16—MISCELLANEOUS PROVISIONS     16.1. This Agreement shall be construed, governed, interpreted and applied in accordance with the laws of the State of North Carolina, except that questions affecting the construction and effect of any patent shall be determined by the law of the country in which the patent was granted. 11 --------------------------------------------------------------------------------     16.2. The parties hereto acknowledge that this Agreement supersedes all License Agreements and constitutes a merger and together with the recitals and exhibits hereto which are incorporated herein sets forth the entire agreement and understanding of the parties hereto as to the subject matter hereof, and shall not be subject to any change or modification except by the execution of a written instrument subscribed to by the parties hereto.     16.3. The provisions of this Agreement are severable, and in the event that any provision of this Agreement shall be determined to be invalid or unenforceable under any controlling body of law, such invalidity or unenforceability shall not in any way affect the validity or enforceability of the remaining provisions hereof.     16.4. The parties understand and agree that where any provisions of this Agreement are in violation of any of the laws and/or regulations of the United States Government and/or the State of North Carolina, such provision(s) shall be automatically rendered null and void, and such provisions will be modified to the extent necessary to be enforceable and substituted for the unenforceable or violative provision(s).     16.5. LICENSEE agrees to mark the Defined Product(s) sold in the United States with all applicable United States patent numbers. All Defined Product(s) shipped to or sold in other countries shall be marked in such a manner as to conform with the patent laws and practices of the country of manufacture or sale.     16.6. LICENSEE shall be solely responsible for the payment and discharge of any taxes or duties relating to any transaction of LICENSEE, its employees, contractors, agents, or sublicensees, in connection with the manufacture, use, or sale in any country of the Defined Product(s) or Licensed Processes.     16.7. The failure of either party to assert a right hereunder or to insist upon compliance with any term or condition of this Agreement shall not constitute a waiver of that right or excuse a similar subsequent failure to perform any such term or condition by the other party.     16.8. All terms and conditions of this Agreement regarding business matters including but not limited to royalties or other payments shall be held in confidence by each party to the extent permitted by law unless authorized in writing by the other party subject to the exceptions to confidential information set forth at 5.4.     16.9. This Consolidated, Restated and Amended License Agreement shall be effective as o f January 1, 1999.     16.10. The UNIVERSITY and LICENSEE agree to exercise good faith and best efforts to: keep the other fully informed concerning the status of the Patent Rights and the claims thereunder; and assist in the advancement, prosecution and protection of such Patent Rights and the claims thereunder. Each party will respond in respect to any consent which may be required hereunder within seven (7) business days of receipt of sufficient information from the other party which is reasonably necessary to an informed decision thereon.     16.11. Time shall be of the essence in all things pertaining to the performance of this Agreement. 12 --------------------------------------------------------------------------------     IN WITNESS WHEREOF, the parties have hereunto set their hands and seals and duly executed this Agreement effective as of the date first above written. SIGNATURE PAGE FOLLOWS               NORTH CAROLINA STATE UNIVERSITY   MICHAEL FOODS, INC.   By:       -------------------------------------------------------------------------------- Charles Moreland. Vice Chancellor       By:       -------------------------------------------------------------------------------- Jeff Shapiro, Vice President   Dated:       June 9, 2000       Dated:         13 -------------------------------------------------------------------------------- EXHIBIT A IDENTIFICATION OF MANUFACTURERS OF INFRINGING COMPETITIVE PRODUCTS UNDER ARTICLE 4 Cutler Egg Products, Inc. Nulaid Foods, Inc. Rose Acres Farms, Inc. Wilcox Farms, Inc. Willamette Egg Farms, Inc. Sunny Fresh Foods, division of Cargill, Inc. 14 -------------------------------------------------------------------------------- EXHIBIT B DISCLOSURE OF ACTIONS AND PROCEEDINGS REGARDING PATENT RIGHTS UNDER ARTICLE 12 Pending Suit:     Nulaid Foods, Inc., Valley Fresh Foods, Inc., and Nulaid-Nest Best v. Michael Foods, Inc. and North Carolina State University; Michael Foods, Inc. and North Carolina State University v. Nulaid Foods, Inc., Valley Fresh Foods, Inc., and Nulaid-Nest Best, U.S. District Court, Eastern District of California; Case No. CIV-S-93-1314 WBS(PAN) Threatened Suit:     Sunny Fresh Foods, Inc. v. Michael Foods and North Carolina State University, U.S. District Court, District of Minnesota, Fourth Division, Case No. 4-92-635, to be initiated upon issuance of Notice of Allowance by the United States Patent and Trademark Office of a Reissue Patent relating to U.S. Patent No. 5,019,408. Pending Agency Proceedings:     U.S. Patent No. 4,808,425, awaiting formal issuance of a Reexamination Certificate by United States Patent and Trademark Office     U.S. Patent No. 5,019.408, awaiting action by Examiner Weier consistent with decision of United States Patent and Trademark Office Board of Appeals. Pending are protests filed by: 1/5/95 Papetti Protest; 1/18/95 Papetti Rule 1.182 Protest; 1/24/95 Whale; 1/26/95 Sharpe; 1 /27/95 Low Rule 1.182 Protest; 1 /31 /95 Nulaid Protest; 1 /31 /95 Low Protest; 2/9/95 Papetti Supplemental Protest; 2/16/95 Cutler Protest by Oblon; 3/7/95 Papetti Second Supplemental Protest; 4/18/95 Papetti's Revision to Second Supplemental Protest; 7/11/95 Papetti Revised Second Supplemental Protest; 9/5/95 Nulaid Protest; 9/28/95 Papetti Petition 1.182; 10/6/95 Nulaid 1.291 and 1.182 Supplemental Protests; 11/9/95 United Egg Association Protest by Forman; 12/18/95 Nulaid Protest; 1/9/96 Sunny Fresh Protest by Jones; and 12/14/99 Sunny Fresh Protest. 15 -------------------------------------------------------------------------------- EXHIBIT C MICHAEL FOODS, INC. REPRESENTATION OF EASY EGGS© AND TABLE READY™ EGG PRODUCTS SOLD BY QUARTER (IN POUNDS) FOR CALENDAR YEARS 1997  - 1999         Easy Eggs© --------------------------------------------------------------------------------   Table Ready™ --------------------------------------------------------------------------------   Total -------------------------------------------------------------------------------- lst Qtr 1997       50,025,736   10,200,875 * 60,226,611 2nd Qtr 1997       52,155,700   29,064,619   81,220,319 3rd Qtr 1997       54,843,138   28,957,769   83,800,907 4th Qtr 1997       57,388,977   33,077,341   90,466,318         --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   --------------------------------------------------------------------------------     1997   214,413,551   101,300,604   315,714,155         --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   -------------------------------------------------------------------------------- lst Qtr 1998       50,815,929   30,551,037   81,366,966 2nd Qtr 1998       53,160,509   32,190,988   85,351,497 3rd Qtr 1998       51,440,445   30,392,205   81,832,650 4th Qtr 1998       48,674,374   29,822,311   78,496,685         --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   --------------------------------------------------------------------------------     1998   204,091,257   122,956,541   327.047,798         --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   -------------------------------------------------------------------------------- 1st Qtr 1999       43,594,536   29,117,140   72,711,676 2nd Qtr 1999       46,518,970   30,761,864   77,280,834 3rd Qtr 1999       46,152,760   32,136,786   78,289,546 4th Qtr 1999       46,341,802   34,304,884   80,646,686         --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   --------------------------------------------------------------------------------     1999   182,608,068   126,320,674   308,928,742         --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   Total All Years               601,112,876       350,577,819       951,690,695         --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- *Papetti's Hygrade Egg Products was acquired on February 26, 1997, therefore the first quarter of 1997 is for the month of March only. 16 -------------------------------------------------------------------------------- QUICKLINKS CONSOLIDATED. RESTATED AND AMENDED LICENSE AGREEMENT ARTICLE 1—DEFINITIONS ARTICLE 2—GRANT ARTICLE 3—BEST EFFORTS; USE OF PATENT RIGHTS ARTICLE 4—ROYALTIES ARTICLE 5—PAYMENT, REPORTS AND RECORDS ARTICLE 6—PATENT PROSECUTION ARTICLE 7—TERMINATION ARTICLE 8—INFRINGEMENT OF THIRD-PARTY RIGHTS ARTICLE 9—INFRINGEMENT OF UNIVERSITY'S PATENT RIGHTS BY THIRD PARTIES ARTICLE 10—PRODUCT LIABILITY ARTICLE 11—ASSIGNMENT ARTICLE 12—REPRESENTATIONS AND WARRANTIES ARTICLE 13—NON-USE OF NAMES ARTICLE 14—EXPORT CONTROLS ARTICLE 15—PAYMENTS, NOTICES AND OTHER COMMUNICATIONS ARTICLE 16—MISCELLANEOUS PROVISIONS EXHIBIT A IDENTIFICATION OF MANUFACTURERS OF INFRINGING COMPETITIVE PRODUCTS UNDER ARTICLE 4 Cutler Egg Products, Inc. Nulaid Foods, Inc. Rose Acres Farms, Inc. Wilcox Farms, Inc. Willamette Egg Farms, Inc. Sunny Fresh Foods, division of Cargill, Inc. EXHIBIT B DISCLOSURE OF ACTIONS AND PROCEEDINGS REGARDING PATENT RIGHTS UNDER ARTICLE 12 EXHIBIT C MICHAEL FOODS, INC. REPRESENTATION OF EASY EGGS© AND TABLE READY™ EGG PRODUCTS SOLD BY QUARTER (IN POUNDS) FOR CALENDAR YEARS 1997 - 1999

