Exhibit 10.1

 

DISTRIBUTION AGREEMENT

 

BETWEEN

 

ANTE4, INC. AND ANTE5, INC.

 

Dated: April 16, 2010

 

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DISTRIBUTION AGREEMENT

 

TABLE OF CONTENTS

 

INTRODUCTION

1

 

 

ARTICLE 1 DEFINITIONS

3

1.01     

General

3

1.02

Terms Defined Elsewhere in Agreement

7

ARTICLE 2 TRANSFERS OF ASSETS AND TREATMENT OF LIABILITIES

7

2.01

Performance of Subscription Agreement

7

2.02

Corrective Transfers of Assets from Subsidiary to Parent

7

2.03

Transfers Not Effected Before the Distribution

7

2.04

Cooperation Concerning Assets

8

2.05

No Representations or Warranties; Consents

8

2.06

Ordinary Course Operations

9

2.07

Allocation of Debt

9

2.08

Settlement of Intercompany Accounts

9

2.09

Limitation on Loans and Distributions by Subsidiary

9

ARTICLE 3 OFFICERS AND DIRECTORS OF SUBSIDIARY

9

3.01

Subsidiary Board and Officers

9

ARTICLE 4 THE DISTRIBUTION

10

4.01

Cooperation Before the Distribution

10

4.02

Distribution Record Date, Distribution Date and Procedures

10

4.03

Conditions Precedent to the Distribution

10

4.04

The Distribution

11

4.05

Adjustment of Parent Stock Options

12

4.06

Redemption of Subsidiary Common Stock

12

ARTICLE 5 SATISFACTION OF LIABILITIES

12

5.01

Satisfaction of Liabilities

12

5.02

Assumption and Satisfaction of Unallocated Contingent Liabilities

12

ARTICLE 6 INDEMNIFICATION

12

6.01

Indemnification by Subsidiary

12

6.02

Indemnification by Parent

13

6.03

Insurance Proceeds

13

6.04

Procedure for Indemnification

14

6.05

Remedies Cumulative

16

6.06

Survival of Indemnities

16

6.07

Coordination with Tax Allocation and Indemnity Provisions

16

ARTICLE 7 ACCESS TO INFORMATION AND SERVICES

17

7.01

Provision of Corporate Records

17

7.02

Access to Information

17

7.03

Production of Witnesses

18

7.04

Reimbursement

18

7.05

Retention of Records

18

7.06

Confidentiality

18

7.07

Privileged Matters

19

 

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ARTICLE 8 INSURANCE

20

8.01     

Definitions

20

8.02

Policies and Rights Included within the Subsidiary Assets

21

8.03

Policies and Rights Included within the Parent Assets

21

8.04

Shared Policy Insurance Administration, Reserves and Premiums

22

8.05

Insurance after the Distribution

23

8.06

Agreement for Waiver of Conflict and Shared Defense

24

ARTICLE 9 EMPLOYMENT AND EMPLOYEE BENEFIT MATTERS

24

9.01

Definitions

24

9.02

Employment and Related Obligations

27

9.03

Stock Option Plans

28

9.04

Parent’s 401(k) Plan

29

9.05

Parent and Subsidiary Medical/Dental Plan

29

9.06

Vacation and Sick Pay Liabilities

29

9.07

Garnishments and Withholding

29

9.08

Labor and Employment Matters

30

9.09

Access to Information; Cooperation

30

9.10

Reimbursement

31

9.11

Preservation of Right To Amend or Terminate Plans

31

9.12

Effect on Employees

31

ARTICLE 10 TAX MATTERS

31

10.01

Definitions

31

10.02

Preparation and Filing of Tax Returns

34

10.03

Taxable Years

35

10.04

Advance Review of Tax Returns

36

10.05

Consistent Positions on Tax Returns

36

10.06

Allocation of Straddle Period Taxes

36

10.07

Payment of Taxes

37

10.08

Amendments to Tax Returns

37

10.09

Refunds of Taxes

38

10.10

Carrybacks

38

10.11

NOL, ITC and AMT Credit Benefit

38

10.12

Payroll Taxes

39

10.13

Tax Indemnification

40

10.14

Cooperation; Document Retention; Confidentiality

41

10.15

Contests and Audits

42

10.16

Tax Elections

43

ARTICLE 11 MISCELLANEOUS

44

11.01

Entire Agreement; No Third Party Beneficiaries

44

11.02

Forbearance

44

11.03

Expenses

44

11.04

Governing Law

44

11.05

Notices

44

11.06

Amendments

44

11.07

Assignments; Predecessors and Successors

45

11.08

Termination and Effectiveness

45

 

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11.09    

Guarantees

45

11.10

Specific Performance

45

11.11

Headings; References; Rules of Construction

45

11.12

Counterparts

45

11.13

Severability; Enforcement

46

11.14

Mediation and Arbitration of Disputes

46

11.15

Payment Method and Character; No Setoffs

47

11.16

Third-Party Beneficiaries

47

11.17

Further Assurances

47

 

* * * * * * * * * *

 

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DISTRIBUTION AGREEMENT

 

THIS DISTRIBUTION AGREEMENT (the “Agreement”) is made and entered into as of the
16th day of April 2010, by and between ante4, Inc., a Delaware corporation
(“Parent”); and ante5, Inc., a newly formed Delaware corporation that is a
wholly-owned subsidiary of Parent (“Subsidiary”).

 

INTRODUCTION

 

A.                                   Transfer of Assets Remaining after 2009
Transaction.  On November 2, 2009, Parent sold to Peerless Media Ltd. (“Buyer”),
substantially all of Parent’s operating assets other than cash, investments and
certain excluded business assets, in exchange for cash and certain royalty
rights (the “2009 Transaction”), pursuant to the Asset Purchase Agreement
between Parent and Buyer, dated August 24, 2009 (the “Purchase Agreement”). 
Substantially all of those excluded business assets, as well as cash for working
capital and certain other assets and rights of Parent described in Schedule A
attached as a part of this Agreement, are being been transferred to Subsidiary
as described in the following Part B, and are collectively referred to in this
Agreement as the “Transferred Assets.”

 

B.                                     Formation and Purpose of Subsidiary. 
Parent plans to use the cash proceeds of the 2009 Transaction to acquire a new
operating business.  Parent is currently negotiating with Plains Energy
Investments, Inc. (“Plains Energy”) for such an acquisition, to be completed by
merging Plains Energy Acquisition Corp., a newly formed subsidiary of Parent
(“Merger Subsidiary”) into Plains Energy (the “Merger”), in exchange for a
certain number of shares of Parent Common Stock (as defined in Section 1.01),
pursuant to a Merger Agreement being negotiated between Parent and Plains Energy
(the “Merger Agreement”).  Parent has determined that (1) Plains Energy is not
willing to ascribe any value to the Transferred Assets in negotiating the terms
of the Merger, (2) Plains Energy is concerned about certain Liabilities of
Parent, and (3) Plains Energy has requested that Subsidiary indemnify Parent and
Plains Energy for a specified amount of any losses resulting from, among other
things, third party claims that may be asserted against Parent after the Merger,
but arising before the Merger from operation or ownership of the Transferred
Assets, or from any act or omission of Parent.  Accordingly, Parent has decided
to separate the Transferred Assets and certain Liabilities from Parent, as
described in the following paragraphs of this Introduction; and provide for such
indemnification in this Agreement.

 

As of April 16, 2010, Parent formed Subsidiary and entered into a written
Subscription Agreement (the “Subscription Agreement”) to transfer to Subsidiary
all of the Transferred Assets in exchange for (1) Subsidiary’s assumption of
certain existing and contingent Liabilities of Parent described in Schedule B
attached as a part of this Agreement (the “Assumed Liabilities”); and
(2) Subsidiary’s issuance to Parent of one (1) share of the voting common stock,
$0.001 par value per share, of Subsidiary (“Subsidiary Common Stock”).

 

Subsidiary has been formed to (1) separate the Transferred Assets and the
Assumed Liabilities from Parent, as requested by Plains Energy; (2) allow the
Parent Shareholders (as defined in Section 1.01) to share, after the
distribution of Subsidiary Common Stock to them (as

 

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described in part C below), in the ultimate value of the Transferred Assets, if
any, after satisfaction of the Assumed Liabilities; and (3) provide for the
indemnification described in the first paragraph of this part B.  To accomplish
the latter two purposes, Subsidiary will engage in the administration and
monetization of the Transferred Assets; and the management and satisfaction of
the Assumed Liabilities and any such indemnification.

 

Under the terms of the 2009 Transaction, certain ex-employees of Parent who are
now employees of Buyer are providing transition services to Parent for a limited
period after the 2009 Transaction.  As a result, Parent now employs only one
employee (its CEO); and has contracted with another corporation for accounting
and financial services.  Parent intends to transfer those employees and that
contract to Subsidiary upon the closing of the Merger because, if the Merger
occurs, Parent and its newly acquired business will be managed by employees of
Plains Energy.

 

C.                                     Distribution and Limited Retention of
Subsidiary Common Stock.  To further those purposes, the Board of Directors of
Parent has determined that it is in the best interests of Parent and the Parent
Shareholders to fully separate the Transferred Assets and Assumed Liabilities
from Parent, after the Merger Closing Date, through (1) the distribution of all
of the Subsidiary Common Stock (after a stock split required to provide for the
necessary shares) to the Parent Shareholders (as those terms are defined in
Section 1.01); and (2) the adjustment of Parent Stock Options (as defined in
Section 1.01) (collectively, the “Distribution,” as more fully defined in
Section 1.01), as soon as practicable after the closing of the Merger.  The
Distribution is intended to equitably adjust the rights of the holders of Parent
Stock Options, to preserve their intrinsic value after the Distribution, by
adjustment of their terms and the issuance of Subsidiary Stock Options pursuant
to Sections 4.05 and 9.03.

 

As of the Merger Closing Date, Parent will hold all of the Subsidiary Common
Stock; and after the Distribution, Parent will not hold any shares of Subsidiary
Common Stock.

 

If the Distribution is delayed due to the closing condition set forth in
Section 4.03(e) until a time when the former holders of stock or warrants issued
by Plains Energy (or their assignees) will receive Subsidiary Common Stock as
Parent Shareholders in the Distribution, those former Plains Energy stockholders
have agreed to sell such Subsidiary Common Stock to Subsidiary for a nominal
price, and this Agreement is intended to provide for that purchase, so as to
limit the economic benefit of the Distribution to Parent Shareholders (or their
assignees) who held Parent Common Stock (or options to buy such stock)
immediately before the Merger.

 

D.                                    Purposes of Agreement.  In connection with
the Subscription Agreement and the Distribution, Parent and Subsidiary have
determined that it is necessary and desirable to set forth the principal
corporate transactions required to effect the Distribution; and to set forth the
agreements between Parent and Subsidiary that will govern certain matters after
the Distribution.

 

E.                                      Income Tax Consequences.  Parent and
Subsidiary acknowledge that (1) Parent’s contribution of the Transferred Assets
to Subsidiary, in exchange for Subsidiary Common Stock and Subsidiary’s
assumption of the Assumed Liabilities pursuant to the Subscription Agreement, is
intended to qualify as a transaction free from federal income Tax, with respect
to Parent and Subsidiary, under Section 351(a) of the Code (as those terms are
defined in Section 1.01), unless the value of the Transferred Assets is less
than the amount of any Debt (as those terms are

 

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defined in Section 1.01) included in the Assumed Liabilities; and (2) the
Distribution is not intended to qualify as a Tax-free transaction, with respect
to either Parent or the Parent Shareholders who receive Subsidiary Common Stock.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the facts recited above, which are a part of
this Agreement, and the respective promises set forth below, the parties agree
as follows:

 

ARTICLE 1
DEFINITIONS

 

1.01                           General.  For purposes of this Agreement, the
following terms shall have the meanings set forth below:

 

“Action” shall mean any claim, action, suit, cause of action, arbitration,
inquiry, proceeding or investigation by or before any Governmental Entity or any
arbitration tribunal.

 

“After-Tax Basis” means, with respect to any Liability or other loss indemnified
hereunder, the actual amount of any payment to be made with respect to such
Liability or loss, after giving effect to any Tax cost incurred by the recipient
arising out of the receipt of such payment (unless such receipt is treated as
other than the receipt of Taxable income), and reducing such payment by the
value of, any and all federal, state or other Tax Benefits (as defined in
Section 10.01) attributable to the full payment of the indemnified Liability or
loss, which value shall be determined on an assumed basis by multiplying the
amount of any applicable deduction, credit, offset or other Tax item by the
applicable highest marginal rate of income Taxation in effect for the period for
which the adjustment is made.

 

“Agreement” has the meaning specified in the first paragraph of this Agreement.

 

“ARS” means the auction rate securities in the amount of approximately
$3,699,979 held by Parent in its account with UBS Financial Services, which
Parent expects to receive in full (net of the repayment of a line of credit with
UBS Financial Services in the amount of approximately $2,442,920) in June 2010.

 

“Assumed Liabilities” has the meaning specified in part B of the Introduction.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Debt” shall mean all (i) indebtedness for borrowed money and obligations
evidenced by bonds, notes, debentures or similar instruments; (ii) obligations
issued or assumed as the deferred purchase price of property or services;
(iii) obligations under capital leases; and (iv) all guarantees of the
obligations of other Persons described in the foregoing clauses (i) - (iii).

 

“Distribution” shall mean, collectively, (i) the distribution of Subsidiary
Common Stock by Parent to the Parent Shareholders on the Distribution Date, as
such distribution is more fully described in Section 4.04; and (ii) the
adjustment of the terms of the Parent Stock Options,

 

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pursuant to Sections 4.05 and 9.03, including the issuance of Subsidiary Stock
Options to holders of Parent Stock Options pursuant to Section 9.03.

 

“Distribution Date” means a business day determined by the Parent Board pursuant
to Section 4.02, for the completion of the Distribution.

 

“Distribution Effective Time” means the close of business on the Distribution
Date.

 

“Distribution Record Date” means the date established by the Parent Board as the
date for making a record of the Parent Shareholders entitled to participate in
the Distribution, which Distribution Record Date shall, subject to Section 4.02,
be the trading day immediately prior to the Merger Closing Date.

 

“Governmental Entity” means any court, regulatory or administrative agency or
commission, or other governmental authority or instrumentality.

 

“Liabilities” shall mean any and all Debts, liabilities and obligations,
absolute or contingent, matured or unmatured, liquidated or unliquidated,
accrued or unaccrued, known or unknown, whenever arising, including all costs
and expenses relating thereto; and including, without limitation, those Debts,
liabilities and obligations arising under any law, rule, regulation, Action,
threatened Action, order or consent decree of any Governmental Entity or any
award of any arbitrator of any kind, and those arising under any contract,
commitment or undertaking.

 

“Merger” has the meaning specified in part B of the Introduction.

 

“Merger Agreement” has the meaning specified in part B of the Introduction.

 

“Merger Closing Date” means the date on which the Merger is consummated.

 

“Merger Effective Time” means the time on the Merger Closing Date at which the
Merger becomes effective according to the terms of the Merger Agreement.

 

“Merger Subsidiary” has the meaning specified in part B of the Introduction.

 

“Parent” has the meaning set forth in the first paragraph of this Agreement.