                                           AMENDMENT NO. 2                                                             TO                    ASSET PURCHASE AND SALE AGREEMENT                                            DATED JUNE 7, 2000                                             BY AND BETWEEN                       POTOMAC ELECTRIC POWER COMPANY                                                          AND                                       SOUTHERN ENERGY, INC.                                                     AMENDMENT NO. 2                                                                      TO                                  ASSET PURCHASE AND SALE AGREEMENT           THIS AMENDMENT NO. 2 TO ASSET PURCHASE AND SALE AGREEMENT (this "Amendment") is dated December __, 2000 and is by and between POTOMAC ELECTRIC POWER COMPANY, a District of Columbia and Virginia corporation ("Seller"), and SOUTHERN ENERGY, INC., a Delaware corporation ("Buyer," collectively with Seller, the "Parties").           WHEREAS, Buyer has agreed to purchase and assume, and Seller has agreed to sell and assign, the Auctioned Assets (as defined in the Purchase Agreement) and certain associated liabilities, on the terms and conditions set forth in that certain Asset Purchase and Sale Agreement, dated June 7, 2000, as amended by Amendment No. 1 to Asset Purchase and Sale Agreement, dated September 18, 2000 (the "Purchase Agreement");           WHEREAS, pursuant to the side letter dated June 7, 2000, Buyer and Seller agreed to modify the schedules to the Purchase Agreement to correct scrivener's errors and omissions or erroneous inclusions therein; and           WHEREAS, the parties hereto desire to amend the Purchase Agreement and the exhibits and schedules relating thereto as set forth herein.           NOW, THEREFORE, in consideration of the mutual covenants and agreements herein set forth and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Buyer and Seller agree as follows:           1.     Defined Terms. Defined terms used in this Amendment and not defined herein shall have the meanings ascribed to them in the Purchase Agreement.           2.     Amendment to Article IX.                     (a)     Section 9.1(a) is hereby amended by inserting the following sentence           at the end thereof:                            "Notwithstanding the foregoing, the term Transferred Union Employee                     shall not include any Union Employee who, on or before the Closing Date, has                     given written notice to Seller of his or her intent to retire from active employment                     with Seller, and who actually retires under the terms of the Seller's Pension Plan                     effective January 1, 2001."                     (b)     The fourth sentence of Section 9.3 is hereby deleted in its entirety and replaced with the following:                            "Each Transferred Savings Employee shall be afforded the option of transferring                     his or her account balance into the Buyer's Savings Plan, including any outstanding                     loan balances attributable to such accounts; provided, however, that if Seller is able                     to obtain a favorable ruling from the Internal Revenue Service to the effect that (or                     determines on the basis of rulings by the Internal Revenue Service that) the                     consummation of the transactions contemplated hereby shall constitute a sale of                     substantially all of the assets used in a trade or business within the meaning of                     Section 401(k)(10) of the Code, or that there has been a separation from service as a                     non-continuation of the same trade or business within the meaning of Section                     401(k)(2)(B)(i)(I) of the Code, each Transferred Savings Employee shall be afforded                     the option of maintaining his or her account balance under Seller's Savings Plan,                     transferring his or her account balance into Buyer's Savings Plan, including any                     outstanding loan balances attributable to such account, rolling over his or her                     account balance, including any outstanding loan balances attributable to such                     accounts into the Buyer's Savings Plan, rolling over his or her account balance into                     an individual retirement account or cashing in his or her account balance (subject to                     applicable withholding taxes and penalties)."                     (c)     The seventh sentence of Section 9.3 is hereby deleted in its entirety and replaced with the following:                            "In the event that a Transferred Savings Employee shall elect to leave his or her                     account balance in Seller's Savings Plans, Seller shall allow the Transferred                     Employee to repay any outstanding loan attributable to such account balance                     through repayment coupons that the Seller shall provide to the Transferred                     Employee prior to the Closing Date."           4.     Amendment to Section 12.4. The address for Troutman Sanders LLP in Section 12.4 of the Purchase Agreement is hereby deleted and replaced with the following address:                               Troutman Sanders LLP                               401 9th Street N.W.                               Suite 1000                               Washington, D.C. 20004                               Telecopier: (202) 274-2994                               Attention: Benjamin L. Israel, Esq .           5.     Amendments to Schedules.                  5.1      Amendment to Schedule 2.2(a)(iii). Schedule 2.2(a)(iii) is hereby deleted           in its entirety and replaced with the Schedule 2.2(a)(iii) attached hereto as Attachment           A.                  5.3      Amendment to Schedule 2.2(a)(v). Schedule 2.2(a)(v) is hereby deleted in its           entirety and replaced with the Schedule 2.2(a)(v) attached hereto as Attachment B.                  5.4      Amendment to Schedule 2.2(a)(vi). Schedule 2.2(a)(vi) is hereby deleted in           its entirety and replaced with the Schedule 2.2(a)(vi) attached hereto as Attachment C.                  5.5     Amendment to Schedule 2.2(a)(vii). Schedule 2.2(a)(vii) is hereby deleted in           its entirety and replaced with the Schedule 2.2(a)(vii) attached hereto as Attachment D.                  5.5     Amendment to Schedule 2.2(b)(i). Schedule 2.2(b)(i) is hereby deleted in its           entirety and replaced with the Schedule 2.2(b)(i) attached hereto as Attachment E.                  5.6     Amendment to Schedule 2.3(a)(iv). Schedule 2.3(a)(iv) is hereby deleted in its           entirety and replaced with the Schedule 2.3(a)(iv) attached hereto as Attachment F.                  5.7     Amendment to Schedule 5.5(a). Schedule 5.5(a) is hereby deleted in its           entirety and replaced with the Schedule 5.5(a) attached hereto as Attachment G.                  5.8     Amendment to Schedule 5.5(b). Schedule 5.5(b) is hereby deleted in its           entirety and replaced with the Schedule 5.5(b) attached hereto as Attachment H.                  5.9     Amendment to Schedule 5.10(c). Exhibit A to Schedule 5.10(c) is hereby           deleted in its entirety and replaced with the Exhibit A to Schedule 5.10(c) attached hereto           as Attachment I.           6.     Amendments to the Exhibits.                  6.1     Amendment to Exhibit C-4. Section 2.1(f) of Exhibit C-4, the Morgantown           Easement Agreement, is hereby deleted in its entirety and replaced with the following:                            "(f) An easement of Access to, and the right to use, the parking lots, access                  roads, driveways and other such facilities located upon the Generator's Real Property,                  together with the right to use the railroad lines and railroad spurs located upon the                  Generator's Real Property (such railroad lines and railroad spurs, "Generator's Rail                  Facilities") for the transportation of machinery and/or similar uses; provided, however,                  that the easement of Access to Generator's Rail Facilities shall require Generator's                  prior consent, such consent not to be unreasonably withheld."                  6.2     Amendment to Exhibit E-1. The second sentence of Section 4.2.1(b) of Exhibit           E-1, the Potomac River Interconnection Agreement, is hereby deleted in its entirety and           replaced with the following: "If applicable, the Generator shall test the Station's black-start           combustion-turbines annually to confirm that the black-start combustion turbines will start           without any external power supply."                  6.3     Amendment to Exhibit E-3. Schedule C to Exhibit E-3, the Dickerson           Interconnection Agreement, is hereby deleted in its entirety and replaced with the           Schedule C attached hereto as Attachment J                  6.4     Amendment to Exhibit E-4. Schedule C to Exhibit E-4, the Chalk Point           Interconnection Agreement, is hereby deleted in its entirety and replaced with the           Schedule C attached hereto as Attachment K.           7.     Governing Law. This Amendment is governed by, and shall be construed in accordance with, the laws of the District of Columbia without regard to principles of conflicts of law.           8.     Modifications and Amendments. This Amendment shall not be modified or amended except by a written instrument executed by both of the Parties.           9.     Entire Agreement; Severability. This Amendment and the Purchase Agreement constitute the entire agreement and understanding between the parties hereto with respect to the subject matter hereof. In the event that any portion of this Amendment or the Purchase Agreement shall be determined to be invalid or unenforceable, such portion of this Amendment or Purchase Agreement shall be severable from the other provisions of this Amendment or the Purchase Agreement which provisions shall be valid, binding upon and enforceable against the Parties.          10.     Effectiveness; Purchase Agreement. This Amendment shall be of full force and effect upon its execution and delivery by each of the Parties except that the amendments to the Interconnection Agreements contemplated in Sections 6.2, 6.3 and 6.4 above, shall not be effective until they are filed by Pepco with the Federal Energy Regulatory Commission pursuant to Section 205 of the Federal Power Act and such filing shall occur within two Business Days of the Closing Date. Except as amended by this Amendment, all other terms of the Purchase Agreement shall continue in full force and effect and unchanged and are hereby confirmed in all respects.          11.     Counterparts. This Amendment may be executed in two counterparts, each of which shall be deemed an original, but both of which together shall constitute one and the same instrument.           IN WITNESS WHEREOF, Buyer and Seller have signed and delivered this Amendment on the day and year set forth above. SOUTHERN ENERGY, INC.                             POTOMAC ELECTRIC POWER COMPANY By:      ELIZABETH B. CHANDLER                   By:              MARY SHARPE-HAYES                  Name:  Elizabeth B. Chandler                               Name:  Mary Sharpe-Hayes       Title:    VP                                                             Title:   Vice President

QuickLinks -- Click here to rapidly navigate through this document Exhibit 10.1 SECURITIES PURCHASE AGREEMENT     THIS SECURITIES PURCHASE AGREEMENT ("Agreement") is made and entered into as of October 10, 2000, by and among Reuter Manufacturing Inc., a Minnesota corporation (the "Company"), Activar, Inc., a Minnesota corporation ("Activar"), J.L. Reissner ("Reissner"), and M.J. Tate ("Tate") (Activar, Reissner and Tate, individually an "Investor" and collectively, the "Investors").     NOW THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Company and the Investors hereby agree as follows:     1.  Authorization of Securities.  The Company shall designate, from its previously authorized "blank check" preferred stock, the number of shares of Series A Convertible Preferred Stock, $.1875 par value per share (the "Series A Preferred"), as provided herein, which shall be entitled to the preferences, rights and benefits set forth in the certificate of designation attached hereto as Exhibit 1 (the "Certificate of Designation"). As used in this Agreement, the term "Preferred Stock" shall mean the Series A Preferred to be sold at the closing described in Section 3 of this Agreement and all shares of Series A Preferred issued in exchange or substitution therefor. The Series A Preferred shall be convertible into shares of the Company's common stock, $.1875 par value per share (the "Common Stock"). Any shares of Common Stock issuable upon conversion of the Series A Preferred, when issued, shall be referred to as "Conversion Shares."     2.  Sale and Purchase of Shares.  Subject to the terms and conditions hereof, the Company agrees to sell to each Investor and each Investor agrees to purchase from the Company in accordance with this Agreement, the respective numbers of shares of Series A Preferred and Common Stock set forth opposite each Investor's name on Exhibit 2 at a purchase price of $0.1777778 per share (the "Purchase Commitment"), a total purchase price of eight hundred thousand dollars ($800,000). The Series A Preferred and Common Stock sold to the Investors pursuant to this Agreement are referred to herein as the "Shares." The Company's agreements with each Investor are separate agreements, and the Company's sales of Series A Preferred and Common Stock to each Investor are separate sales.     3.  Closing.  The closing of the purchase of the Shares described herein shall take place at the offices of Oppenheimer Wolff & Donnelly LLP, 45 South Seventh Street, Suite 3300, Minneapolis, Minnesota 55402, at 10 a.m., Minneapolis time, on or about October 10, 2000, or as soon as practicable thereafter (the "Closing"), or at such other place or different time or day as may be mutually acceptable to the Investors and the Company, provided that an aggregate of at least $800,000 of Shares are purchased by the Investors at the Closing. The date and time on which the Closing occurs shall be referred to as the "Closing Date."     At the Closing, (a) the Company shall deliver to each Investor stock certificates for the number of Shares being purchased by such Investor, which Shares shall be registered in the Investor's name or as otherwise designated by the Investor, and (b) the Investor shall pay to the Company the purchase price for the Purchase Commitment set forth on Exhibit 2, by wire transfer or bank or cashier's check payable to the Company. The Company acknowledges receipt of $407,000 of the purchase price from Activar prior to the date of this Agreement.     4.  Representations and Warranties by the Company.  To induce the Investors to enter into this Agreement and to purchase the Shares, the Company hereby represents and warrants to the Investors that:     4.1.  Organization, Standing, Etc.  The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Minnesota and has the requisite corporate power and authority to own, lease or operate its properties and to carry on its business as it is now being conducted and as it is proposed to be conducted.     4.2.  Governing Instruments.  The copies of the Articles of Incorporation and the Bylaws of the Company, and all amendments thereto (collectively, the "Charter Documents"), made available to the Investors prior to the execution of this Agreement, are true and complete copies of the duly and legally adopted Charter Documents in effect as of the date of this Agreement and at the Closing. --------------------------------------------------------------------------------     4.3.  Corporate Acts and Proceedings.  This Agreement and the Voting Agreement have been duly authorized by all necessary corporate action on behalf of the Company, have been duly executed and delivered by authorized officers of the Company, are valid and binding agreements on the part of the Company and are enforceable against the Company in accordance with their respective terms, except as the enforceability thereof may be limited by (a) bankruptcy, insolvency, fraudulent conveyance, moratorium, reorganization or other similar laws affecting the enforcement of creditors' rights generally or (b) judicial limitations on the enforcement of the remedy of specific performance and other equitable remedies.     4.4.  Capital Stock.  Immediately prior to the Closing, the authorized capital stock of the Company consists of 9,000,000 shares of Common Stock, of which 5,224,219 shares are issued and outstanding; and 1,000,000 shares of Series A Preferred, none of which is issued and outstanding. All of the outstanding shares of capital stock of the Company were duly authorized and validly issued and are fully paid and nonassessable. Schedule 4.4 contains a listing of all options, warrants and other rights outstanding for the purchase of equity of the Company outstanding as of the date of this Agreement.     4.5.  Valid Issuance.  The Company has the requisite corporate power and authority to execute and deliver this Agreement and the Voting Agreement and to perform its obligations under each. The Shares, when issued and paid for pursuant to the terms of this Agreement, will be duly authorized and validly issued and outstanding, fully paid, nonassessable and free and clear of all pledges, liens, encumbrances and restrictions, except as set forth herein or in the Articles of Incorporation or the Voting Agreement. Upon approval by the shareholders of the Company of an amendment to the Company's Articles of Incorporation increasing the number of authorized shares of Common Stock, the Conversion Shares will be reserved for issuance upon conversion of the Series A Preferred and, when issued upon conversion of the Series A Preferred in accordance with the terms of this Agreement, will be duly authorized, validly issued and outstanding, fully paid, nonassessable and free and clear of all pledges, liens, encumbrances and restrictions, except as set forth herein or in the Articles of Incorporation or the Voting Agreement.     4.6.  No Brokers or Finders.  No person, firm or corporation has or will have, as a result of any contractual undertaking by the Company, any right, interest or valid claim against the Company or the Investors for any commission, fee or other compensation as a finder or broker, or in any similar capacity, in connection with the transactions contemplated by this Agreement. The Company will defend, indemnify and hold the Investors harmless against any and all liability with respect to any such commission, fee or other compensation which may be payable or determined to be payable.     5.  Representations of the Investors.  Each Investor represents to the Company that with respect to such Investor:     5.1.  Investment Intent.  The Shares and the Conversion Shares into which such Shares may be converted being acquired by such Investor are being purchased for investment for such Investor's own account and not with the view to, or for resale in connection with, any distribution or public offering thereof. Such Investor has no current plan or intention to engage in a sale, exchange, transfer, distribution, redemption, reduction in any way of such Investor's risk of ownership by short sale or otherwise, or other disposition, directly or indirectly of the Shares being acquired by each such Investor pursuant to this Agreement or the Conversion Shares into which such Shares may be converted. Such Investor is able to bear the economic risk of its investment and has the knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks (including tax considerations) of its investment, including the high degree of risk of loss of such Investor's entire investment herein.     