 

“Parent Assets” has the meaning set forth in part B of Schedule A.

 

“Parent Board” means Parent’s Board of Directors, as constituted at the
applicable time.

 

“Parent Books and Records” shall mean the books and records (including
computerized records) of Parent that are necessary to manage the Parent Assets
or are required by law to be retained by Parent, including, without limitation:
(i) all such books and records relating to Parent Individuals (as defined in
Section 9.01); (ii) all files relating to any Parent Liabilities, including
without limitation any Action being retained by Parent as part of the Parent
Liabilities; and (iii) original corporate minute books, stock ledgers and
certificates and corporate seals, and all licenses, leases, agreements and
filings, relating to Parent or the Parent Assets (but not including the
Subsidiary Books and Records; provided, however, that Parent shall have access
to, and shall

 

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have the right to obtain duplicate copies of, the Subsidiary Books and Records
in accordance with the provisions of Article 7).

 

“Parent Common Stock” means the outstanding common stock, par value $.001 per
share, of Parent.

 

“Parent Liabilities” shall mean (i) the Liabilities, if any, of Parent under, or
to be retained or assumed by Parent pursuant to this Agreement (including
Parent’s portion of any Unallocated Contingent Liabilities, as provided in
Section 5.02, but excluding the Assumed Liabilities) or any of the Related
Agreements; (ii) all Actions against Parent or Liabilities arising out of, or
specifically associated with, any of the Parent Assets; (iii) the Liabilities,
if any, of Parent under the Purchase Agreement and the Merger Agreement, but
excluding any portion thereof that is included in the Assumed Liabilities or
indemnifiable by Subsidiary under Section 6.01; (iv) the Indemnification
Agreements entered into by and between Parent and each of the directors of
Parent that resign from the Parent Board before the Merger Effective Time; and
(v) all other Liabilities of Parent arising out of, or specifically associated
with, any of the Parent Assets; provided, however, that the Parent Liabilities
shall not include any Actions, losses, damages, costs, expenses or Liabilities
for any Tax (which shall be governed solely by Article 10, except to the extent
modified by Section 6.01).

 

“Parent Shareholders” shall mean the holders of record of Parent Common Stock as
of the close of business on the Distribution Record Date.

 

“Parent Stock Options” has the meaning specified in Section 9.01.

 

“Person” means any individual, corporation, partnership, limited liability
company, firm, joint venture, association, joint-stock company, trust, estate,
unincorporated organization or Governmental Entity.

 

“Plains Energy” has the meaning specified in part B of the Introduction.

 

“Purchase Agreement” has the meaning specified in part A of the Introduction.

 

“Related Agreements” shall mean the Subscription Agreement and any other
agreements, instruments, understandings, assignments or other arrangements set
forth in writing, that are entered into between Parent and Subsidiary in
connection with the formation of Subsidiary or the Distribution, other than the
Merger Agreement or any other agreements between Parent and Plains Energy in
connection with the Merger.

 

“Subscription Agreement” has the meaning specified in part B of the
Introduction.

 

“Subsidiary” has the meaning set forth in the first paragraph of this Agreement.

 

“Subsidiary Assets” shall mean (i) the Transferred Assets, to the extent in
existence immediately before the Merger Effective Time; (ii) the Subsidiary
Books and Records; (iii) the rights of Subsidiary under the Shared Policies (as
defined in Section 8.01); (iv) the rights of Subsidiary under this Agreement;
(v) all other rights and assets expressly to be retained by, or

 

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assigned or allocated to, Subsidiary under this Agreement or the Related
Agreements; (vi) all rights and assets acquired by Subsidiary after the Merger
Effective Time.

 

“Subsidiary Board” means Subsidiary’s Board of Directors, as constituted
immediately before the Merger Closing Date.

 

“Subsidiary Books and Records” shall mean the books and records (including
computerized records) of Subsidiary and any other books and records of Parent
that relate principally to Subsidiary, are necessary to operate the Transferred
Assets and satisfy the Assumed Liabilities, or are required by law to be
retained by Subsidiary, including, without limitation:  (i) all such books and
records relating to Transferred Employees; (ii) all files relating to any Action
being assumed or retained by Subsidiary as part of the Subsidiary Liabilities;
and (iii) original corporate minute books, stock ledgers and certificates, and
all licenses, leases, agreements and filings, relating to Subsidiary Assets or
the Subsidiary Liabilities (but not including the Parent Books and Records;
provided, however, that Subsidiary shall have access to, and have the right to
obtain duplicate copies of, any of the Parent Books and Records that pertain to
the Transferred Assets or the Assumed Liabilities in accordance with the
provisions of Article 7).

 

“Subsidiary Common Stock” has the meaning specified in part B of the
Introduction.

 

“Subsidiary Liabilities” shall mean, subject to the limitations of the last
paragraph of Section 6.01: (i) all Liabilities of Subsidiary under, or to be
retained or assumed by Subsidiary pursuant to, this Agreement or any of the
Related Agreements (including the Assumed Liabilities and Subsidiary’s portion
of any Unallocated Contingent Liabilities, as provided in Section 5.02 and
limited under Section 6.01); (ii) all Liabilities of Subsidiary other than any
Parent Liabilities that are neither included in the Assumed Liabilities (which
shall be assumed or retained by Parent in connection with the Distribution), nor
indemnified by Subsidiary under Section 6.01; (iii) all Actions against Parent
arising out of, or specifically associated with, any of the Subsidiary Assets;
and (iv) all other Liabilities of Parent arising out of, or specifically
associated with, any of the Subsidiary Assets or the Assumed Liabilities
(including any Debt secured by the Subsidiary Assets); provided, however, that
the Subsidiary Liabilities shall not include any Actions, losses, damages,
costs, expenses or Liabilities for any Tax (which shall be governed solely by
Article 10, except to the extent modified by Section 6.01).

 

“Subsidiary Stock Options” has the meaning specified in Section 9.01.

 

“Tax,” “Taxes” and “Taxable” have the respective meanings specified in
Section 10.01.

 

“Tax Return” and “Tax Returns” have the respective meanings specified in
Section 10.01.

 

“Transferred Assets” shall have the meaning specified in part A of the
Introduction.

 

“Transferred Employee” has the meaning specified in Section 9.01.

 

“Treasury Regulations” shall mean the United States Treasury Regulations, as
amended.

 

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1.02                           Terms Defined Elsewhere in Agreement.  Other
capitalized terms are defined in this Agreement for use in specified Articles or
Sections, or elsewhere in this Agreement to the extent expressly stated herein.

 

ARTICLE 2
TRANSFERS OF ASSETS AND TREATMENT OF LIABILITIES

 

2.01                           Performance of Subscription Agreement.  Pursuant
to the Subscription Agreement:

 

(A)                                  PARENT SHALL CONTRIBUTE THE TRANSFERRED
ASSETS TO THE CAPITAL OF SUBSIDIARY, BY TAKING OR CAUSING TO BE TAKEN ALL
ACTIONS NECESSARY TO CAUSE THE TRANSFER, ASSIGNMENT, DELIVERY AND CONVEYANCE TO
SUBSIDIARY OF PARENT’S RIGHT, TITLE AND INTEREST IN THE TRANSFERRED ASSETS AND
ANY OTHER SUBSIDIARY ASSETS HELD BY PARENT; AND

 

(B)                                 IN CONSIDERATION OF THE PARENT’S OBLIGATION
TO MAKE THAT CAPITAL CONTRIBUTION, SUBSIDIARY HAS ISSUED THE SUBSIDIARY COMMON
STOCK TO PARENT AND ASSUMED THE ASSUMED LIABILITIES.

 

2.02                           Corrective Transfers of Assets from Subsidiary to
Parent.  Before the Distribution Date, Subsidiary shall take or cause to be
taken all actions necessary to cause the transfer, assignment, delivery and
conveyance to Parent of all of Subsidiary’s right, title and interest in any
Parent Assets held by Subsidiary, at or before the Distribution Effective Time,
that had been inadvertently assigned to or were otherwise received by
Subsidiary.  Any such transfers made under this paragraph shall be made as a
correction of the initial transfer of assets to Subsidiary in consideration of
the Subsidiary Common Stock.

 

2.03                           Transfers Not Effected Before the Distribution. 
To the extent that any asset transfers contemplated by this Article 2 shall not
have been fully effected as of the Distribution Effective Time:

 

(A)                                  THE PARTIES SHALL COOPERATE IN GOOD FAITH
TO EFFECT SUCH TRANSFERS AS PROMPTLY AS SHALL BE PRACTICABLE AFTER THE EFFECTIVE
TIME.  NOTHING HEREIN SHALL BE DEEMED TO REQUIRE THE TRANSFER OF ANY ASSETS
THAT, BY THEIR TERMS OR OPERATION OF LAW, CANNOT BE TRANSFERRED; PROVIDED,
HOWEVER, THAT PARENT AND SUBSIDIARY SHALL COOPERATE IN GOOD FAITH IN SEEKING TO
OBTAIN ANY NECESSARY CONSENTS OR APPROVALS FOR THE TRANSFER OF ALL ASSETS
CONTEMPLATED TO BE TRANSFERRED PURSUANT TO THIS AGREEMENT.

 

(B)                                 THE PARTY RETAINING SUCH ASSET SHALL
THEREAFTER HOLD SUCH ASSET IN TRUST FOR THE USE AND BENEFIT OF THE PARTY
ENTITLED THERETO (AT THE EXPENSE OF THE PARTY ENTITLED THERETO); AND TAKE SUCH
OTHER ACTIONS AS MAY BE REASONABLY REQUIRED IN ORDER TO PLACE THE PARTIES,
INSOFAR AS REASONABLY POSSIBLE, IN THE SAME POSITION AS WOULD HAVE EXISTED HAD
SUCH ASSET BEEN TRANSFERRED AS CONTEMPLATED HEREBY.  AS AND WHEN ANY SUCH ASSET
BECOMES TRANSFERABLE, SUCH TRANSFER SHALL BE EFFECTED FORTHWITH.

 

(C)                                  THE PARTIES AGREE THAT, EXCEPT AS SET FORTH
IN THIS SECTION 2.03, AS OF THE DISTRIBUTION EFFECTIVE TIME, EACH PARTY HERETO
SHALL BE DEEMED TO HAVE ACQUIRED COMPLETE AND

 

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SOLE BENEFICIAL OWNERSHIP OVER ALL OF THE ASSETS, TOGETHER WITH ALL RIGHTS,
POWERS AND PRIVILEGES INCIDENTAL THERETO, THAT SUCH PARTY IS ENTITLED TO ACQUIRE
PURSUANT TO THE TERMS OF THIS AGREEMENT.

 

2.04                           Cooperation Concerning Assets.  If, at any time
after the Distribution Date, Subsidiary reasonably determines that any of the
Parent Assets (other than cash or investments) are essential for the operation
of the Transferred Assets or satisfaction of the Assumed Liabilities, or Parent
reasonably determines that any of the Subsidiary Assets are essential for the
operation of the Parent Assets, and the nature of such assets makes it
impracticable for Subsidiary or Parent, as the case may be, to obtain substitute
assets or to make alternative arrangements on commercially reasonable terms to
conduct their respective operations, and reasonable provisions for the use
thereof are not already included in this Agreement or the Related Agreements,
then Subsidiary (with respect to the Subsidiary Assets) and Parent (with respect
to the Parent Assets) shall cooperate in good faith to make such assets
available to the other party on commercially reasonable terms, as may be
reasonably required for such party to maintain normal business operations. 
However, (a) the usage of such assets by the other party shall not materially
interfere with the use of such assets by the party holding such assets; and
(b) such assets shall be required to be made available only until such time as
the other party can reasonably obtain substitute assets or make alternative
arrangements on commercially reasonable terms to permit it to maintain normal
business operations.

 

2.05                           No Representations or Warranties; Consents.  Each
of the parties hereto understands and agrees that no party hereto is, in this
Agreement, in any Related Agreement or otherwise, representing or warranting in
any way (a) as to the value or freedom from encumbrance of, or any other matter
concerning, any assets of such party; or (b) as to the legal sufficiency to
convey title to any asset transferred pursuant to this Agreement or any Related
Agreement, except as may be expressly stated in a Related Agreement.  IT IS ALSO
AGREED AND UNDERSTOOD THAT THERE ARE NO WARRANTIES, EXPRESS OR IMPLIED, AS TO
THE MERCHANTABILITY OR FITNESS OF ANY OF THE ASSETS EITHER TRANSFERRED TO OR
RETAINED BY THE PARTIES, AS THE CASE MAY BE, AND ALL SUCH ASSETS SHALL BE “AS
IS, WHERE IS” AND “WITH ALL FAULTS;” provided, however, that the absence of
representations and warranties under this Agreement shall have no effect upon
any allocation of Liabilities under this Agreement.

 

Each party hereto understands and agrees that no party hereto is, in this
Agreement, in any Related Agreement or otherwise, representing or warranting in
any way that the obtaining of any consents or approvals, the execution and
delivery of any amendatory agreements and the making of any filings or
applications contemplated by this Agreement, any Related Agreement or otherwise
will satisfy the provisions of any or all applicable laws or judgments or other
instruments or agreements relating to such assets.  Notwithstanding the
foregoing, the parties shall use their good faith efforts to obtain all consents
and approvals, to enter into all reasonable amendatory agreements and to make
all filings and applications which may be reasonably required for the
consummation of the transactions contemplated by this Agreement and the Related
Agreements; and shall take all such further reasonable actions as shall be
necessary to preserve for each of Subsidiary and Parent, to the greatest extent
feasible, the economic and operational benefits of the allocation of assets and
Liabilities provided for in this Agreement.  If, at any time after the
Distribution Date, any further action is necessary or desirable to carry out

 

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the purposes of this Agreement, the proper officers and directors of each party
to this Agreement shall take all such necessary or desirable action.

 

2.06                           Ordinary Course Operations.  The parties agree
that all business operations with respect to the Subsidiary Assets and the
Assumed Liabilities, including, but not limited to, the administration, payment
and collection of accounts payable and accounts receivable (if any), will be
conducted in the ordinary course of business and consistent with past practice
before the Distribution Effective Time.

 

2.07                           Allocation of Debt.  Debt will be allocated as
follows:

 

(A)                                  ANY DEBT OF PARENT, INCLUDING WITHOUT
LIMITATION ANY DEBT SECURED BY PARENT ASSETS, SHALL BE RETAINED DEBT TO BE
SATISFIED BY PARENT.

 

(B)                                 ANY DEBT OF SUBSIDIARY, INCLUDING WITHOUT
LIMITATION ANY DEBT SECURED BY SUBSIDIARY ASSETS, SHALL BE (I) RETAINED AS AN
OBLIGATION TO BE SATISFIED BY SUBSIDIARY OR (II) ASSUMED BY SUBSIDIARY (AS
APPLICABLE) AS PART OF THE ASSUMED LIABILITIES.  AS OF THE DATE OF THIS
AGREEMENT, THE PARTIES BELIEVE THERE WILL BE NO SUCH DEBT, EXCEPT FOR A CERTAIN
PROMISSORY NOTE TO BE ISSUED BY SUBSIDIARY TO PARENT PURSUANT TO THE MERGER
AGREEMENT, IN THE AMOUNT OF $500,000.

 

2.08                           Settlement of Intercompany Accounts.  Except for
the promissory note described in the preceding sentence, all accounts between
Parent and Subsidiary shall be paid in full and settled before the Distribution
Effective Time; provided, however, that nothing contained in this Section 2.08
shall affect the assumption and satisfaction of Liabilities pursuant to
Article 5, the indemnification provisions of Article 6 or Article 10, or the
indemnification provisions of the Related Agreements.

 

2.09                           Limitation on Loans and Distributions by
Subsidiary.  On or after the Merger Closing Date, Parent shall not cause
Subsidiary to make, nor shall Subsidiary make, (a) any loans to Parent (except
as provided in paragraph (b) of Section 2.07) or any of its subsidiaries, or
(b) any distribution of cash or property to Parent with respect to Subsidiary
Common Stock, except as may be otherwise expressly provided in this Agreement.

 

ARTICLE 3
OFFICERS AND DIRECTORS OF SUBSIDIARY

 

3.01                           Subsidiary Board and Officers.  Subsidiary and
Parent shall take all actions that may be required to appoint as officers and
directors of Subsidiary those individuals named in Schedule C attached hereto,
effective no later than the Merger Effective Time.  Parent agrees not to remove
any such directors or appoint any additional directors of Subsidiary at any time
after the Merger Effective Time.

 

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ARTICLE 4
THE DISTRIBUTION

 

4.01                           Cooperation Before the Distribution.

 

(A)                                  SUBJECT TO SECTION 11.08, SUBSIDIARY AND
PARENT SHALL USE ALL REASONABLE BEST EFFORTS TO OBTAIN ANY CONSENTS OR APPROVALS
FROM ANY GOVERNMENTAL ENTITY OR OTHER THIRD-PARTY PERSON THAT ARE NECESSARY OR
DESIRABLE IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED HEREBY.

 

(B)                                 SUBJECT TO SECTION 11.08, SUBSIDIARY AND
PARENT WILL USE ALL REASONABLE BEST EFFORTS TO TAKE, OR CAUSE TO BE TAKEN, ALL
ACTIONS, AND TO DO, OR CAUSE TO BE DONE, ALL THINGS NECESSARY OR DESIRABLE UNDER
APPLICABLE LAW, TO CONSUMMATE THE TRANSACTIONS CONTEMPLATED UNDER THIS AGREEMENT
AND THE RELATED AGREEMENTS INCLUDING, BUT NOT LIMITED TO, ACTIONS RELATING TO
THE SATISFACTION OF THE CONDITIONS INDICATED IN SECTION 4.02.

 

4.02                           Distribution Record Date, Distribution Date and
Procedures.  The Parent Board has established the trading day immediately prior
to the Merger Closing Date as the Distribution Record Date, subject to the
following:

 

(A)                                  THE PARENT BOARD SHALL ESTABLISH
APPROPRIATE PROCEDURES IN CONNECTION WITH THE DISTRIBUTION AND SHALL ESTABLISH A
DISTRIBUTION DATE THAT IS NOT LATER THAN THE FIFTH (5TH) BUSINESS DAY FOLLOWING
THE SATISFACTION OR WAIVER OF ALL CONDITIONS PRECEDENT TO THE DISTRIBUTION, AS
SET FORTH IN SECTION 4.03.

 

(B)                                 IF THE DISTRIBUTION DATE HAS NOT OCCURRED ON
OR PRIOR TO THE 60TH DAY FOLLOWING THE DISTRIBUTION RECORD DATE (THE “OUTSIDE
DISTRIBUTION DATE”), OR THE SUBSIDIARY BOARD DETERMINES IN ITS DISCRETION THAT
SUCH CONDITIONS ARE NOT REASONABLY LIKELY TO BE SATISFIED BEFORE THE OUTSIDE
DISTRIBUTION DATE, THEN THE PARENT BOARD SHALL (I) ESTABLISH A DATE DESIGNATED
BY THE SUBSIDIARY BOARD IN ITS DISCRETION AS A NEW DISTRIBUTION RECORD DATE, AND
(II) ESTABLISH A DISTRIBUTION DATE THAT IS NOT LATER THAN THE FIFTH (5TH)
BUSINESS DAY FOLLOWING THE SATISFACTION OR WAIVER OF ALL CONDITIONS PRECEDENT TO
THE DISTRIBUTION, AS SET FORTH IN SECTION 4.03. THIS SECTION 4.02(B) SHALL
CONTINUE TO APPLY SUCCESSIVELY IF A DISTRIBUTION DATE HAS NOT OCCURRED ON OR
BEFORE THE APPLICABLE OUTSIDE DISTRIBUTION DATE (I.E., THE 60TH DAY FOLLOWING
THE DISTRIBUTION RECORD DATE OR ANY NEW DISTRIBUTION RECORD DATE, AS
APPLICABLE).

 

4.03                           Conditions Precedent to the Distribution.  In no
event shall the Distribution occur unless the following conditions shall have
been satisfied (or waived as provided below):

 

(A)                                  NO ORDER, INJUNCTION OR DECREE SHALL HAVE
BEEN ISSUED BY ANY COURT OF COMPETENT JURISDICTION TO PREVENT CONSUMMATION OF
THE DISTRIBUTION OR ANY OF THE OTHER TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT
OR ANY OF THE RELATED AGREEMENTS;

 

(B)                                 ALL NECESSARY REGULATORY APPROVALS AND
CONSENTS OF GOVERNMENTAL ENTITIES AND OTHER THIRD-PARTY PERSONS SHALL HAVE BEEN
RECEIVED, EXCEPT FOR ANY SUCH APPROVALS OR CONSENTS THE FAILURE OF WHICH TO
OBTAIN WOULD NOT HAVE A MATERIAL ADVERSE EFFECT ON THE BUSINESS, OPERATIONS OR
CONDITION (FINANCIAL OR OTHERWISE) OF EITHER PARENT OR SUBSIDIARY;

 

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(C)                                  THE PARENT BOARD SHALL NOT HAVE REASONABLY
DETERMINED IN GOOD FAITH THAT THE DISTRIBUTION WOULD NOT BE PERMITTED UNDER THE
DELAWARE GENERAL CORPORATION LAW;

 

(D)                                 THE MERGER SHALL HAVE BEEN CONSUMMATED; AND

 

(E)                                  SUBSIDIARY SHALL HAVE FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION (THE “SEC”) A REGISTRATION STATEMENT ON
FORM 10 FOR THE PURPOSE OF REGISTERING THE SUBSIDIARY COMMON STOCK UNDER THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED; AND AN INFORMATION STATEMENT
SATISFYING THE REQUIREMENTS OF SCHEDULE 14A OR SCHEDULE 14C OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, SHALL HAVE BEEN FILED WITH THE SEC AND MAILED
TO THE PARENT SHAREHOLDERS.

 

Parent shall use its best efforts, and shall cooperate with Subsidiary, to take,
or cause to be taken, all actions, and to do, or cause to be done, all things
necessary, appropriate or desirable to consummate and make effective, in the
most expeditious manner practicable, the Distribution and the other transactions
contemplated hereby, including without limitation the satisfaction of the
conditions set forth in this Section 4.03.

 

4.04                           The Distribution.  As of the Distribution
Effective Time, subject to the conditions set forth in this Agreement, Parent
shall deliver to Agent (as defined below), for the benefit of the Parent
Shareholders, a share certificate representing all of the outstanding shares of
Subsidiary Common Stock owned by Parent, which certificate shall be endorsed in
blank; and Parent shall instruct the Agent to distribute to each of the Parent
Shareholders, as soon as practicable after the Distribution Date, a certificate
(each a “Subsidiary Certificate”) representing one share of Subsidiary Common
Stock for each share of Parent Common Stock held by the Parent Shareholder. 
Subsidiary agrees to provide all Subsidiary Certificates that the Agent shall
require in order to effect the Distribution.  If the Distribution Record Date is
after the Merger Closing Date, Parent shall cause Subsidiary Certificates to be
distributed in respect of Parent Common Stock issued in the Merger that is held
of record by a Person who was a shareholder of Plains Energy immediately before
the Merger, or such shareholder’s successors or assigns (other than such
successors or assigns that have acquired such shares pursuant to a “broker’s
transaction” within the meaning of Section 4(4) of the Securities Act of 1933,
as amended, and Rule 144 promulgated thereunder) (each such holder, a “Plains
Energy Stockholder”), to bear a legend in substantially the following form:

 

The transferability of this certificate and the shares of Common Stock
represented by it are subject to the terms and conditions contained in a lock up
agreement between the registered owner and the Company.

 

Parent shall cause such legend to remain on any such Subsidiary Certificates so
long as the lock-up restrictions remain in place; and Parent agrees that it
shall not, without the prior written approval of the Subsidiary Board, amend the
lock-up agreements or waive or otherwise prematurely terminate the restrictions
thereunder.

 

“Agent” means Wells Fargo Bank, N.A., acting as distribution agent appointed by
Parent to distribute Subsidiary Common Stock to the Parent Shareholders pursuant
to the Distribution.

 

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4.05                           Adjustment of Parent Stock Options.  On and after
the Distribution Date, Parent shall remain obligated under all Parent Stock
Options it has granted; provided, however, that the Parent Stock Options
outstanding as of the Distribution Record Date shall be adjusted pursuant to
Section 9.03, as of the Distribution Effective Time, as part of the
Distribution.

 

4.06                           Redemption of Subsidiary Common Stock.  At any
time after the Distribution Effective Time:

 

(A)                                  SUBSIDIARY MAY REDEEM FOR CASH, AS OF THE
DISTRIBUTION EFFECTIVE TIME, ANY SHARES OF SUBSIDIARY COMMON STOCK THAT ARE
DISTRIBUTED IN THE DISTRIBUTION TO PLAINS ENERGY STOCKHOLDERS (AND THEIR
ASSIGNEES) WHO RECEIVED SHARES OF PARENT COMMON STOCK IN THE MERGER, OR
PURCHASED SHARES OF PARENT COMMON STOCK PURSUANT TO CONVERTED WARRANTS
PREVIOUSLY ISSUED BY PLAINS ENERGY; AND SUCH REDEMPTION SHALL BE COMPLETED AT A
PRICE OF $0.001 PER SHARE.

 

ARTICLE 5
SATISFACTION OF LIABILITIES

 

5.01                           Satisfaction of Liabilities.  From and after the
Distribution Date, (a) Subsidiary shall assume, pay, perform and discharge in
due course all of the Subsidiary Liabilities; and (b) Parent shall assume, pay,
perform and discharge in due course all of the Parent Liabilities.

 

5.02                           Assumption and Satisfaction of Unallocated
Contingent Liabilities.  From and after the Distribution Date, to the extent
that there is a Liability incurred by Parent or Subsidiary before the
Distribution Effective Time that is not recorded on the books and records of
either Parent or Subsidiary, is neither a Parent Liability nor a Subsidiary
Liability and cannot in good faith be allocated by the parties hereto as either
a Parent Liability or a Subsidiary Liability (all such Liabilities, “Unallocated
Contingent Liabilities”), then such Unallocated Contingent Liabilities shall be
allocated between Parent and Subsidiary on a pro rata basis in proportion to the
estimated fair market value of each party’s assets as of the Distribution
Effective Time; and shall be partially assumed, paid, performed and discharged
by each such party based upon such allocation; provided, however, that
Subsidiary’s share of any such Unallocated Contingent Liabilities shall be
limited to the extent required under Section 6.01.

 

ARTICLE 6
INDEMNIFICATION

 

6.01                           Indemnification by Subsidiary.  Subject to the
last paragraph of this Section 6.01, and Sections 6.03 and 6.07, Subsidiary
shall indemnify, defend and hold harmless (on an After-Tax Basis) Parent, Merger
Subsidiary (or its successor after the Merger), and each of the past or present
directors, officers, employees and agents, and each of the heirs, executors,
successors and assigns of any of the foregoing (the “Parent Indemnitees”), from
and against any and all Actions, threatened Actions, costs, damages, Liabilities
and expenses, including but not limited to reasonable attorneys’ fees, the
reasonable fees of other professionals and experts, and court or arbitration
costs (“Indemnifiable Losses” and, individually, an “Indemnifiable Loss”) that
are suffered or incurred by any of the Parent Indemnitees and that relate to or
arise from all or any of the following:

 

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(A)                                  ANY FAILURE OR ALLEGED FAILURE OF
SUBSIDIARY TO (I) PAY, PERFORM OR OTHERWISE DISCHARGE IN DUE COURSE ANY OF THE
SUBSIDIARY LIABILITIES; OR (II) COMPLY WITH THE PROVISIONS OF SECTION 2.08;

 

(B)                                 THE OPERATION OR OWNERSHIP OF THE SUBSIDIARY
ASSETS AFTER THE DISTRIBUTION DATE;

 

(C)                                  THE INDEMNIFICATION OBLIGATIONS OF PARENT
PURSUANT TO SECTION 9 OF THE PURCHASE AGREEMENT;

 

(D)                                 ANY ACTION OR THREATENED ACTION MADE OR
ASSERTED BY ANY PERSON (INCLUDING, WITHOUT LIMITATION, ANY GOVERNMENTAL ENTITY)
WHO IS NOT A PARTY TO THIS AGREEMENT, ANY OF THE RELATED AGREEMENTS OR THE
MERGER AGREEMENT, THAT RELATES TO OPERATION OR OWNERSHIP OF THE TRANSFERRED
ASSETS, OR RELATES TO ANY ACT OR OMISSION OF PARENT, IN EITHER CASE AT ANY TIME
ON OR BEFORE THE MERGER CLOSING DATE; OR

 

(E)                                  ANY TAX LIABILITY OF PARENT THAT IS
INDEMNIFIABLE BY SUBSIDIARY UNDER SECTION 10.13(B), BUT ONLY TO THE EXTENT SUCH
TAX LIABILITY IS ATTRIBUTABLE TO PARENT, SUBSIDIARY, MERGER SUBSIDIARY OR ANY
OTHER DIRECT OR INDIRECT SUBSIDIARY OF PARENT FOR ANY TAXABLE PERIOD (AS DEFINED
IN SECTION 10.01) ENDING ON OR BEFORE THE MERGER CLOSING DATE, AS SUCH TAX
LIABILITY IS DETERMINED PURSUANT TO THE PRINCIPLES SET FORTH IN SECTION 10.06.

 

Notwithstanding any contrary provision in this Agreement, Subsidiary shall not
be liable to the Parent Indemnitees for any amount of Indemnifiable Losses
arising from clauses (d) and (e) of the preceding paragraph, that exceeds
$2,500,000 in the aggregate (the “Indemnification Cap”); nor any such
Indemnifiable Loss for which none of the Parent Indemnitees has delivered to
Subsidiary, in the manner required under this Article 6, a written claim for
indemnification of such Indemnifiable Loss during the period beginning on the
Merger Closing Date and ending on the second anniversary of the Merger Closing
Date.  All claims for such indemnification for which proper notification of
Subsidiary shall have been made by a Parent Indemnitee before the close of
business on the last day of such two-year period shall continue to survive and
shall remain a basis for indemnity hereunder until such claim is finally
resolved or disposed of in accordance with the terms of this Agreement.