5.2.  Restrictions on Resale, Rule 144.  The Investor understands that the Shares have not been registered under the Securities Act of 1933, as amended (the "Securities Act") or any state securities 2 -------------------------------------------------------------------------------- laws by reason of their contemplated issuance in transactions exempt from the registration requirements of the Securities Act pursuant to Section 4(2) thereof or Rule 504, 505 or 506 promulgated under the Securities Act and applicable state securities laws, and that the reliance of the Company and others upon these exemptions is predicated in part upon this representation by the Investor. The Investor further understands that the Shares may not be transferred or resold without (i) registration under the Securities Act and any applicable state securities laws or (ii) an exemption from the requirements of the Securities Act and applicable state securities laws. The Investor also understands that the Conversion Shares will be issued without prior registration thereof under the Securities Act or applicable state securities laws in reliance upon Section 4(2) of the Securities Act and transactional exemptions from registration under applicable state securities laws based upon appropriate representations of the Investor. As such, the Conversion Shares will be subject to transfer restrictions similar to restrictions applicable to the Shares. The Investor understands that any sales pursuant to Rule 144 can be made only in full compliance with the provisions of Rule 144.     5.3.  Location of Principal Office, Qualification as an Accredited Investor, Etc.  The state in which the Investor's principal office is located is the state set forth in the Investor's address on Exhibit 2. The Investor by execution of this Agreement hereby represents that he or it qualifies as an "accredited investor" for purposes of Regulation D promulgated under the Securities Act. The Investor (i) is an investor in securities of companies in the development stage and acknowledges that he or it is able to fend for himself or itself, and bear the loss of his or its entire investment in the Shares and (ii) has such knowledge and experience in financial and business matters that he or it is capable of evaluating the merits and risks of the investment to be made by him or it pursuant to this Agreement. Activar also represents he or it has not been organized solely for the purpose of acquiring the Shares or Conversion Shares.     5.4.  Acts and Proceedings.  The Investor has full power and authority to enter into and perform under this Agreement in accordance with its terms. This Agreement has been duly authorized by all necessary action on the part of the Investor, has been duly executed and delivered by the such Investor, and is a valid and binding agreement of the Investor and enforceable against the Investor in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, moratorium, reorganization or other similar laws affecting the enforcement of creditors' rights generally and to judicial limitations on the remedy of specific enforcement and other equitable remedies. The execution of and performance of the transactions contemplated by this Agreement to be executed by the Investor and compliance with its provisions by the Investor will not violate any provision of law and will not conflict with or result in any breach of any of the terms, conditions or provisions of, or constitute a default under, or require a consent or waiver under, its organizational documents (each as amended to date) or any indenture, lease, agreement or other instrument to which the Investor is a party or by which the Investor or any of the Investor's properties is bound, or any decree, judgment, order, statute, rule or regulation applicable to the Investor.     5.5.  Disclosure of Information.  The Investor represents that the Company has made available to the Investor at a reasonable time prior to the execution of this Agreement sufficient and satisfactory opportunity to ask questions and receive answers from the Company's management concerning the Company's business, management and financial affairs, the terms and conditions of the offering of the Shares and to obtain any additional information (which the Company possesses or can acquire without unreasonable effort or expense) as may be necessary to verify the accuracy of information furnished to the Investor. The Investor has reviewed the representations concerning the Company contained in this Agreement. The foregoing, however, does not limit or modify the representations and warranties of the Company in this Agreement or the right of the Investor to rely thereon. 3 --------------------------------------------------------------------------------     5.6.  Legend; Stop Transfer.  The Shares, and any Conversion Shares issued upon conversion thereof, shall bear a legend substantially similar to the following: THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER EITHER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR APPLICABLE BLUE SKY LAWS, AND ARE SUBJECT TO CERTAIN INVESTMENT REPRESENTATIONS. THESE SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION UNDER THE ACT AND SUCH APPLICABLE BLUE SKY LAWS, OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED. The Company shall make a notation regarding the restrictions on transfer of the Shares and any such Conversion Shares in its books and the Shares and any such Conversion Shares shall be transferred on the books of the Company only if transferred or sold pursuant to an effective registration statement under the Securities Act covering the securities to be transferred or an opinion of counsel satisfactory to the Company that such registration is not required.     5.7.  No Brokers or Finders.  No person, firm or corporation has or will have, as a result of any contractual undertaking by any Investor, any right, interest or valid claim against any Investor or the Company for any commission, fee or other compensation as a finder or broker, or in any similar capacity, in connection with the transactions contemplated by this Agreement. Each Investor will indemnify and hold the Company harmless against any and all liability with respect to any such commission, fee or other compensation which may be payable or determined to be payable.     6.  Conditions of the Investor's Obligation.  The obligation of each Investor to purchase the Shares on the Closing Date is subject to the fulfillment or waiver by each such Investor prior to or on such Closing Date of the conditions set forth in this Section 6.     6.1.  Representations and Warranties.  The representations and warranties of the Company under this Agreement shall be true in all material respects as of the Closing Date with the same effect as though made on and as of such date.     6.2.  Compliance With Agreements.  The Company shall have performed and complied in all material respects with all agreements or conditions required by this Agreement and the Voting Agreement to be performed and complied with by it prior to or as of the Closing Date.     6.3.  Qualification Under State Securities Laws.  All registrations, qualifications, permits and approvals required under Minnesota state securities laws for the lawful execution and delivery of this Agreement and the offer, sale, issuance and delivery of the Shares to each Investor at the Closing shall have been obtained or will be obtained by the Company in compliance with such laws.     6.4.  Voting Agreement.  As of the Closing Date, the Voting Agreement shall have been executed and delivered and remain in effect, in the form attached hereto as Exhibit 6.4.     7.  Conversion of Preferred Stock.  The Series A Preferred shall be convertible into Conversion Shares in accordance with the terms and conditions set forth in the Certificate of Designation. Each Investor acknowledges the need to amend the Company's Articles of Incorporation in order to authorize additional shares of Common Stock to effect the conversion of the Series A Preferred. All shares of Conversion Shares that may be issued will be, upon issuance in accordance with the terms of this Agreement, fully paid and nonassessable and free from all taxes, liens and charges (except for taxes, if any, upon the income of the holder and applicable transfer taxes) with respect to the issue thereof, and the issuance thereof shall not give rise to any preemptive rights on the part of any person. 4 --------------------------------------------------------------------------------     8.  Restrictions On Transfer of Securities.       8.1.  Restrictions.  The Shares, and upon conversion of the Series A Preferred, the Conversion Shares, are transferable only pursuant to (i) a public offering registered under the Securities Act; (ii) Rule 144 of the Commission (or any similar rule then in effect) if such rule is available; and (iii) subject to the conditions specified elsewhere in this Section 8, any other legally available means of transfer under applicable federal and state securities laws; provided, however, that in the case of (ii) and (iii), the Company first shall have received an opinion of legal counsel, reasonably satisfactory to the Company, to the effect that such sale or transfer is exempt from the registration requirements of the Securities Act.     8.2.  Legend.  Each certificate representing Shares or Conversion Shares shall be endorsed with a legend substantially similar to the legend set forth in Section 5.6 hereof.     8.3.  Removal of Legend.  