 

6.02                           Indemnification by Parent.  Subject to Sections
6.03 and 6.07, Parent shall indemnify, defend and hold harmless (on an After-Tax
Basis) Subsidiary, and each of its past or present directors, officers,
employees and agents, and each of the heirs, executors, successors and assigns
of any of the foregoing (the “Subsidiary Indemnitees”) from and against any and
all Indemnifiable Losses incurred or suffered by any of the Subsidiary
Indemnitees and arising from (a) any failure or alleged failure of Parent to
pay, perform or otherwise discharge in due course any of the Parent Liabilities;
(b) the operation or ownership of the Parent Assets after the Distribution Date;
or (b) any failure or alleged failure of Parent to comply with the provisions of
Section 2.08.

 

6.03                           Insurance Proceeds.  The amount which any party
(an “Indemnifying Party”) is or may be required to pay to any other Person (an
“Indemnified Person”) pursuant to Section 6.01 or Section 6.02 shall be reduced
(including, without limitation, retroactively) by any Insurance

 

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Proceeds (as defined in Section 8.01) or other amounts actually recovered by or
on behalf of such Indemnified Person in reduction of the related Indemnifiable
Loss.  Any such Insurance Proceeds or other amounts shall not, however, reduce
the amount of the Indemnifiable Loss solely for the purpose of calculating
whether and the extent to which aggregate Indemnifiable Losses exceed the
Indemnification Cap.  If an Indemnified Person has received a payment required
by this Agreement from an Indemnifying Party in respect of an Indemnifiable Loss
and later actually receives Insurance Proceeds, or other amounts in respect of
such Indemnifiable Loss as specified above, then such Indemnified Person shall
pay to such Indemnifying Party a sum equal to the amount of such Insurance
Proceeds or other amounts actually received.

 

6.04                           Procedure for Indemnification.

 

(A)                                  NOTICE OF THIRD-PARTY CLAIM.  IF AN
INDEMNIFIED PERSON SHALL RECEIVE WRITTEN NOTICE OF THE ASSERTION BY A PERSON
(INCLUDING, WITHOUT LIMITATION, ANY GOVERNMENTAL ENTITY) WHO IS NOT A PARTY TO
THIS AGREEMENT OR TO ANY OF THE RELATED AGREEMENTS OF ANY CLAIM OR OF THE
COMMENCEMENT BY ANY SUCH PERSON OF ANY ACTION WITH RESPECT TO WHICH AN
INDEMNIFYING PARTY MAY BE OBLIGATED TO PROVIDE INDEMNIFICATION PURSUANT TO THIS
AGREEMENT (A “THIRD-PARTY CLAIM”), SUCH INDEMNIFIED PERSON SHALL GIVE THE
INDEMNIFYING PARTY WRITTEN NOTICE THEREOF PROMPTLY AFTER BECOMING AWARE OF SUCH
THIRD-PARTY CLAIM; PROVIDED, HOWEVER, THAT THE FAILURE OF ANY INDEMNIFIED PERSON
TO GIVE NOTICE AS REQUIRED BY THIS SECTION 6.04 SHALL NOT RELIEVE THE
INDEMNIFYING PARTY OF ITS OBLIGATIONS UNDER THIS ARTICLE 6, EXCEPT TO THE EXTENT
THAT SUCH INDEMNIFYING PARTY IS MATERIALLY PREJUDICED BY SUCH FAILURE TO GIVE
NOTICE.  SUCH NOTICE SHALL DESCRIBE THE THIRD-PARTY CLAIM IN REASONABLE DETAIL,
AND SHALL INDICATE THE AMOUNT (ESTIMATED IF NECESSARY) OF THE INDEMNIFIABLE LOSS
THAT HAS BEEN CLAIMED AGAINST OR MAY BE SUSTAINED BY SUCH INDEMNIFIED PERSON.

 

(B)                                 NOTICE OF ELECTION TO DEFEND THIRD-PARTY
CLAIM.  WITHIN 15 DAYS AFTER THE RECEIPT OF NOTICE FROM AN INDEMNIFIED PERSON IN
ACCORDANCE WITH SECTION 6.04(A) (OR SOONER, IF THE NATURE OF SUCH THIRD-PARTY
CLAIM SO REQUIRES), THE INDEMNIFYING PARTY SHALL NOTIFY THE INDEMNIFIED PERSON
OF ITS ELECTION WHETHER TO ASSUME RESPONSIBILITY FOR SUCH THIRD-PARTY CLAIM
(PROVIDED THAT, IF THE INDEMNIFYING PARTY DOES NOT SO NOTIFY THE INDEMNIFIED
PERSON OF ITS ELECTION WITHIN 15 DAYS AFTER RECEIPT OF SUCH NOTICE FROM THE
INDEMNIFIED PERSON, THE INDEMNIFYING PARTY SHALL BE DEEMED TO HAVE ELECTED NOT
TO ASSUME RESPONSIBILITY FOR SUCH THIRD-PARTY CLAIM).  AN ELECTION NOT TO ASSUME
RESPONSIBILITY FOR SUCH THIRD-PARTY CLAIM MAY ONLY BE MADE IN THE EVENT OF A
GOOD FAITH DISPUTE THAT A THIRD-PARTY CLAIM IS NOT COVERED AS AN INDEMNIFIABLE
LOSS UNDER THE GROUNDS SPECIFIED IN SECTION 6.01 OR 6.02, AS THE CASE MAY BE. 
SUBJECT TO SECTION 6.04(E) , AN INDEMNIFYING PARTY MAY ELECT TO DEFEND OR TO
SEEK TO SETTLE OR COMPROMISE, AT SUCH INDEMNIFYING PARTY’S OWN EXPENSE AND BY
COUNSEL REASONABLY SATISFACTORY TO THE INDEMNIFIED PERSON, ANY THIRD-PARTY
CLAIM; PROVIDED, HOWEVER, THAT (I) THE INDEMNIFYING PARTY MUST CONFIRM IN
WRITING THAT IT AGREES THAT THE INDEMNIFIED PERSON IS ENTITLED TO
INDEMNIFICATION HEREUNDER IN RESPECT OF SUCH THIRD-PARTY CLAIM; AND (II) NO
COMPROMISE OR SETTLEMENT SHALL BE MADE WITHOUT THE PRIOR WRITTEN CONSENT OF THE
INDEMNIFIED PERSON, WHICH CONSENT SHALL NOT BE REASONABLY WITHHELD.

 

(C)                                  COOPERATION WITH INDEMNIFYING PARTY;
DEFENSE COSTS.  IN THE EVENT THAT THE INDEMNIFYING PARTY ELECTS TO ASSUME
RESPONSIBILITY FOR THE THIRD-PARTY CLAIM, PURSUANT TO SECTION 6.04(B) ABOVE,
(I) THE INDEMNIFIED PERSON SHALL COOPERATE IN GOOD FAITH IN THE DEFENSE OR
SETTLEMENT OR COMPROMISE OF SUCH THIRD-PARTY CLAIM, INCLUDING MAKING AVAILABLE
TO THE

 

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INDEMNIFYING PARTY ANY PERSONNEL AND ANY BOOKS, RECORDS OR OTHER DOCUMENTS
WITHIN THE INDEMNIFIED PERSON’S CONTROL OR WHICH IT OTHERWISE HAS THE ABILITY TO
MAKE AVAILABLE THAT ARE NECESSARY OR APPROPRIATE FOR THE DEFENSE OF THE
THIRD-PARTY CLAIM; (II) THE INDEMNIFYING PARTY SHALL KEEP THE INDEMNIFIED PERSON
REASONABLY INFORMED REGARDING THE STRATEGY, STATUS AND PROGRESS OF THE DEFENSE
OF THE THIRD-PARTY CLAIM; AND (III) THE INDEMNIFYING PARTY SHALL CONSIDER, IN
GOOD FAITH, THE OPINIONS AND SUGGESTIONS OF THE INDEMNIFIED PERSON WITH RESPECT
TO THE THIRD-PARTY CLAIM.

 

After notice from an Indemnifying Party to an Indemnified Person of its election
to assume responsibility for a Third-Party Claim, such Indemnifying Party shall
not be liable to such Indemnified Person under this Article 6 for any legal or
other costs or expenses (except costs or expenses approved in advance by the
Indemnifying Party) subsequently incurred by such Indemnified Person in
connection with the defense thereof; provided, however, that if the defendants
in any such claim include both the Indemnifying Party and one or more
Indemnified Persons, and in such Indemnified Persons’ reasonable judgment a
conflict of interest between such Indemnified Persons and such Indemnifying
Party exists in respect of such claim, such Indemnified Persons shall have the
right to employ separate counsel and in that event the reasonable fees and
expenses of such separate counsel (but not more than one separate counsel
reasonably satisfactory to the Indemnifying Party) shall be paid by such
Indemnifying Party.

 

(D)                                 PROCEDURE IF NO DEFENSE ELECTION IS MADE. 
IF AN INDEMNIFYING PARTY ELECTS NOT TO ASSUME RESPONSIBILITY FOR A THIRD-PARTY
CLAIM, THE INDEMNIFIED PERSON MAY DEFEND OR (SUBJECT TO THE FOLLOWING SENTENCE)
SEEK TO COMPROMISE OR SETTLE SUCH THIRD-PARTY CLAIM.  NOTWITHSTANDING THE
FOREGOING, AN INDEMNIFIED PERSON MAY NOT SETTLE OR COMPROMISE ANY CLAIM WITHOUT
PRIOR WRITTEN NOTICE TO THE INDEMNIFYING PARTY, WHICH SHALL HAVE THE OPTION
WITHIN TEN DAYS FOLLOWING THE RECEIPT OF SUCH NOTICE (I) TO DISAPPROVE THE
SETTLEMENT, AND TO THEN ASSUME ALL PAST AND FUTURE RESPONSIBILITY FOR THE CLAIM,
INCLUDING IMMEDIATELY REIMBURSING THE INDEMNIFIED PERSON FOR PRIOR EXPENDITURES
IN CONNECTION WITH THE CLAIM; (II) TO DISAPPROVE THE SETTLEMENT AND CONTINUE TO
REFRAIN FROM PARTICIPATION IN THE DEFENSE OF THE CLAIM, IN WHICH EVENT THE
INDEMNIFIED PERSON MAY, IN ITS SOLE DISCRETION, PROCEED WITH THE SETTLEMENT AND
THE INDEMNIFYING PARTY SHALL HAVE NO FURTHER RIGHT TO CONTEST THE AMOUNT OR
REASONABLENESS OF THE SETTLEMENT; (III) TO APPROVE AND PAY THE AMOUNT OF THE
SETTLEMENT, RESERVING THE INDEMNIFYING PARTY’S RIGHT TO CONTEST THE INDEMNIFIED
PERSON’S RIGHT TO INDEMNITY; OR (IV) TO APPROVE AND PAY THE SETTLEMENT.  IN THE
EVENT THE INDEMNIFYING PARTY MAKES NO RESPONSE TO SUCH WRITTEN NOTICE, THE
INDEMNIFYING PARTY SHALL BE DEEMED TO HAVE ELECTED OPTION (II).  WHEN THE
INDEMNIFYING PARTY CHOOSES OR IS DEEMED TO HAVE CHOSEN OPTION (II) OR (III), THE
ISSUE OF WHETHER THE INDEMNIFIED PERSON HAS A RIGHT TO INDEMNITY UNDER THIS
ARTICLE 6 SHALL BE RESOLVED BY ARBITRATION PURSUANT TO THE PROVISIONS OF
SECTION 11.14.  IF THE INDEMNIFYING PARTY DOES NOT PREVAIL IN SUCH ARBITRATION,
THE INDEMNIFYING PARTY SHALL PROMPTLY REIMBURSE THE INDEMNIFIED PERSON FOR ALL
INDEMNIFIABLE LOSSES, PLUS INTEREST ON SUCH AMOUNTS AT THE LOWER OF (I) 10% OR
(II) THE HIGHEST LEGAL INTEREST RATE, ACCRUING FROM THE DATE OF PAYMENT BY THE
INDEMNIFIED PERSON.

 

(E)                                  PROCEDURE IF DEFENSE ELECTION IS NOT
EFFECTIVE.  NOTWITHSTANDING THE FOREGOING, IF AN INDEMNIFIED PERSON REASONABLY
AND IN GOOD FAITH DETERMINES THAT (I) THE INDEMNIFYING PARTY IS NOT FINANCIALLY
CAPABLE TO DEFEND A THIRD-PARTY CLAIM AND TO PROVIDE FULL INDEMNIFICATION WITH
RESPECT TO ANY SETTLEMENT THEREOF, OR (II) THE INDEMNIFYING PARTY OR SUCH
INDEMNIFYING PARTY’S ATTORNEY IS NOT ADEQUATELY REPRESENTING THE INDEMNIFIED
PERSON’S INTERESTS

 

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WITH RESPECT TO SUCH THIRD-PARTY CLAIM, THE INDEMNIFIED PERSON MAY, BY NOTICE TO
THE INDEMNIFYING PARTY, ASSUME THE EXCLUSIVE RIGHT TO DEFEND, COMPROMISE OR
SETTLE SUCH THIRD-PARTY CLAIM AND THE INDEMNIFYING PARTY SHALL REMAIN
RESPONSIBLE FOR, AND BE BOUND BY THE RESOLUTION OF, SUCH THIRD-PARTY CLAIM.

 

(F)                                    REPAYMENT OF EXCESS INDEMNIFICATION.  IN
ADDITION TO ANY ADJUSTMENTS REQUIRED PURSUANT TO SECTION 6.03, IF THE AMOUNT OF
ANY INDEMNIFIABLE LOSS SHALL, AT ANY TIME SUBSEQUENT TO THE PAYMENT REQUIRED BY
THIS AGREEMENT, BE REDUCED BY RECOVERY, SETTLEMENT OR OTHERWISE, THE AMOUNT OF
SUCH REDUCTION, LESS ANY EXPENSES INCURRED IN CONNECTION THEREWITH, SHALL
PROMPTLY BE REPAID BY THE INDEMNIFIED PERSON TO THE INDEMNIFYING PARTY.

 

(G)                                 SUBROGATION RIGHTS.  IN THE EVENT OF PAYMENT
BY AN INDEMNIFYING PARTY TO ANY INDEMNIFIED PERSON IN CONNECTION WITH ANY
THIRD-PARTY CLAIM, SUCH INDEMNIFYING PARTY SHALL BE SUBROGATED TO AND SHALL
STAND IN THE PLACE OF SUCH INDEMNIFIED PERSON AS TO ANY EVENTS OR CIRCUMSTANCES
IN RESPECT OF WHICH SUCH INDEMNIFIED PERSON MAY HAVE ANY RIGHT OR CLAIM RELATING
TO SUCH THIRD-PARTY CLAIM AGAINST ANY CLAIMANT OR PLAINTIFF ASSERTING SUCH
THIRD-PARTY CLAIM OR AGAINST ANY OTHER PARTY THAT MAY BE LIABLE.  SUCH
INDEMNIFIED PERSON SHALL COOPERATE WITH SUCH INDEMNIFYING PARTY IN GOOD FAITH
AND IN A REASONABLE MANNER, AND AT THE COST AND EXPENSE OF SUCH INDEMNIFYING
PARTY, IN PROSECUTING ANY SUBROGATED RIGHT OR CLAIM.