Any legend endorsed on a certificate shall be removed, and the Company shall issue a certificate without such legend to the holder of such security, if such security is being disposed of pursuant to a registration under the Securities Act or pursuant to Rule 144 or any similar rule then in effect or if such holder provides the Company with an opinion of counsel satisfactory to the Company to the effect that a transfer of such securities may be made without registration. In addition, if the holder of such securities delivers to the Company an opinion of such counsel, reasonably satisfactory to the Company, to the effect that no subsequent transfer of such securities will require registration pursuant to Rule 144(k) under the Securities Act, the Company will promptly upon such contemplated transfer deliver new certificates evidencing such security that do not bear the legend set forth in Section 5.6.     9.  Miscellaneous.       9.1.  Oral Changes, Waivers, Etc.  Neither this Agreement nor any provision hereof may be changed, waived, discharged or terminated orally, but only by a statement in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought.     9.2.  Notices.  All notices, requests, consents and other communications required or permitted hereunder shall be in writing and shall be delivered, or mailed first-class postage prepaid, registered or certified mail, as follows: (a) if to any Investor, to such Investor's address as listed on Exhibit 2; (b) if to the Company, to 410 11th Avenue South, Hopkins, MN 55343 Attn: President. Such notices and other communications shall for all purposes of this Agreement be treated as being effective or having been given if delivered personally, or, if sent by mail, when received. Any party may change its address for such communications by giving notice thereof to the other parties in conformity with this Section.     9.3.  Survival of Representations, Warranties, Etc.  All representations, warranties, covenants and agreements contained herein or in any other agreement or schedule delivered pursuant to this Agreement shall survive for a period of one year after the execution and delivery of this Agreement or such other agreement or schedule, as the case may be.     9.4.  Delays or Omissions.  Except as expressly provided herein, no delay or omission to exercise any right, power or remedy accruing to any party under this Agreement shall impair any such right, power or remedy of such party nor shall it be construed to be a waiver of any such breach or default, or an acquiescence thereto, or of a similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any party hereto of any breach or default under this Agreement, or any waiver on the part of any party of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing. 5 --------------------------------------------------------------------------------     9.5.  Other Remedies.  Any and all remedies herein expressly conferred upon a party shall be deemed cumulative with, and not exclusive of, any other remedy conferred hereby or by law on such party, and the exercise of any one remedy shall not preclude the exercise of any other. The parties may seek enforcement of the terms of this Agreement by suit in equity on action at law to protect the rights granted under this Agreement.     9.6.  Entire Agreement.  This Agreement, the exhibits hereto, the documents referenced herein and the exhibits thereto, constitute the entire understanding and agreement of the parties hereto with respect to the subject matter hereof and thereof and supersede all prior and contemporaneous agreements or understandings, inducements or conditions, express or implied, written or oral, between the parties with respect hereto and thereto, including without limitation any term sheet(s) executed prior to and relating to this Agreement (the "Term Sheet"). The express terms hereof control and supersede any course of performance or usage of the trade inconsistent with any of the terms hereof.     9.7.  Severability.  Should any one or more of the provisions of this Agreement or of any agreement entered into pursuant to this Agreement be determined to be illegal or unenforceable, all other provisions of this Agreement and of each other agreement entered into pursuant to this Agreement, shall be given effect separately from the provision or provisions determined to be illegal or unenforceable and shall not be affected thereby. The parties further agree to replace such void or unenforceable provision of this Agreement with a valid and enforceable provision which will achieve, to the extent possible, the economic, business and other purposes of the void or unenforceable provision.     9.8.  Successors and Assigns.  The terms and conditions of this Agreement shall inure to the benefit of and be binding upon and be enforceable by the successors and assigns of the parties hereto.     9.9.  Governing Law.  This Agreement shall be governed by and construed under the laws of the State of Minnesota, notwithstanding the laws of conflict of any jurisdiction.     9.10.  Counterparts.  This Agreement may be executed concurrently in two (2) or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.     9.11.  Payment of Fees and Expenses.  The parties will be solely responsible for their own respective legal costs incurred in negotiating and performing this transaction. (BALANCE OF PAGE INTENTIONALLY BLANK; SIGNATURE PAGE FOLLOWS NEXT) 6 --------------------------------------------------------------------------------     IN WITNESS WHEREOF, this Agreement is hereby executed as of the date first written above. Company:   REUTER MANUFACTURING INC.           By:   /s/ MICHAEL TATE    -------------------------------------------------------------------------------- Michael Tate Its: President and Chief Executive Officer   Investor:       ACTIVAR, INC.           By:   /s/ J.L. REISSNER    -------------------------------------------------------------------------------- J.L. Reissner Its: President and Chief Operating Officer   Investor:       By:   /s/ J.L. REISSNER    -------------------------------------------------------------------------------- J.L. Reissner   Investor:       By:   /s/ M.J. TATE    -------------------------------------------------------------------------------- M.J. Tate (SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT) 7 -------------------------------------------------------------------------------- QUICKLINKS SECURITIES PURCHASE AGREEMENT

EXHIBIT 10.3 EMPLOYMENT AGREEMENT       AGREEMENT made as of July 1, 2000 by and between JONES APPAREL GROUP, INC., a Pennsylvania corporation (the "Company"), and WESLEY R. CARD (the "Executive"). W I T N E S S E T H:       WHEREAS, Executive has been serving as a senior executive of the Company; and     WHEREAS, the Company wishes to continue to employ the Executive, and the Executive wishes to continue employment with the Company, on the terms and conditions hereinafter set forth.     NOW, THEREFORE, it is agreed as follows:     1.     Employment. During the term of this Agreement, the Company shall employ the Executive as the Chief Financial Officer of the Company, with such responsibilities and authority as Executive has heretofore had as Chief Financial Officer of the Company. The Executive shall report directly to the Chief Executive Officer of the Company. During the term of this Agreement, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote all of Executive's business time and attention to the business affairs of the Company, and to perform such responsibilities in a professional manner. Notwithstanding the foregoing, during the term of this Agreement, it shall not be a violation of this Agreement for the Executive to (a) serve on civic or charitable boards or committees; (b) deliver lectures, fulfill speaking engagements or teach at educational institutions; (c) serve as a non-employee member of a board of directors of a business entity which is not competitive with the Company and as to which the Board of Directors of the Company has given its consent; and (d) attend to personal business, so long as such activities do not interfere with the performance of the Executive's responsibilities as a senior executive of the Company in accordance with this Agreement.     2.    Term. The Company shall employ the Executive for the period commencing as of July 1, 2000 and ending as of June 30, 2003 (the "Expiration Date"), as renewed in accordance with the following sentence (the "Term"). The Executive's employment with the Company will continue, and this Agreement will be automatically extended without limitation, for successive 12-month periods commencing July 1 and ending June 30 (a "Contract Year"), unless either party to this Agreement advises the other in writing, no later than June 30, 2001 and no later than each June 30 thereafter, that such party does not wish to extend (a "Non-extension Notice"). If this Agreement shall be so extended, the "Expiration Date" shall mean the then applicable <PAGE> 2 extended "Expiration Date", and the "Term" shall mean the period commencing July 1, 2000 and ending on the then applicable extended "Expiration Date". For example, (i) if by June 30, 2001, neither party has given a Non-extension Notice to the other, the Term will be automatically extended through June 30, 2004, and (ii) if the Term is so extended through June 30, 2004, then if by June 30, 2002, neither party has given a Non-extension Notice to the other, the Term will be automatically extended through June 30, 2005.     3.    Salary, Retirement Plans, Fringe Benefits and Allowances.         (a) Throughout the Term, the Executive shall receive a salary at the annual rate of not less than $575,000. The Executive's salary shall be payable at such regular times and intervals as the Company customarily pays its senior executives from time to time, but no less frequently than once a month.         (b) During the Term, the Executive shall be eligible to participate in all savings and retirement plans, practices, policies and programs to the extent applicable generally to other senior executives of the Company.         (c) During the Term, the Executive and/or the Executive's family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare, fringe and other benefit plans, practices, policies and programs provided by the Company (including, without limitation, medical, prescription drug, dental, disability, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other senior executives of the Company.         (d) The Executive shall be entitled to an aggregate of four (4) weeks paid vacation during each calendar year of the Term. The Executive shall also be entitled to the benefits of the Company's policies relating to sick leave and holidays.         (e) The Executive shall have all expenses reasonably incurred by Executive on behalf of the Company reimbursed by the Company in accordance with the Company's standard policies and practices. The Executive shall be entitled to first class seating for air travel on Company business.         (f) The Company shall make available to the Executive all perquisites that are made available to senior executives of the Company.     4.    Bonus.     Executive shall participate in the Company's Executive Annual Incentive Plan (the "Bonus Plan"), pursuant to which the Executive may be entitled to receive annual bonus payments for each full calendar year of employment which ends prior to the Expiration Date and throughout which the Executive has been employed by the Company, conditioned upon the 2 <PAGE> 3 attainment of annual criteria and objectives established for participants in the Bonus Plan.     5.    Stock Options. Subject to the absolute authority of the Stock Option Committee of the Board of Directors of the Company from time to time to grant (or not to grant) to eligible individuals options to purchase common stock of the Company ("Options"), it is the intention of the Company and the expectation of the Executive that while the Executive is employed hereunder, the Executive will receive Options annually, on the following terms and conditions (and any Options so granted shall be subject to the following terms and conditions, which shall govern any conflicts in the terms hereof with any terms and conditions in any stock option agreement):         (a) Target awards will be in an amount (plus or minus 25%) equal to 150% of Executive's salary;         (b) For purposes of determining the number of shares subject to a given Option grant, the value of such Option shall be determined using the Black-Scholes valuation method, or another generally recognized valuation method which is being used uniformly by the Company for its senior executives;         (c) The exercise price per share of the Options shall be the fair market value of the common stock on the date of grant, and the Options shall expire on the tenth anniversary of the date of grant; and         (d) The Options shall vest ratably on the first three anniversaries of the date of grant; provided, however, that all such Options and all other options to purchase Common Shares then held by the Executive which are not then vested (in the aggregate being referred to herein as "Accelerated Options") shall become fully vested and immediately exercisable during the remaining original term of each such Accelerated Option, upon the occurrence of any of the following events ("Acceleration Events"): Executive's Retirement (as defined herein), death, Disability, a Change in Control (as defined herein), and termination of Executive's employment by the Company without Cause or by the Executive for Good Reason; and         (e) The Options shall be granted on such other terms and conditions as are generally made applicable to Options granted to the other senior executives of the Company.     6.    Termination of Employment.         (a) By the Company for Cause, or by the Executive without Good Reason. The Company may terminate the Executive's employment for Cause (as defined herein) before the Expiration Date. If the Executive's employment is terminated for Cause, or if Executive resigns during the Term without Good Reason (as defined below), the Company shall pay to the Executive any unpaid salary through the date of termination, as well as reimburse the Executive for any unpaid reimbursable expenses incurred on behalf of the Company, and thereafter the Company shall have no additional obligations to the Executive under this Agreement. 3 <PAGE> 4         (b) Death or Disability; Retirement. (i) If the Executive's employment terminates before the Expiration Date because of Executive's death or Disability (as defined herein), the Company shall pay Executive or Executive's duly appointed personal representative, as the case may be, (i) any unpaid salary through the date of death or the Disability Termination Date (as defined herein), as well as reimbursement of any unpaid reimbursable expenses incurred on behalf of the Company, (ii) an amount equal to Executive's monthly salary during each of the six (6) months following Executive's death or the Disability Termination Date, and (iii) the Target Bonus for the calendar year in which Executive dies or becomes Disabled, prorated for the portion of such year preceding Executive's death or the Disability Termination Date, which shall be paid not later than 120 days after the end of such year. Except as set forth in this Section 6(b), the Company shall have no additional obligations to the Executive under this Agreement in the event of Executive's termination of employment under this Section 6(b).             (ii) In addition to the foregoing and notwithstanding any other agreement between the Executive and the Company, all Accelerated Options which were held by the Executive at the time of the Executive's Retirement, death or the Disability Termination Date, shall become fully exercisable and shall remain exercisable by the Executive or by the Executive's estate or his representative, as the case may be, during the remaining original term of the Accelerated Option in the case of the Executive's Retirement or Disability, or during the 3-year period following the date of the Executive's death.         (c) By the Company without Cause, or by the Executive for Good Reason. (i) The Company may terminate the Executive's employment before the Expiration Date without Cause, and the Executive may terminate Executive's employment before the Expiration Date for Good Reason, upon 30-days written notice to the other party. If the Executive's employment is so terminated by the Company without Cause, or by the Executive for Good Reason, as the case may be, the Company shall pay and provide to the Executive (i) any unpaid salary through the date of termination, as well as reimbursement of any unpaid reimbursable expenses incurred on behalf of the Company, (ii) the Target Bonus for the calendar year in which termination occurs, prorated for the portion of such year preceding termination (payable no later than the 30th day immediately following termination of employment), (iii) during each month of the Severance Period (as defined below), an amount equal to the sum of (x) Executive's monthly salary at the rate in effect immediately preceding termination and (y) one-twelfth of the Executive's Target Bonus for the calendar year in which termination occurs, (iv) throughout the Severance Period, continuation of Executive's participation (including the Company's contributions thereto) in all benefit plans and practices in which Executive was participating immediately preceding termination, and (v) reimbursement to the Executive for up to $10,000 of executive outplacement services. Except as set forth in this Subsection 6(c), the Company shall not have any additional obligations to the Executive under this Agreement in the event of Executive's termination of employment under this Subsection 6(c).             (ii) In addition to the foregoing and notwithstanding any other agreement between the Executive and the Company, all Accelerated Options which were held by the Executive at the time of the termination of the Executive's employment by the Company without Cause 4 <PAGE> 5 or by the Executive for Good Reason (whether or not following a Change of Control), shall become fully exercisable and shall remain exercisable for the same period following termination as would apply if the Executive's employment had not terminated.         (d) Change in Control. If, following a "Change in Control" (as defined herein) and prior to the Expiration Date, the Company terminates the Executive's employment without Cause, or the Executive terminates employment hereunder for Good Reason, the Company shall pay to the Executive, within 20 days following termination, (i) any unpaid salary through the date of termination, as well as reimbursement of any unpaid reimbursable expenses incurred on behalf of the Company, (ii) the Target Bonus for the calendar year in which termination occurs, prorated for the portion of such year preceding termination, (iii) a lump-sum payment equal to (x) 200% of Executive's yearly salary at the rate in effect immediately preceding termination multiplied by (y) the Severance Multiple (as defined herein), (iv) reimbursement to the Executive for up to $10,000 of executive outplacement services, and (v) a lump-sum equal to the Company's cost for health insurance, life insurance and retirement benefits for the Severance Period.         (e) As used herein:             (i) the term "Cause" shall mean (v) the Executive's commission of an act of fraud or dishonesty or a crime involving money or other property of the Company; (w) the Executive's conviction of a felony or a plea of guilty or nolo contendere to an indictment for a felony; (x) if, in carrying out Executive's duties hereunder, the Executive engages in conduct which constitutes willful misconduct or gross negligence; (y) the Executive's failure to carry out a lawful order of the Board of Directors of the Company or its Chief Executive Officer; or (z) a material breach by the Executive of this Agreement. Any act or failure to act on the part of the Executive which is based upon authority given pursuant to a resolution duly adopted by the Board of Directors of the Company or authorized in writing by the Chief Executive Officer of the Company, or based upon the advice of counsel for the Company, shall not constitute Cause as used herein. For purposes of this provision only, a breach shall be "material" if it is demonstrably injurious to the Company, its affiliates or any of its respective business units, financially or otherwise.             