 

6.05                           Remedies Cumulative.  Claims for indemnification,
compensation and reimbursement brought in accordance with and subject to this
Article 6 shall be the sole and exclusive remedy of any Parent Indemnitee for
monetary damages from and after the Distribution Date with respect to breaches
of this Agreement by Subsidiary.  Without limiting the generality of the
foregoing, nothing contained in this Agreement shall limit the rights of any
Indemnified Person to seek or obtain injunctive relief or any other equitable
remedy to which such Indemnified Person is otherwise entitled.

 

6.06                           Survival of Indemnities.  Except to the extent
otherwise provided in the last paragraph of Section 6.01, the obligations of
each of Subsidiary and Parent under this Article 6 shall survive the sale or
other transfer by it of any assets or business or the assignment by it of any
Liabilities, with respect to any Indemnifiable Loss of the other related to such
assets, business or Liabilities.

 

6.07                           Coordination with Tax Allocation and Indemnity
Provisions.

 

(A)                                  EXCEPT AS EXPRESSLY PROVIDED IN
SECTION 6.01 AND THIS SECTION 6.07, THIS ARTICLE 6 SHALL NOT GOVERN ANY TAX
MATTER, AND ANY AND ALL ACTIONS, LOSSES, DAMAGES, COSTS, EXPENSES, LIABILITIES,
REFUNDS, DEDUCTIONS, WRITE-OFFS, OR BENEFITS RELATING TO TAXES SHALL BE
EXCLUSIVELY GOVERNED BY ARTICLE 10.

 

(B)                                 IF, AT THE TIME SUBSIDIARY IS REQUIRED TO
MAKE ANY PAYMENT TO PARENT UNDER THIS ARTICLE 6, PARENT OWES SUBSIDIARY ANY
AMOUNT UNDER ARTICLE 10, THEN SUCH AMOUNTS SHALL BE OFFSET AND THE EXCESS SHALL
BE PAID BY THE PARTY LIABLE FOR SUCH EXCESS.  SIMILARLY, IF, AT THE TIME PARENT
IS REQUIRED TO MAKE ANY PAYMENT TO SUBSIDIARY UNDER THIS ARTICLE 6, SUBSIDIARY
OWES PARENT ANY AMOUNT UNDER ARTICLE 10, THEN SUCH AMOUNTS SHALL BE OFFSET AND
THE EXCESS SHALL BE PAID BY THE PARTY LIABLE FOR SUCH EXCESS.

 

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ARTICLE 7
ACCESS TO INFORMATION AND SERVICES

 

7.01                           Provision of Corporate Records.

 

(A)                                  SUBSIDIARY BOOKS AND RECORDS.  EXCEPT AS
OTHERWISE PROVIDED IN A RELATED AGREEMENT, PARENT SHALL DELIVER, ON OR AS SOON
AS PRACTICABLE AFTER THE DISTRIBUTION DATE, TO THE EXTENT NOT PREVIOUSLY
DELIVERED IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED IN ARTICLE 2, TO
SUBSIDIARY (AT PARENT’S COST) ALL OF THE SUBSIDIARY BOOKS AND RECORDS IN
PARENT’S POSSESSION, EXCEPT TO THE EXTENT SUCH ITEMS ARE ALREADY IN THE
POSSESSION OF SUBSIDIARY.  THE SUBSIDIARY BOOKS AND RECORDS SHALL BE THE
PROPERTY OF SUBSIDIARY, BUT THE SUBSIDIARY BOOKS AND RECORDS THAT REASONABLY
RELATE TO PARENT OR THE TRANSFERRED ASSETS SHALL BE AVAILABLE TO PARENT FOR
REVIEW AND DUPLICATION UNTIL PARENT SHALL NOTIFY SUBSIDIARY IN WRITING THAT SUCH
RECORDS ARE NO LONGER OF USE TO PARENT.

 

(B)                                 PARENT BOOKS AND RECORDS.  EXCEPT AS
OTHERWISE PROVIDED IN A RELATED AGREEMENT, SUBSIDIARY SHALL DELIVER, ON OR AS
SOON AS PRACTICABLE AFTER THE DISTRIBUTION DATE, TO THE EXTENT NOT PREVIOUSLY
DELIVERED IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED IN ARTICLE 2, TO
PARENT (AT PARENT’S COST) ALL OF THE PARENT BOOKS AND RECORDS IN SUBSIDIARY’S
POSSESSION, EXCEPT TO THE EXTENT SUCH ITEMS ARE ALREADY IN THE POSSESSION OF
PARENT.  THE PARENT BOOKS AND RECORDS SHALL BE THE PROPERTY OF PARENT, BUT THE
PARENT BOOKS AND RECORDS THAT REASONABLY RELATE TO SUBSIDIARY OR THE TRANSFERRED
ASSETS SHALL BE AVAILABLE TO SUBSIDIARY FOR REVIEW AND DUPLICATION UNTIL
SUBSIDIARY SHALL NOTIFY PARENT IN WRITING THAT SUCH RECORDS ARE NO LONGER OF USE
TO SUBSIDIARY.

 

7.02                           Access to Information.  Except as otherwise
provided in a Related Agreement, from and after the Distribution Date, Parent
shall afford to Subsidiary and its authorized accountants, counsel and other
designated representatives reasonable access (including using reasonable efforts
to give access to individuals and other Persons possessing information) and
duplicating rights during normal business hours, with respect to all records,
books, contracts, instruments, computer data and other data and information
relating to pre-Distribution operations (collectively, “Information”) within
Parent’s possession or control, insofar as such access is reasonably required by
Subsidiary for the conduct of its business, subject to appropriate restrictions
for classified or Privileged Information, as defined in Section 7.07(a).

 

Similarly, except as otherwise provided in a Related Agreement, Subsidiary shall
afford to Parent and its authorized accountants, counsel and other designated
representatives reasonable access (including using reasonable efforts to give
access to individuals and other Persons possessing information) and duplicating
rights during normal business hours, with respect to Information within
Subsidiary’s possession or control, insofar as such access is reasonably
required by Parent for the conduct of its business, subject to appropriate
restrictions for classified or Privileged Information.  Information may be
requested under this Article 7 for the legitimate business purposes of either
party, including without limitation, audit, accounting, claims (including claims
for indemnification hereunder), litigation and Tax purposes, as well as for
purposes of fulfilling disclosure and reporting obligations and for performing
this Agreement and the transactions contemplated hereby.

 

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7.03                           Production of Witnesses.  At all times from and
after the Distribution Date, each of Subsidiary and Parent shall use reasonable
efforts to make available to the other, upon written request, its and its
subsidiaries’ present and past officers, directors, employees and agents as
witnesses to the extent that such Persons may reasonably be required in
connection with any Action.

 

7.04                           Reimbursement.  Except as otherwise provided in
any Related Agreement, a party providing Information or witnesses to the other
party under this Article 7 shall be entitled to receive from the recipient, upon
the presentation of invoices therefor, payments of such amounts, relating to
supplies, disbursements and other out-of-pocket expenses (at cost) of employees
who are witnesses or otherwise furnish assistance (at cost), as may be
reasonably incurred in providing such Information or witnesses.  Notwithstanding
the foregoing, the parties acknowledge that a party providing Information or
witnesses shall not be entitled to receive reimbursement of salary or other
compensation expenses relating to any employees providing such Information or
acting as such witnesses.

 

7.05                           Retention of Records.  Except as otherwise
required by applicable law or a Related Agreement (or otherwise agreed in
writing), each of Subsidiary and Parent may destroy or otherwise dispose of any
of the Information that is material Information and is not contained in other
Information retained by the other, only after the later to occur of (a) all
applicable statutes of limitations (including any waivers or extensions thereof)
with respect to Tax Returns which Parent or Subsidiary, as the case may be, may
be obligated to file on behalf of any member of the Subsidiary Group or any
member of the Pre-Distribution Group or the Post-Distribution Parent Group (each
as defined in Section 10.01), as the case may be; and (b) any retention period
required by applicable law or pursuant to any record retention agreement,
provided, however, that before such destruction or disposal, (x) it shall
provide no less than 90 or more than 120 days advance written notice to the
other, specifying in reasonable detail the Information proposed to be destroyed
or disposed of and (y) if a recipient of such notice shall request in writing
before the scheduled date for such destruction or disposal that any of the
Information proposed to be destroyed or disposed of be delivered to such
requesting party, the party proposing the destruction or disposal shall promptly
arrange for the delivery of such of the Information as was requested at the
expense of the party requesting such Information.

 

7.06                           Confidentiality.  Each of Parent and its
subsidiaries on the one hand, and Subsidiary and its subsidiaries on the other
hand, shall hold, and shall cause its consultants and advisors to hold, in
strict confidence, all Information concerning the other in its possession or
furnished by the other or the other’s representatives pursuant to this Agreement
(except to the extent that such Information has been (i) in the public domain
through no fault of such party; or (ii) later lawfully acquired from other
sources by such party), and each party shall not release or disclose such
Information to any other Person, except its auditors, attorneys, financial
advisors, rating agencies, bankers and other consultants and advisors, unless
compelled to disclose by judicial or administrative process or, as reasonably
advised by its counsel, by other requirements of law, or unless such Information
is reasonably required to be disclosed in connection with (x) any litigation
with any third-parties or litigation between Parent and Subsidiary, (y) any
contractual agreement to which members of Parent or Subsidiary are currently
parties, or (z) in exercise of either party’s rights hereunder.

 

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7.07                           Privileged Matters.  Subsidiary and Parent
recognize that certain legal and other professional services, that have been and
will be provided before the Distribution Effective Time, have been and will be
rendered for the benefit of both Parent and Subsidiary; and that both Parent and
the Subsidiary should be deemed to be the client for the purposes of asserting
all Privileges with respect to such services.  To allocate the interests of each
party in the Privileged Information, the parties agree as follows:

 

(A)                                  DEFINITIONS.

 

“Privileged Information” means all information as to which Parent or Subsidiary
is entitled to assert the protection of a Privilege.

 

“Privileges” shall mean all privileges that may be asserted under applicable law
including, without limitation, privileges arising under or relating to the
attorney-client relationship (including but not limited to the attorney-client
and work product privileges), the accountant-client privilege, and privileges
relating to internal evaluative processes.

 

(B)                                 PARENT SHALL BE ENTITLED, IN PERPETUITY, TO
CONTROL THE ASSERTION OR WAIVER OF ALL PRIVILEGES IN CONNECTION WITH PRIVILEGED
INFORMATION THAT RELATES SOLELY TO PARENT, WHETHER OR NOT THE PRIVILEGED
INFORMATION IS IN THE POSSESSION OF OR UNDER THE CONTROL OF PARENT OR
SUBSIDIARY.  PARENT SHALL ALSO BE ENTITLED, IN PERPETUITY, TO CONTROL THE
ASSERTION OR WAIVER OF ALL PRIVILEGES IN CONNECTION WITH PRIVILEGED INFORMATION
THAT RELATES SOLELY TO THE SUBJECT MATTER OF ANY CLAIMS CONSTITUTING PARENT
LIABILITIES, NOW PENDING OR WHICH MAY BE ASSERTED IN THE FUTURE, IN ANY ACTIONS
INITIATED AGAINST OR BY PARENT, WHETHER OR NOT THE PRIVILEGED INFORMATION IS IN
THE POSSESSION OF OR UNDER THE CONTROL OF PARENT OR SUBSIDIARY.

 

(C)                                  SUBSIDIARY SHALL BE ENTITLED, IN
PERPETUITY, TO CONTROL THE ASSERTION OR WAIVER OF ALL PRIVILEGES IN CONNECTION
WITH PRIVILEGED INFORMATION THAT RELATES SOLELY TO THE SUBSIDIARY, WHETHER OR
NOT THE PRIVILEGED INFORMATION IS IN THE POSSESSION OF OR UNDER THE CONTROL OF
PARENT OR SUBSIDIARY.  SUBSIDIARY SHALL ALSO BE ENTITLED, IN PERPETUITY, TO
CONTROL THE ASSERTION OR WAIVER OF ALL PRIVILEGES IN CONNECTION WITH PRIVILEGED
INFORMATION WHICH RELATES SOLELY TO THE SUBJECT MATTER OF ANY CLAIMS
CONSTITUTING SUBSIDIARY LIABILITIES, NOW PENDING OR WHICH MAY BE ASSERTED IN THE
FUTURE, IN ANY ACTIONS INITIATED AGAINST OR BY SUBSIDIARY, WHETHER OR NOT THE
PRIVILEGED INFORMATION IS IN THE POSSESSION OF OR UNDER THE CONTROL OF PARENT OR
SUBSIDIARY.

 

(D)                                 SUBSIDIARY AND PARENT AGREE THAT THEY SHALL
HAVE A SHARED PRIVILEGE, WITH EQUAL RIGHT TO ASSERT OR WAIVE, SUBJECT TO THE
RESTRICTIONS IN THIS SECTION 7.07, WITH RESPECT TO ALL PRIVILEGES NOT ALLOCATED
PURSUANT TO THE TERMS OF SECTIONS 7.07(A) AND (B).  ALL PRIVILEGES RELATING TO
ANY ACTIONS OR OTHER MATTERS WHICH INVOLVE BOTH SUBSIDIARY AND PARENT, OR IN
RESPECT OF WHICH BOTH SUBSIDIARY AND PARENT RETAIN ANY RESPONSIBILITY OR
LIABILITY UNDER THIS AGREEMENT, SHALL BE SUBJECT TO A SHARED PRIVILEGE.

 

(E)                                  NO PARTY MAY WAIVE ANY PRIVILEGE THAT COULD
BE ASSERTED UNDER ANY APPLICABLE LAW, AND IN WHICH THE OTHER PARTY HAS A SHARED
PRIVILEGE, WITHOUT THE CONSENT OF THE OTHER PARTY, EXCEPT TO THE EXTENT
REASONABLY REQUIRED IN CONNECTION WITH ANY LITIGATION WITH THIRD-PARTIES OR AS
PROVIDED IN SUBSECTION (E) BELOW.  ANY SUCH CONSENT SHALL BE IN WRITING, OR
SHALL BE

 

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DEEMED TO BE GRANTED UNLESS WRITTEN OBJECTION IS MADE WITHIN TWENTY (20) DAYS
AFTER WRITTEN NOTICE UPON THE OTHER PARTY REQUESTING SUCH CONSENT.

 

(F)                                    IN THE EVENT OF ANY LITIGATION OR DISPUTE
BETWEEN PARENT AND SUBSIDIARY, EITHER PARTY MAY WAIVE A PRIVILEGE IN WHICH THE
OTHER PARTY HAS A SHARED PRIVILEGE, WITHOUT OBTAINING THE CONSENT OF THE OTHER
PARTY, PROVIDED THAT SUCH WAIVER OF A SHARED PRIVILEGE SHALL BE EFFECTIVE ONLY
AS TO THE USE OF INFORMATION WITH RESPECT TO THE LITIGATION OR DISPUTE BETWEEN
PARENT AND SUBSIDIARY, AND SHALL NOT OPERATE AS A WAIVER OF THE SHARED PRIVILEGE
WITH RESPECT TO THIRD-PARTIES.