Cause shall not exist unless and until the Company (i) has delivered to the Executive a written Notice of Termination that specifically identifies the events, actions, or non-actions, as applicable, that the Company believes constitute Cause hereunder, and, in the case of termination for Cause under clauses (x), (y) or (z) above, the Executive has been provided with an opportunity to cure the offending conduct (if curable) within 30 days after delivery of the written Notice of Termination, and has not so cured such conduct (if curable), and (ii) the Executive has been provided an opportunity to be heard (with counsel) within 30 days after delivery of the Notice of Termination; provided, however, that in the case of termination for Cause under clauses (x), (y), and (z) above, the date of termination shall be no earlier than 35 days after delivery of the Notice of Termination. 5 <PAGE> 6         (ii) the term "Good Reason" shall mean any one of the following:             (1) a material breach of the Company's obligations under this Agreement, which breach has not been cured within 20 business days after the Company's receipt of written notice from the Executive of such breach;             (2) a reduction in the Executive's then annual base salary;             (3) the relocation of the Executive's office to a location more than 30 miles from Executive's present office;             (4) the failure to pay the Executive any undisputed portion of the Executive's compensation within 15 business days after the date of receipt of written notice that such compensation or payment is due;             (5) the failure to continue in effect any compensation or benefit plan in which the Executive is participating, unless either (i) an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan; or (ii) the failure to continue the Executive's participation therein (or in such substitute or alternative plan) does not discriminate against the Executive, both with respect to the amount of benefits provided and the level of the Executive's participation, relative to other similarly situated participants;             (6) a reduction in the Executive's title and status as Chief Financial Officer of the Company, or any change in the Executive's status as reporting directly to the Chief Executive Officer; or the assignment to the Executive of any duties materially inconsistent with the Executive's position (including, without limitation, status, office, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 1 of this Agreement, or any other action by the Company which results in a material diminution in such position, authority, duties or responsibilities, excluding for this purpose any action not taken in bad faith and which is remedied by the Company no later than thirty (30) days after written notice by the Executive; or             (7) any purported termination by the Company of the Executive's employment otherwise than as expressly permitted in this Agreement.         (iii) the terms "Disabled" or "Disability" shall mean the Executive's physical or mental incapacity which renders the Executive incapable, even with a reasonable accommodation by the Company, of performing the essential functions of the duties required of Executive by this Agreement for one hundred twenty (120) or more consecutive days; the term "Disability Termination Date" shall mean the date as of which the Executive's employment with the Company is terminated, either by the Executive or by the Company, following the suffering of a Disability by the Executive.         (iv) the term "Severance Period" shall mean the period commencing with the 6 <PAGE> 7 termination of the Executive's employment and ending with the Expiration Date.         (v) the term "Severance Multiple" shall mean 3 times.         (vi) the term "Change in Control" shall have the same meaning as in the Company's 1999 Stock Option Plan, as in effect on the date hereof.         (vii) the term "Target Bonus" shall mean 75% of Executive's annual salary for any given year during the Term.         (viii) the term "Retirement" shall mean voluntary retirement by the Executive after attaining age 55 with 10 years of service with the Company, or, if the Executive has not attained age 55 and/or has less than 10 years of service with the Company, the Company determines that circumstances exist that warrant the granting of Retirement status.         (f) The Executive shall have no obligation to seek other employment or otherwise mitigate the Company's obligations to make payments under this Section 6, and the Company's obligations shall not be reduced by the amount, if any, of other compensation or income earned or received by the Executive after the effective date of Executive's termination.     7.    Effect of Section 280G of the Internal Revenue Code.     (a) Notwithstanding any other provision of this Agreement to the contrary, and except as provided in Section 7(b), to the extent that any payment or distribution of any type to or for the benefit of the Executive by the Company (or by any affiliate of the Company, any person or entity who acquires ownership or effective control of the Company or ownership of a substantial portion of the Company's assets (within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), and the regulations thereunder), or any affiliate of such person or entity, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (the "Total Payments"), is or will be subject to the excise tax imposed under Section 4999 of the Code (the "Excise Tax"), then the Total Payments shall be reduced (but not below zero) if and to the extent that a reduction in the Total Payments would result in the Executive retaining a larger amount, on an after-tax basis (taking into account federal, state and local income taxes and the Excise Tax), than if the Executive received the entire amount of such Total Payments. Unless the Executive shall have given prior written notice specifying a different order to the Company to effectuate the foregoing, the Company shall reduce or eliminate the Total Payments, by first reducing or eliminating the portion of the Total Payments which are not payable in cash and then by reducing or eliminating cash payments, in each case in reverse order beginning with payments or benefits which are to be paid the farthest in time from the Determination (as defined herein). Any notice given by the Executive pursuant to the preceding sentence shall take precedence over the provisions of any other plan, arrangement or agreement governing the Executive's rights and entitlements to any benefits or compensation. 7 <PAGE> 8     (b) The determination of whether the Total Payments shall be reduced as provided in this Section 7 and the amount of such reduction shall be made at the Company's expense by an accounting firm selected by the Company from among its independent auditors and the five (5) largest accounting firms (an "Eligible Accounting Firm") in the United States (the "Accounting Firm"). The Accounting Firm shall provide its determination (the "Determination"), together with detailed supporting calculations and documentation to the Company and the Executive within ten (10) days of the last day of Executive's employment. If the Accounting Firm determines that no Excise Tax is payable by the Executive with respect to the Total Payments, it shall furnish the Executive with an opinion reasonably acceptable to the Executive that no Excise Tax will be imposed with respect to any such payments and, absent manifest error, such Determination shall be binding, final and conclusive upon the Company and the Executive. If the Accounting Firm determines that an Excise Tax would be payable, the Executive shall have the right to accept the Determination of the Accounting Firm as to the extent of the reduction, if any, pursuant to this Section 7, or to have such Determination reviewed by another Eligible Accounting Firm selected by the Executive, at the expense of the Company, in which case the determination of such second accounting firm shall be binding, final and conclusive upon the Company and Executive.     8.    Company Property. Any trade name or mark, program, discovery, process, design, invention or improvement which the Executive makes or develops, which relates, directly or indirectly, to the business of the Company or its affiliates, or Executive's employment by the Company, shall be considered as "made for hire" and shall belong to the Company and shall be promptly disclosed to the Company. During the Executive's employment and thereafter, the Executive shall, without additional compensation, execute and deliver to or as requested by the Company, any instruments of transfer and take such other action as the Company may reasonably request to carry out the provisions hereof, including filing, at the Company's sole expense, trademark, patent or copyright applications for any trade name or mark, invention or writing covered hereby and assigning such applications to the Company.     9.    Confidential Information. The Executive shall not, either during the term of Executive's employment by the Company or thereafter, disclose to anyone or use (except, in each case, in the performance of Executive's responsibilities hereunder and in the regular course of the Company's business), any information acquired by the Executive in connection with or during the period of Executive's employment by the Company, with respect to any confidential, proprietary or secret aspect of the affairs of the Company or any of its affiliates, including but not limited to the requirements and terms of dealings with existing or potential licensors, licensees, designers, suppliers and customers and methods of doing business, all of which the Executive acknowledges are confidential and proprietary to the Company, and any of its affiliates, as the case may be.     10.    