 

(G)                                 IF A DISPUTE ARISES BETWEEN THE PARTIES
REGARDING WHETHER A PRIVILEGE SHOULD BE WAIVED TO PROTECT OR ADVANCE THE
INTEREST OF EITHER PARTY, EACH PARTY AGREES THAT IT SHALL NEGOTIATE IN GOOD
FAITH, SHALL ENDEAVOR TO MINIMIZE ANY PREJUDICE TO THE RIGHTS OF THE OTHER
PARTY, AND SHALL NOT UNREASONABLY WITHHOLD CONSENT TO ANY REQUEST FOR WAIVER BY
THE OTHER PARTY.  EACH PARTY SPECIFICALLY AGREES THAT IT WILL NOT WITHHOLD
CONSENT TO WAIVER FOR ANY PURPOSE EXCEPT TO PROTECT ITS OWN LEGITIMATE
INTERESTS.

 

(H)                                 UPON RECEIPT BY ANY PARTY OF ANY SUBPOENA,
DISCOVERY OR OTHER REQUEST WHICH ARGUABLY CALLS FOR THE PRODUCTION OR DISCLOSURE
OF INFORMATION SUBJECT TO A SHARED PRIVILEGE OR AS TO WHICH THE OTHER PARTY HAS
THE SOLE RIGHT HEREUNDER TO ASSERT A PRIVILEGE, OR IF ANY PARTY OBTAINS
KNOWLEDGE THAT ANY OF ITS CURRENT OR FORMER DIRECTORS, OFFICERS, AGENTS OR
EMPLOYEES HAS RECEIVED ANY SUBPOENA, DISCOVERY OR OTHER REQUEST THAT ARGUABLY
CALLS FOR THE PRODUCTION OR DISCLOSURE OF SUCH PRIVILEGED INFORMATION, SUCH
PARTY SHALL PROMPTLY NOTIFY THE OTHER PARTY OF THE EXISTENCE OF THE REQUEST AND
SHALL PROVIDE THE OTHER PARTY A REASONABLE OPPORTUNITY TO REVIEW THE INFORMATION
AND TO ASSERT ANY RIGHTS IT MAY HAVE UNDER THIS SECTION 7.07 OR OTHERWISE TO
PREVENT THE PRODUCTION OR DISCLOSURE OF SUCH PRIVILEGED INFORMATION.

 

(I)                                     THE TRANSFER OF THE SUBSIDIARY BOOKS AND
RECORDS AND THE PARENT BOOKS AND RECORDS AND OTHER INFORMATION BETWEEN PARENT
AND ITS SUBSIDIARIES AND SUBSIDIARY AND ITS SUBSIDIARIES IS MADE IN RELIANCE ON
THE AGREEMENT OF SUBSIDIARY AND PARENT, AS SET FORTH IN SECTIONS 7.06 AND 7.07,
TO MAINTAIN THE CONFIDENTIALITY OF PRIVILEGED INFORMATION AND TO ASSERT AND
MAINTAIN ALL APPLICABLE PRIVILEGES.  THE ACCESS TO INFORMATION BEING GRANTED
PURSUANT TO SECTIONS 7.01 AND 7.02, THE AGREEMENT TO PROVIDE WITNESSES AND
INDIVIDUALS PURSUANT TO SECTION 7.03, AND THE TRANSFER OF PRIVILEGED INFORMATION
BETWEEN PARENT AND ITS SUBSIDIARIES AND SUBSIDIARY AND ITS SUBSIDIARIES PURSUANT
TO THIS AGREEMENT SHALL NOT BE DEEMED A WAIVER OF ANY PRIVILEGE THAT HAS BEEN OR
MAY BE ASSERTED UNDER THIS AGREEMENT OR OTHERWISE.

 

ARTICLE 8
INSURANCE

 

8.01                           Definitions.  For purposes of this Article 8, the
following terms shall have the meanings set forth below:

 

“Insurance Administration” means, with respect to each Policy, this term shall
include, but not be limited to, the accounting for premiums, retrospectively
rated premiums, defense costs, adjuster’s fees, indemnity payments, deductibles
and retentions as appropriate under the terms and conditions of each of the
Policies; and the reporting to primary and excess insurance

 

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carriers of any losses, claims and/or audit exposure in accordance with Policy
provisions, and the distribution of Insurance Proceeds as contemplated by this
Agreement.

 

“Insured Claims” shall mean the property losses or Liabilities that,
individually or in the aggregate, are covered within the terms and conditions of
any of the Policies, whether or not subject to deductibles, co-insurance,
uncollectibility or retrospectively rated premium adjustments, but only to the
extent that such property losses or Liabilities are within applicable Policy
limits, including aggregates.

 

“Insurance Proceeds” shall mean those moneys (i) received by an insured from an
insurance carrier; or (ii) paid by an insurance carrier on behalf of the
insured, in either case net of any applicable premium adjustment,
retrospectively rated premium, deductible, retention, cost or reserve paid or
held by or for the benefit of such insured.

 

“Pre-Distribution Policies” shall mean insurance policies and insurance
contracts of any kind relating to the Transferred Assets, the Assumed
Liabilities or the Subsidiary Individuals for any period before the Distribution
Effective Time, including without limitation (a) comprehensive general,
automobile, aircraft, employment, workers’ compensation, directors’ and
officers’ and umbrella liability policies; (b) the Multi-Media Tail liability
insurance coverage with Chartis Inc.; (c) property and crime insurance policies;
and (d) primary and excess policies included in clause (a), (b) or (c), in each
case together with the rights and benefits thereunder.

 

“Shared Policies” shall mean all Pre-Distribution Policies, current or past,
that are owned or maintained by or on behalf of Parent and/or any of its
subsidiaries or their respective predecessors; and insure Parent, Subsidiary or
the Transferred Assets, or any combination thereof.

 

8.02                           Policies and Rights Included within the
Subsidiary Assets.  Without limiting the generality of the definition of the
Subsidiary Assets or the effect of Section 2.01, the Subsidiary Assets shall
include any and all rights of Subsidiary as an insured party under each of the
Shared Policies, specifically including rights of indemnity and the right to be
defended by or at the expense of the insurer, where applicable, with respect to
all Insured Claims and other injuries, losses, Liabilities, damages and expenses
incurred or claimed to have been incurred (a) at or before the Distribution
Effective Time by any Person or (b) in connection with the ownership or
operation of the Transferred Assets before or after the Distribution; and which
Insured Claims or other injuries, losses, Liabilities, damages and expenses may
arise out of insured or insurable occurrences or events under one or more of the
Shared Policies.

 

8.03                           Policies and Rights Included within the Parent
Assets.  Without limiting the generality of the definition of the Parent Assets
or the effect of Section 2.01, the Parent Assets shall include any and all
rights of Parent as an insured party under each of the Shared Policies,
specifically including rights of indemnity and the right to be defended by or at
the expense of the insurer, where applicable, with respect to all Insured Claims
and other injuries, losses, Liabilities, damages and expenses incurred or
claimed to have been incurred (a) at or before the Distribution Effective Time
by any Person or (b) in connection with the ownership or operation of the
Transferred Assets before or after the Distribution, and which injuries, losses,
Liabilities,

 

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damages and expenses may arise out of insured or insurable occurrences or events
under one or more of the Shared Policies.

 

8.04                           Shared Policy Insurance Administration, Reserves
and Premiums.

 

(A)                                  GENERAL.  NOTWITHSTANDING THE PROVISIONS OF
ARTICLE 6, BUT SUBJECT TO ANY CONTRARY PROVISIONS OF ANY RELATED AGREEMENT, FROM
AND AFTER THE DISTRIBUTION DATE:

 

(I)                                     SUBSIDIARY SHALL BE RESPONSIBLE FOR THE
INSURANCE ADMINISTRATION OF THE SHARED POLICIES (OTHER THAN ANY SHARED POLICIES
PROVIDING INSURANCE AGAINST EMPLOYMENT, WORKERS’ COMPENSATION OR DIRECTORS’ AND
OFFICERS’ LIABILITY); PROVIDED, HOWEVER, THAT (A) SUBSIDIARY SHALL NOT TAKE ANY
ACTION TO REMOVE PARENT OR PLAINS ENERGY (AS SUCCESSOR TO MERGER SUBSIDIARY) AS
AN INSURED OR ADDITIONAL INSURED UNDER THE SHARED POLICIES ADMINISTERED BY
SUBSIDIARY, UNTIL SUCH TIME AS ANY RENEWAL OR REPLACEMENT SHARED POLICY NO
LONGER PROVIDES COVERAGE FOR ANY PERIOD BEFORE THE DISTRIBUTION EFFECTIVE TIME;
AND (B) THE ADMINISTRATION OF SUCH SHARED POLICIES BY SUBSIDIARY IS IN NO WAY
INTENDED TO LIMIT, INHIBIT OR PRECLUDE ANY RIGHT TO INSURANCE COVERAGE FOR ANY
INSURED CLAIM OF A NAMED INSURED UNDER THE SHARED POLICIES INCLUDING, BUT NOT
LIMITED TO, PARENT OR PLAINS ENERGY (AS SUCCESSOR TO MERGER SUBSIDIARY);

 

(II)                                  PARENT SHALL BE RESPONSIBLE FOR THE
INSURANCE ADMINISTRATION OF THE SHARED POLICIES PROVIDING INSURANCE AGAINST
EMPLOYMENT, WORKERS’ COMPENSATION AND DIRECTORS’ AND OFFICERS’ LIABILITY;
PROVIDED, HOWEVER, THAT (A) PARENT SHALL NOT TAKE ANY ACTION TO REMOVE
SUBSIDIARY AS AN INSURED OR ADDITIONAL INSURED UNDER THE SHARED POLICIES
ADMINISTERED BY PARENT, UNTIL SUCH TIME AS ANY RENEWAL OR REPLACEMENT SHARED
POLICY NO LONGER PROVIDES COVERAGE FOR ANY PERIOD BEFORE THE DISTRIBUTION
EFFECTIVE TIME; AND (B) THE ADMINISTRATION OF SUCH SHARED POLICIES BY PARENT IS
IN NO WAY INTENDED TO LIMIT, INHIBIT OR PRECLUDE ANY RIGHT TO INSURANCE COVERAGE
FOR ANY INSURED CLAIM OF A NAMED INSURED UNDER SUCH SHARED POLICIES INCLUDING,
BUT NOT LIMITED TO, SUBSIDIARY;

 

(III)                               SUBSIDIARY SHALL BE ENTITLED TO THE BENEFIT
OF RESERVES HELD BY ANY INSURANCE CARRIER, WITH RESPECT TO THE SUBSIDIARY
LIABILITIES; AND

 

(IV)                              PARENT SHALL BE ENTITLED TO THE BENEFIT OF
RESERVES HELD BY ANY INSURANCE CARRIER, WITH RESPECT TO THE PARENT LIABILITIES.

 

(B)                                 SHARED POLICY INSURANCE PREMIUMS.

 

(I)                                     SUBSIDIARY SHALL PAY THE PREMIUMS WITH
RESPECT TO THE SHARES POLICIES FOR WHICH SUBSIDIARY IS RESPONSIBLE FOR INSURANCE
ADMINISTRATION UNDER THE PRECEDING SUBSECTION (A).  TO THE EXTENT THAT
SUBSIDIARY PAYS PREMIUMS FOR PARENT LIABILITIES (RETROSPECTIVELY-RATED OR
OTHERWISE), WITH RESPECT TO SHARED POLICIES AS REQUIRED UNDER THE TERMS AND
CONDITIONS OF THE RESPECTIVE POLICIES, PARENT SHALL UPON THE WRITTEN REQUEST OF
SUBSIDIARY FORTHWITH REIMBURSE SUBSIDIARY FOR THAT PORTION OF SUCH PREMIUMS PAID
BY SUBSIDIARY AS IS ATTRIBUTABLE TO PARENT LIABILITIES.

 

(II)                                  PARENT SHALL PAY THE PREMIUMS WITH RESPECT
TO THE SHARED POLICIES FOR WHICH PARENT IS RESPONSIBLE FOR INSURANCE
ADMINISTRATION UNDER THE PRECEDING SUBSECTION (A). TO THE EXTENT THAT PARENT
PAYS PREMIUMS FOR SUBSIDIARY LIABILITIES (RETROSPECTIVELY-RATED OR

 

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OTHERWISE), WITH RESPECT TO SHARED POLICIES AS REQUIRED UNDER THE TERMS AND
CONDITIONS OF THE RESPECTIVE POLICIES, SUBSIDIARY SHALL UPON THE WRITTEN REQUEST
OF PARENT FORTHWITH REIMBURSE PARENT FOR THAT PORTION OF SUCH PREMIUMS PAID BY
PARENT AS ARE ATTRIBUTABLE TO SUBSIDIARY LIABILITIES.

 

(C)                                  ALLOCATION OF INSURANCE PROCEEDS. 
INSURANCE PROCEEDS RECEIVED WITH RESPECT TO CLAIMS, COSTS AND EXPENSES UNDER THE
POLICIES SHALL BE PAID TO SUBSIDIARY WITH RESPECT TO THE SUBSIDIARY LIABILITIES,
AND TO PARENT WITH RESPECT TO THE PARENT LIABILITIES.  PAYMENT OF THE ALLOCABLE
PORTIONS OF INDEMNITY COSTS OF INSURANCE PROCEEDS RESULTING FROM THE LIABILITY
POLICIES WILL BE MADE TO THE APPROPRIATE PARTY UPON RECEIPT FROM THE INSURANCE
CARRIER.  IN THE EVENT THAT THE AGGREGATE LIMITS ON ANY POLICIES ARE EXCEEDED,
THE PARTIES AGREE TO PROVIDE AN EQUITABLE ALLOCATION OF INSURANCE PROCEEDS
RECEIVED AFTER THE DISTRIBUTION DATE BASED UPON THEIR RESPECTIVE BONA FIDE
CLAIMS TAKING INTO ACCOUNT THEIR RELATIVE CONTRIBUTIONS TOWARDS PREMIUMS AND THE
INSURANCE PROCEEDS USED BY EACH PARTY TO SATISFY INSURED CLAIMS.  THE PARTIES
AGREE TO USE THEIR REASONABLE BEST EFFORTS TO COOPERATE IN GOOD FAITH WITH
RESPECT TO INSURANCE MATTERS.

 

(D)                                 SHARED POLICY INSURANCE CHARGES.

 

(I)                                     SUBJECT TO THE LAST PARAGRAPH OF
SECTION 6.01, SUBSIDIARY ASSUMES RESPONSIBILITY FOR AND SHALL PAY TO THE
APPROPRIATE INSURANCE CARRIERS OR OTHERWISE ANY PREMIUMS, RETROSPECTIVELY RATED
PREMIUMS, DEFENSE COSTS, INDEMNITY PAYMENTS, DEDUCTIBLES, RETENTIONS OR OTHER
CHARGES AS APPROPRIATE (COLLECTIVELY “INSURANCE CHARGES”), WHENEVER ARISING,
THAT BECOME DUE AND PAYABLE UPON THE TERMS AND CONDITIONS OF ANY APPLICABLE
POLICY IN RESPECT OF ANY INSURED CLAIMS AGAINST SUBSIDIARY FOR CHARGES THAT
RELATE TO THE PERIOD BEFORE THE DISTRIBUTION EFFECTIVE TIME.  IF SUBSIDIARY
FAILS TO PAY ANY SUCH INSURANCE CHARGES WHEN DUE AND PAYABLE, WHETHER AT THE
REQUEST OF THE PERSON ENTITLED TO PAYMENT OR UPON DEMAND BY PARENT, PARENT MAY
(BUT SHALL NOT BE REQUIRED TO) PAY SUCH INSURANCE CHARGES FOR AND ON BEHALF OF
SUBSIDIARY AND THEREAFTER SUBSIDIARY SHALL UPON THE WRITTEN REQUEST OF PARENT
FORTHWITH REIMBURSE PARENT FOR SUCH PAYMENT.