Competition; Recruitment; Non-Disparagement.         (a) The Executive shall not, at any time during Executive's employment by the Company and during the Severance Period (provided that the Company is making the payments 8 <PAGE> 9 to Executive which may be required hereby during such Severance Period) (the "Non-Compete Period") and under the following circumstances, engage or become interested (as an owner, stockholder, partner, director, officer, employee, consultant or otherwise) in any business which then competes, directly or indirectly, with the business then conducted by the Company or any of its subsidiaries or affiliates. The ownership of less than 5% of the stock of a publicly owned company which competes with the Company, any of its subsidiaries or affiliates, in and of itself, shall not be considered a violation of the provisions of this Section 10.         (b) The Executive shall not, at any time during Executive's employment by the Company and thereafter until the second anniversary of the expiration of the Non-Compete Period, recruit, solicit for employment, hire or engage, or assist any person or entity in recruiting, soliciting for employment, hiring or engaging, any employee or consultant of the Company, any of its subsidiaries or affiliates, or any person who was an employee or consultant of the Company, any of its subsidiaries or affiliates within one year before the termination of the Executive's employment.         (c) For the longer of any period applicable under this Section 10 or a period of three years immediately following the date of termination, (i) the Company, and its respective affiliates and employees shall not disparage the Executive, and (ii) the Executive shall not disparage the Company, or its respective affiliates and employees.         (d) The Executive acknowledges that these provisions are necessary for the protection of the Company, and its subsidiaries and affiliates and are not unreasonable, because the Executive would be able to recruit and hire personnel other than employees of the Company, and any of their subsidiaries and affiliates. The Executive further agrees that a breach of Section 8, 9 or 10 of this Agreement shall result in the immediate cessation of any payments pursuant to this Section 10 and Section 6 hereof, if applicable. The duration and the scope of these restrictions on the Executive's activities are divisible, so that if any provision of this Section 10 is held or deemed to be invalid, that provision shall be automatically modified to the extent necessary to make it valid.     11.    Notices. Any notice or other communication to the Company or to the Executive under this Agreement shall be in writing and shall be considered given when mailed by certified mail, return receipt requested, to such party at Executive's address below, or to the Company at 1411 Broadway, New York, New York 10018, Attention: General Counsel (or at such other address as such party may specify by written notice to the other party).     12. Successors; Binding Agreement.         (a) Company's Successors. No rights or obligations of the Company under this Agreement may be assigned or transferred by the Company, except that such rights or obligations may be assigned or transferred pursuant to a merger or consolidation in which the Company is not the continuing entity, or the sale or liquidation of all or substantially all of the business or assets of the Company, provided that the assignee or transferee is the successor to all 9 <PAGE> 10 or substantially all of the business or assets of the Company and such assignee or transferee assumes all of the liabilities, obligations and duties of the Company, as contained in this Agreement, either contractually or as a matter of law. The Company will require any such successor 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. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business or assets as aforesaid, which executes and delivers the agreement provided for in this Section 12 or which otherwise becomes bound by all the terms and provisions of this Agreement or by operation of law.         (b) Executive's Successors. This Agreement shall not be assignable by the Executive. This Agreement and all rights of the Executive hereunder shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. Upon the Executive's death, all amounts to which Executive is entitled hereunder, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive's devisee, legatee, or other designee or, if there be no such designee, to the Executive's estate.     13.    Indemnification. The Company shall indemnify Executive and hold the Executive harmless, to the maximum extent permitted by applicable law, from and against all claims, actions, suits, proceedings, loss, damage, liability, costs, charges and expenses, including reasonable attorneys' fees and costs arising in connection with the Executive's performance of Executive's duties hereunder or Executive's status as an employee, officer, director or agent of the Company or its affiliates, in accordance with the Company's indemnity policies for its senior executives.     14.    Interest on Late Payments. "Undisputed Late Obligations" shall bear interest beginning on the Due Date until paid in full at an annual rate of one percent (1.0%) plus the prime rate as declared from time to time by The Chase Manhattan Bank. For purposes hereof, "Undisputed Late Obligations" shall mean any obligation which remains unpaid 5 days after written notice thereof is delivered to the other party in accordance with Section 11 (the "Due Date") for money under this Agreement owing from one party to another, which obligation (i) is not subject to any bona fide dispute or (ii) has been adjudicated by an arbitration panel or court of competent jurisdiction to be due and payable.     15.    Arbitration. Except as otherwise provided herein, all controversies, claims or disputes arising out of or related to this Agreement shall be settled under the rules of the American Arbitration Association then in effect in the State of New York, as the sole and exclusive remedy of either party, and judgment upon such award rendered by the arbitrator(s) may be entered in any court of competent jurisdiction.     16.    Attorneys' Fees. The Company shall reimburse the Executive (or the Executive shall reimburse the Company) for all reasonable costs, including without limitation reasonable attorneys' fees, of the Executive or the Company, as the case may be, in any dispute, arbitration 10 <PAGE> 11 or proceeding arising under this Agreement (collectively, a "Proceeding"), so long as the Executive or the Company, as the case may be, "prevails in substantial part" with respect to Executive's or the Company's claims or defenses in such Proceeding. For purposes hereof, the Executive shall be deemed to have "prevailed in substantial part" if (i) the Executive is the party originally demanding a Proceeding, and the arbitrator(s) shall have awarded the Executive at least 75% of the amount originally demanded by the Executive, or (ii) the Company is the party originally demanding a Proceeding, and the arbitrator(s) shall have denied the Company the relief originally requested. The Company shall be deemed to have "prevailed in substantial part" if the Executive is the party originally demanding a Proceeding and the arbitrator(s) shall have awarded the Executive less than 25% of the amount originally demanded by the Executive.     17.    Miscellaneous.         (a) Given that a breach of the provisions of this Agreement would injure the Company irreparably, the Company may, in addition to its other remedies, obtain an injunction or other comparable relief restraining any violation of this Agreement, and no bond, security or other undertaking shall be required of the Company in connection therewith.         (b) The provisions of this Agreement are separable, and if any provision of this Agreement is invalid or unenforceable, the remaining provisions shall continue in full force and effect.         (c) This Agreement constitutes the entire understanding and agreement between the parties, supersedes all other existing agreements between them and cannot be amended, unless such amendment is in writing and signed by both parties to this Agreement.         (d) This Agreement shall be governed by and construed in accordance with the laws of the State of New York (other than its choice of laws rules), where it has been entered and where it is to be performed. The parties hereto consent to the exclusive jurisdiction of any federal or state court in the State of New York to resolve any dispute arising under this Agreement or otherwise.         (e) The headings in this Agreement are solely for convenience of reference and shall not affect its interpretation.         (f) The failure of either party to insist on strict adherence to any term of this Agreement on any occasion shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement. For any waiver of a provision of this Agreement to be effective, it must be in writing and signed by the party against whom the waiver is claimed.         (g) The obligations of the Executive and the Company hereunder shall survive the termination of the term of this Agreement and the Executive's employment hereunder, to the 11 <PAGE> 12 extent necessary to give full effect to the provisions of this Agreement.     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed as of the date first above written.   JONES APPAREL GROUP, INC. By: /s/ Sidney Kimmel      Chairman and Chief Executive Officer      /s/ Wesley R. Card      Executive 12