 

(II)                                  SUBJECT TO THE LAST PARAGRAPH OF
SECTION 6.01, PARENT ASSUMES RESPONSIBILITY FOR AND SHALL PAY TO THE APPROPRIATE
INSURANCE CARRIERS OR OTHERWISE ANY INSURANCE CHARGES, WHENEVER ARISING, THAT
BECOME DUE AND PAYABLE UPON THE TERMS AND CONDITIONS OF ANY APPLICABLE POLICY IN
RESPECT OF ANY INSURED CLAIMS AGAINST PARENT FOR CHARGES THAT RELATE TO THE
PERIOD BEFORE THE DISTRIBUTION EFFECTIVE TIME.  IF PARENT FAILS TO PAY ANY
INSURANCE CHARGES WHEN DUE AND PAYABLE, WHETHER AT THE REQUEST OF THE PERSON
ENTITLED TO PAYMENT OR UPON DEMAND BY SUBSIDIARY, THEN SUBSIDIARY MAY (BUT SHALL
NOT BE REQUIRED TO) PAY SUCH INSURANCE CHARGES FOR AND ON BEHALF OF PARENT AND
THEREAFTER PARENT SHALL UPON THE WRITTEN REQUEST OF SUBSIDIARY FORTHWITH
REIMBURSE SUBSIDIARY FOR SUCH PAYMENT.

 

8.05                           Insurance after the Distribution.

 

(A)                                  AFTER THE DISTRIBUTION EFFECTIVE TIME,
PARENT (FOR ITSELF AND ITS SUBSIDIARIES) SHALL BE RESPONSIBLE FOR OBTAINING OR
RENEWING AND PAYING FOR ITS OWN INSURANCE COVERAGE RELATING TO THE PARENT ASSETS
AND THE PARENT LIABILITIES, WITH RESPECT TO ALL INSURED CLAIMS AND OTHER
INJURIES, LOSSES, LIABILITIES, DAMAGES AND EXPENSES INCURRED OR CLAIMED TO HAVE
BEEN INCURRED (I) AFTER THE DISTRIBUTION EFFECTIVE TIME BY ANY PERSON OR (II) IN
CONNECTION WITH

 

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THE OWNERSHIP OR OPERATION OF THE PARENT ASSETS OR THE PARENT LIABILITIES AFTER
THE DISTRIBUTION EFFECTIVE TIME.

 

(B)                                 AFTER THE DISTRIBUTION EFFECTIVE TIME,
SUBSIDIARY (FOR ITSELF AND ITS SUBSIDIARIES) SHALL BE RESPONSIBLE FOR OBTAINING
OR RENEWING AND PAYING FOR ITS OWN INSURANCE COVERAGE RELATING TO THE SUBSIDIARY
ASSETS AND THE SUBSIDIARY LIABILITIES, WITH RESPECT TO ALL INSURED CLAIMS AND
OTHER INJURIES, LOSSES, LIABILITIES, DAMAGES AND EXPENSES INCURRED OR CLAIMED TO
HAVE BEEN INCURRED (I) AFTER THE DISTRIBUTION EFFECTIVE TIME BY ANY PERSON OR
(II) IN CONNECTION WITH THE OWNERSHIP OR OPERATION OF THE SUBSIDIARY ASSETS OR
THE SUBSIDIARY LIABILITIES AFTER THE DISTRIBUTION EFFECTIVE TIME.

 

8.06                           Agreement for Waiver of Conflict and Shared
Defense.  In the event that Insured Claims of both Subsidiary and Parent exist
and relate to the same occurrence, Subsidiary and Parent agree to jointly defend
and to waive any conflict of interest necessary to the conduct of that joint
defense.  Nothing in this paragraph shall be construed to limit or otherwise
alter in any way the indemnity obligations of the parties to this Agreement,
including those created by this Agreement, by operation of law or otherwise.

 

ARTICLE 9
EMPLOYMENT AND EMPLOYEE BENEFIT MATTERS

 

9.01                           Definitions.  For purposes of this Article 9, the
following terms shall have the meanings set forth below:

 

“Affiliate” means, with respect to any Employer (the “first Employer”), each
other Person that directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, the first
Employer.  For purposes of this definition, “control” means the possession,
directly or indirectly, of fifty per cent (50%) or more of the voting power or
value of all outstanding voting interests.

 

“COBRA” means the federal statutes designated as Code Section 4980B and ERISA
Sections 601 through 608, as amended; and any applicable state law that also
establishes Employer requirements for continuation of health care, life
insurance or other Welfare Plan benefits for the benefit of certain current and
former Employees or dependents thereof and any successor legislation to any of
such laws.

 

“Employee” means, with respect to any Employer, an individual who is considered,
according to the payroll and other records of such Employer, to be employed by
such Employer, regardless of whether such individual is, at the relevant time,
actively at work or on leave of absence (including vacation, holiday, sick
leave, family and medical leave, disability leave, military leave, jury duty,
layoff with rights of recall, and any other leave of absence or similar
interruption of active employment that is not considered, according to the
policies or practices of such Employer, to have resulted in a permanent
termination of such individual’s employment), but excluding any individual who
is, as of the relevant time, on long-term disability leave.  An Employee
includes, without limitation, any individual who is in one of the following
categories: a Parent Terminee, a Transferred Employee, a Parent Employee or a
Subsidiary Employee.

 

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“Employer” means any of the following, as the context so indicates: Parent,
Subsidiary or Plains Energy (as successor to Merger Subsidiary in the Merger).

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

 

“HMO” means any health maintenance organization organized under 42 U.S.C.
Section 300e-9, or a state health maintenance organization statute that provides
medical services for Parent Individuals or Subsidiary Individuals under any
Medical/Dental Plan.

 

“Medical/Dental Plan” means a Welfare Plan providing health care benefits to
Employees, former Employees and their dependents and beneficiaries; and also
includes a “cafeteria” Plan intended to qualify under Code Section 125.

 

“Parent Employee” means any individual who is or becomes an employee of Parent
or any of its subsidiaries (including but not limited to Plains Energy as
successor to Merger Subsidiary, but excluding Subsidiary) as a result of the
Merger or after the Merger Closing Date.  After the Merger Closing Date, no
Employees remaining employed by Parent on the day before the Merger Closing Date
will become Parent Employees, because they will have become Transferred
Employees working for Subsidiary.

 

“Parent Individual” means any individual who (i) is a Parent Employee, (ii) is a
Parent Service Provider who is hired or continues to serve in that capacity
after the Distribution Merger Closing Date or (iii) is a dependent or
beneficiary of any such individual described in clause (i) or (ii).

 

“Parent and Plains Energy Medical/Dental Plan” means any Medical/Dental Plan
maintained for or providing benefits to Parent Individuals after the Merger
Closing Date, including but not limited to the Medical/Dental Plan of Plains
Energy (as successor to Merger Subsidiary in the Merger).

 

“Parent and Subsidiary Medical/Dental Plan” means the Medical/Dental Plan
previously maintained by Parent, which has been terminated and no longer
provides coverage for any Person.

 

“Parent Qualified Beneficiary” means any Parent Individual (or dependent
thereof) who, on or after the Merger Closing Date, is a Qualified Beneficiary
under the Parent and Plains Energy Medical/Dental Plan.

 

“Parent Service Provider” means any individual, such as a member of the Parent
Board or a consultant, who provides services to Parent and participates in any
Plan maintained for or providing benefits for Employees of Parent, but is not
and has not been a Parent Employee.

 

“Parent Stock Option” means an option to purchase Parent Common Stock pursuant
to the Parent Stock Option Plan or any other option to purchase Parent Common
Stock that has been granted to a Parent Individual.  Parent Stock Options do not
include any warrants to purchase Parent Common Stock that are converted in the
Merger from warrants to purchase stock of Plains Energy.

 

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“Parent Stock Option Plan” means the 2004 Stock Incentive Plan, as adopted by
Parent in July 2004 and amended in May 2006, and as it may be further amended
through the Distribution Date.

 

“Parent Terminee” means any individual who was formerly an Employee of Parent
and terminated such employment on or before the Merger Closing Date, but is not
a Transferred Employee.

 

“Plan” means any Retirement Plan, Medical/Dental Plan, Welfare Plan or other
plan, policy, arrangement, contract or agreement providing compensatory benefits
(other than cash or property) for any group of Employees or individual Employees
(including former Employees), or the dependents or beneficiaries of any such
Employee, whether formal or informal or written or unwritten, and including,
without limitation, any means, whether or not legally required, pursuant to
which any benefit is provided by an Employer to any such Employee, former
Employee or the beneficiaries of any such Employee, existing at the Distribution
Effective Time or prior thereto.

 

“Qualified Beneficiary” means any individual (or dependent thereof) who either
(i) experiences a “qualifying event” (as that term is defined in Code
Section 4980B(f)(3) and ERISA Section 603) while a participant in any
Medical/Dental Plan, or (ii) otherwise becomes a “qualified beneficiary,” as
that term is defined in Code Section 4980B(g)(1) and ERISA 607(3), under any
Medical/Dental Plan.

 

“Retirement Plan” means any Plan that is sponsored by an Employer, provides
deferred compensation for Employees and is described in ERISA as a “pension
plan,” including but not limited to any plan and trust intended to be qualified
under Code Section 401(a) and/or 401(k).

 

“Service Credit” means the period of time taken into account under any Plan for
purposes of determining length of service or plan participation to satisfy
eligibility, vesting, benefit accrual or similar requirements under such Plan.

 

“Subsidiary Employee” means any individual who is (i) a Transferred Employee; or
(ii) not a Transferred Employee, but becomes an Employee of Subsidiary or any of
its subsidiaries after the Merger Closing Date.

 

“Subsidiary Individual” means any individual who (i) is a Transferred Employee;
(ii) is otherwise a Subsidiary Employee; (iii) is a Subsidiary Service Provider;
(iv) is, on or at any time before the Merger Closing Date, a Parent Terminee; or
(v) is a dependent or beneficiary of any individual described in clause (i),
(ii), (iii) or (iv).

 

“Subsidiary Service Provider” means any individual, such as a member of the
Subsidiary Board or a consultant, who provides services to Subsidiary and
participates in any Plan maintained for or providing benefits for Employees of
Subsidiary, but is not and has not been an Employee of Subsidiary.

 

“Subsidiary Stock Option” means an option to purchase Subsidiary Common Stock
pursuant to the Subsidiary Stock Option Plan, or any other option to purchase
Subsidiary Common Stock that has been granted to a Subsidiary Individual.

 

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“Subsidiary Stock Option Plan” means the ante5, Inc. 2010 Stock Incentive Plan,
as adopted by Subsidiary on or before the Merger Closing Date.

 

“Transferred Employee” means any individual who was an Employee of Parent on the
day before the Merger Closing Date and who becomes an Employee of Subsidiary as
of the Merger Closing Date.

 

“Welfare Plan” means any Plan that is sponsored by an Employer and provides
medical, health, disability, accident, life insurance, death, dental or any
other welfare benefit described as such in ERISA, including, without limitation,
any post-employment benefit, but excluding vacation benefits covered under
Section 9.06 and including any “cafeteria Plan” within the meaning of Code
Section 125.

 

9.02                           Employment and Related Obligations.

 

(A)                                  SUBSIDIARY EMPLOYMENT AGREEMENTS WITH
TRANSFERRED EMPLOYEES.  AS OF THE MERGER CLOSING DATE, PARENT SHALL ASSIGN ALL
RIGHTS, AND SUBSIDIARY SHALL ASSUME ALL OBLIGATIONS AND LIABILITIES FOR, AND
ARISING UNDER, ALL WRITTEN AND ORAL EMPLOYMENT AGREEMENTS, IF ANY, IN EACH CASE
WITH RESPECT TO TRANSFERRED EMPLOYEES, IF ANY (THE “TRANSFERRED EMPLOYMENT
AGREEMENTS”); AND PARENT SHALL HAVE NO LIABILITY OR OBLIGATION WITH RESPECT
THERETO.  SUBSIDIARY SHALL TAKE, OR CAUSE TO BE TAKEN, ALL ACTION NECESSARY AND
APPROPRIATE TO ASSUME, AS OF THE MERGER CLOSING DATE, ANY TRANSFERRED EMPLOYMENT
AGREEMENTS, WITH SUCH CHANGES AS MAY BE NECESSARY TO REFLECT THE CHANGE IN THE
EMPLOYER THEREUNDER AND SUCH OTHER CHANGES AS SUBSIDIARY SHALL DETERMINE.  ANY
SUCH TRANSFERRED EMPLOYMENT AGREEMENTS SHALL OTHERWISE HAVE THE SAME TERMS AND
CONDITIONS AS IN EFFECT IMMEDIATELY BEFORE THE MERGER CLOSING DATE, EXCEPT THAT
REFERENCES TO EMPLOYMENT BY OR TERMINATION OF EMPLOYMENT WITH PARENT AND ITS
AFFILIATES SHALL BE CHANGED TO REFER TO EMPLOYMENT BY OR TERMINATION OF
EMPLOYMENT WITH SUBSIDIARY AND ITS AFFILIATES.

 

(B)                                 ALLOCATION OF RESPONSIBILITIES AS EMPLOYER
ON DISTRIBUTION DATE.  AS OF THE MERGER CLOSING DATE, EXCEPT TO THE EXTENT
ASSUMED BY PARENT UNDER THIS AGREEMENT OR ANY RELATED AGREEMENT, SUBSIDIARY
SHALL RETAIN OR ASSUME, AS THE CASE MAY BE, RESPONSIBILITY AS EMPLOYER FOR ANY
TRANSFERRED EMPLOYEES.  AFTER THE MERGER CLOSING DATE, PARENT SHALL NOT RETAIN
RESPONSIBILITY AS EMPLOYER FOR ANY PARENT TERMINEES OR TRANSFERRED EMPLOYEES.

 

(C)                                  ASSUMPTION OF OTHER EMPLOYMENT-RELATED
LIABILITIES ON DISTRIBUTION DATE.  EXCEPT AS SPECIFICALLY PROVIDED IN THIS
AGREEMENT, OR AS OTHERWISE AGREED BY THE PARTIES HERETO:

 

(I)                                     EXCEPT AS PROVIDED OTHERWISE IN
SECTION 9.05(D), AS OF THE MERGER CLOSING DATE, SUBSIDIARY SHALL ASSUME ALL
BENEFIT OBLIGATIONS AND ALL RELATED RIGHTS IN CONNECTION WITH ANY PLAN WITH
RESPECT TO ANY TRANSFERRED EMPLOYEES, PARENT TERMINEES AND OTHER SUBSIDIARY
INDIVIDUALS; AND PARENT SHALL HAVE NO FURTHER LIABILITY WITH RESPECT THERETO. 
WITH RESPECT TO ANY PARENT TERMINEES WHO BECOME EMPLOYED BY SUBSIDIARY AFTER THE
MERGER CLOSING DATE, ANY BENEFIT OBLIGATIONS AND ALL RELATED RIGHTS THAT ACCRUE
AFTER SUCH EMPLOYMENT IN CONNECTION WITH ANY PLAN THAT BECOMES OR CONTINUES TO
BE SPONSORED BY SUBSIDIARY SHALL BE ASSUMED BY SUBSIDIARY.

 

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(II)           PARENT SHALL RETAIN ALL BENEFIT OBLIGATIONS AND ALL RELATED
RIGHTS THAT ACCRUE BEFORE OR AFTER THE DISTRIBUTION DATE IN CONNECTION WITH ANY
PLAN THAT CONTINUES TO BE SPONSORED BY PARENT AFTER THE MERGER CLOSING DATE; AND
SUBSIDIARY SHALL HAVE NO LIABILITY WITH RESPECT THERETO.

 

(D)           SERVICE CREDITS.

 

(I)            DISTRIBUTION DATE TRANSFERS.  IN CONNECTION WITH THE DISTRIBUTION
AND FOR PURPOSES OF DETERMINING SERVICE CREDITS UNDER ANY PLAN, SUBSIDIARY SHALL
CREDIT EACH TRANSFERRED EMPLOYEE WITH SUCH EMPLOYEE’S SERVICE CREDITS AND
ORIGINAL HIRE DATE AS REFLECTED IN THE RECORDS OF PARENT AS OF THE DISTRIBUTION
DATE.  SUCH SERVICE CREDITS AND HIRE DATE SHALL CONTINUE TO BE MAINTAINED AS
DESCRIBED HEREIN FOR AS LONG AS THE TRANSFERRED EMPLOYEE DOES NOT TERMINATE SUCH
EMPLOYMENT OR AS OTHERWISE MAY BE REQUIRED BY APPLICABLE LAW OR ANY APPLICABLE
PLAN.

 

(II)           SERVICE CREDITS FOLLOWING THE DISTRIBUTION DATE.  SUBJECT TO THE
PROVISIONS OF APPLICABLE LAW, (A) SUBSIDIARY MAY, IN ITS SOLE DISCRETION, MAKE
SUCH DECISIONS AS IT DEEMS APPROPRIATE WITH RESPECT TO DETERMINING SERVICE
CREDITS ACCRUED BY TRANSFERRED EMPLOYEES AFTER THE MERGER CLOSING DATE; AND
(B) PARENT MAY, IN ITS SOLE DISCRETION, MAKE SUCH DECISIONS AS IT DEEMS
APPROPRIATE WITH RESPECT TO DETERMINING SERVICE CREDITS ACCRUED BY ANY EMPLOYEES
IT MAY HIRE AFTER THE MERGER CLOSING DATE.

 

9.03         Stock Option Plans.

 

(A)           PARENT STOCK OPTION PLAN.  PARENT SHALL CONTINUE THE PARENT STOCK
OPTION PLAN AND SHALL REMAIN OBLIGATED UNDER ALL PARENT STOCK OPTIONS IT HAS
GRANTED.  AS OF THE DISTRIBUTION EFFECTIVE TIME, ALL PARENT STOCK OPTIONS THAT
ARE OUTSTANDING AS OF THE DISTRIBUTION RECORD DATE SHALL BE ADJUSTED TO ALSO
REPRESENT THE RIGHT TO RECEIVE OPTIONS TO PURCHASE ONE SHARE OF SUBSIDIARY
COMMON STOCK (ROUNDED IN THE AGGREGATE TO THE NEAREST FULL SHARE, WITH ANY RIGHT
TO PURCHASE EXACTLY ONE-HALF OF ONE SHARE BEING ROUNDED UP TO A FULL SHARE) FOR
EACH SHARE OF PARENT COMMON STOCK THAT MAY BE PURCHASED UNDER THE PARENT STOCK
OPTIONS, AS REQUIRED BY THE TERMS OF THE DISTRIBUTION; AND EACH SUCH OPTION TO
PURCHASE SUBSIDIARY COMMON STOCK SHALL BE ISSUED AS BY SUBSIDIARY AS A
SUBSIDIARY STOCK OPTION.  PURSUANT TO SUCH ADJUSTMENT, THE INTRINSIC VALUE OF
THE PARENT STOCK OPTIONS IMMEDIATELY BEFORE THE DISTRIBUTION SHALL BE PRESERVED
IMMEDIATELY AFTER THE DISTRIBUTION; AND THE RESPECTIVE EXERCISE PRICES OF THE
PARENT STOCK OPTIONS SHALL BE ALLOCATED BETWEEN THE PARENT STOCK OPTIONS (AS SO
ADJUSTED) AND SUCH SUBSIDIARY STOCK OPTIONS, BASED UPON THE RELATIVE VALUES OF
PARENT COMMON STOCK AND SUBSIDIARY COMMON STOCK FOLLOWING THE DISTRIBUTION,
EQUITABLY TAKING INTO ACCOUNT THE ONE-TO-ONE RATIO OF SUBSIDIARY COMMON STOCK TO
PARENT COMMON STOCK UNDER THE TERMS OF THE DISTRIBUTION (WITH THOSE PRICES BEING
ROUNDED TO THE NEAREST PENNY, WITH ANY PRICE THAT ENDS IN EXACTLY ONE-HALF OF
ONE PENNY BEING ROUNDED UP TO A FULL PENNY), PURSUANT TO THE EXAMPLE SET FORTH
IN SCHEDULE D ATTACHED HERETO, ALL AS MUTUALLY AGREED BY PARENT AND SUBSIDIARY. 
TO THE EXTENT NECESSARY TO PREVENT FORFEITURES, PARENT SHALL AMEND THE PARENT
STOCK OPTION PLAN AND OTHER INSTRUMENTS EVIDENCING PARENT STOCK OPTIONS THAT ARE
OUTSTANDING AS OF THE MERGER CLOSING DATE TO PROVIDE THAT, WITH RESPECT TO
SUBSIDIARY INDIVIDUALS, INCLUDING BUT NOT LIMITED TO ANY MEMBERS OF THE
SUBSIDIARY BOARD HOLDING PARENT STOCK OPTIONS, ALL REFERENCES TO SERVICE OR
TERMINATION OF SERVICE WITH

 

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PARENT AND ITS AFFILIATES SHALL BE CHANGED TO REFERENCES TO SERVICE OR
TERMINATION OF SERVICE WITH SUBSIDIARY AND ITS AFFILIATES.

 

(B)           SUBSIDIARY STOCK OPTION PLAN.  TO THE EXTENT NECESSARY, SUBSIDIARY
SHALL CAUSE THE SUBSIDIARY STOCK OPTION PLAN TO AUTHORIZE THE SUBSIDIARY STOCK
OPTIONS THAT ARE TO BE GRANTED PURSUANT TO THE ADJUSTMENT OF THE PARENT STOCK
OPTIONS UNDER SUBSECTION (A) ABOVE, WHICH SHALL OTHERWISE HAVE THE SAME TERMS
AND CONDITIONS AS THE PARENT STOCK OPTIONS WITH RESPECT TO WHICH THEY ARE
ISSUED, EXCEPT THAT WITH RESPECT TO PARENT INDIVIDUALS (INCLUDING WITHOUT
LIMITATION ANY PARENT SERVICE PROVIDERS) RECEIVING ANY SUCH SUBSIDIARY STOCK
OPTIONS, REFERENCES TO SERVICE OR TERMINATION OF SERVICE WITH SUBSIDIARY AND ITS
AFFILIATES SHALL BE CHANGED TO REFERENCES TO SERVICE OR TERMINATION OF SERVICE
WITH PARENT AND ITS AFFILIATES.  FROM AND AFTER THE DISTRIBUTION EFFECTIVE TIME,
SUBSIDIARY SHALL ASSUME ALL OBLIGATIONS WITH RESPECT TO SUCH SUBSIDIARY STOCK
OPTIONS, AND SHALL ADMINISTER THE SUBSIDIARY STOCK OPTION PLAN UNDER TERMS
GOVERNING SUCH AWARDS.

 

9.04         Parent’s 401(k) Plan.  Parent previously sponsored the WPT
Enterprises, Inc. 401(k) Plan, which the parties acknowledge was terminated and
fully distributed in 2009.  As of the Merger Closing Date, Subsidiary shall
assume, and shall be responsible for, any remaining sponsorship and fiduciary
duties with respect to the Parent 401(k) Plan; and Parent hereby consents to
Subsidiary’s assumption of those duties.

 

9.05         Parent and Subsidiary Medical/Dental Plan.  The Parent and
Subsidiary Medical/Dental Plan has been terminated and no longer provides
coverage for any Person.

 

9.06         Vacation and Sick Pay Liabilities.  As of the Merger Closing Date,
Subsidiary shall assume and shall be responsible for all Liabilities then
accrued (whether vested or unvested, and whether funded or unfunded) for
vacation and sick leave in respect of any Subsidiary Individuals.  From and
after the Merger Closing Date, Subsidiary shall be solely responsible for the
payment to any Subsidiary Individuals of vacation or sick leave accrued after
the Merger Closing Date.

 

9.07         Garnishments and Withholding.

 

(A)           GARNISHMENTS, TAX LEVIES, CHILD SUPPORT ORDERS, AND WAGE
ASSIGNMENT.  WITH RESPECT TO GARNISHMENTS, TAX LEVIES, CHILD SUPPORT ORDERS, AND
WAGE ASSIGNMENTS IN EFFECT WITH PARENT ON THE DISTRIBUTION DATE, SUBSIDIARY
SHALL HONOR SUCH PAYROLL DEDUCTION AUTHORIZATIONS WITH RESPECT TO ANY SUBSIDIARY
INDIVIDUALS; AND WILL CONTINUE TO MAKE PAYROLL DEDUCTIONS AND PAYMENTS TO THE
AUTHORIZED PAYEE, AS SPECIFIED BY THE COURT OR GOVERNMENTAL ORDER THAT WAS FILED
WITH PARENT ON OR BEFORE THE MERGER CLOSING DATE, OR WITH SUBSIDIARY AT ANY
TIME.  PARENT SHALL, AS OF THE DAY BEFORE THE MERGER, PROVIDE SUBSIDIARY WITH
SUCH INFORMATION IN THE POSSESSION OF PARENT (AND NOT ALREADY IN THE POSSESSION
OF SUBSIDIARY) AS MAY BE NECESSARY OR REASONABLY REQUESTED BY SUBSIDIARY, FOR
SUBSIDIARY TO MAKE THE PAYROLL DEDUCTIONS AND PAYMENTS TO THE AUTHORIZED PAYEE
AS REQUIRED BY THIS SUBSECTION (A).

 

(B)           AUTHORIZATIONS FOR PAYROLL DEDUCTIONS.  UNLESS OTHERWISE
PROHIBITED BY THIS AGREEMENT, A RELATED AGREEMENT OR ANY OTHER AGREEMENT ENTERED
INTO IN CONNECTION WITH THE DISTRIBUTION, SUBSIDIARY WILL HONOR ALL PAYROLL
DEDUCTIONS IN EFFECT WITH PARENT OR SUBSIDIARY AS

 

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OF THE MERGER CLOSING DATE WITH RESPECT TO SUBSIDIARY INDIVIDUALS WHO ARE
EMPLOYEES; AND SUBSIDIARY SHALL NOT REQUIRE THAT ANY SUCH INDIVIDUAL SUBMIT A
NEW AUTHORIZATION TO THE EXTENT THAT THE TYPE OF DEDUCTION BY SUBSIDIARY AFTER
THE DISTRIBUTION DATE DOES NOT DIFFER FROM THAT MADE BY PARENT OR SUBSIDIARY ON
OR BEFORE THE DISTRIBUTION DATE.  SUCH DEDUCTION TYPES INCLUDE, WITHOUT
LIMITATION: SCHEDULED LOAN REPAYMENTS TO ANY CREDIT UNION AND DIRECT DEPOSIT OF
PAYROLL, BONUS ADVANCES, EMPLOYEE RELOCATION LOANS AND OTHER TYPES OF AUTHORIZED
EMPLOYER RECEIVABLES USUALLY COLLECTIBLE THROUGH PAYROLL DEDUCTIONS.  PARENT
SHALL, AS SOON AS PRACTICABLE AFTER THE MERGER, PROVIDE SUBSIDIARY WITH SUCH
INFORMATION IN THE POSSESSION OF PARENT (AND NOT ALREADY IN THE POSSESSION OF
SUBSIDIARY) AS MAY BE NECESSARY OR REASONABLY REQUESTED BY SUBSIDIARY TO HONOR
THE PAYROLL DEDUCTION AUTHORIZATIONS CONTEMPLATED BY THIS SUBSECTION (B).

 

9.08         Labor and Employment Matters.  Notwithstanding any other provision
of this Agreement or any other agreement between Parent and Subsidiary to the
contrary, Parent and Subsidiary understand and agree that:

 

(A)           SEPARATE EMPLOYERS.  AFTER THE MERGER CLOSING DATE AND THE
EMPLOYMENT OF THE TRANSFERRED EMPLOYEES BY SUBSIDIARY, PARENT AND SUBSIDIARY
WILL BE SEPARATE AND INDEPENDENT EMPLOYERS OF THEIR RESPECTIVE EMPLOYEES, EXTENT
TO THE EXTENT OTHERWISE PROVIDED BY APPLICABLE LAW.

 

(B)           EMPLOYMENT POLICIES AND PRACTICES.  SUBJECT TO THE PROVISIONS OF
ERISA AND THE CODE, AND EXCEPT AS LIMITED BY APPLICABLE LAW OR AGREEMENT
(INCLUDING BUT NOT LIMITED TO SECTION 9.05(B) OF THIS AGREEMENT), PARENT AND
SUBSIDIARY MAY ADOPT, CONTINUE, MODIFY OR TERMINATE SUCH EMPLOYMENT POLICIES,
COMPENSATION PRACTICES, RETIREMENT PLANS, WELFARE PLANS AND OTHER EMPLOYEE
BENEFIT PLANS OF ANY KIND OR DESCRIPTION, AS EACH MAY DETERMINE, IN ITS SOLE
DISCRETION, ARE NECESSARY OR APPROPRIATE.

 

(C)           NOTICE OF CLAIMS.  WITHOUT LIMITATION TO THE SCOPE AND APPLICATION
TO EACH PARTY IN THE PERFORMANCE OF ITS DUTIES HEREIN, EACH PARTY HERETO WILL
NOTIFY IN WRITING AND CONSULT WITH THE OTHER PARTY BEFORE MAKING ANY SETTLEMENT
OF AN EMPLOYEE CLAIM, FOR THE PURPOSE OF AVOIDING ANY PREJUDICE TO SUCH OTHER
PARTY ARISING FROM THE SETTLEMENT.

 

(D)           EMPLOYEES ON LEAVE OF ABSENCE.  AS OF THE MERGER CLOSING DATE,
SUBSIDIARY SHALL ASSUME RESPONSIBILITY, IF ANY, AS EMPLOYER FOR ALL EMPLOYEES
RETURNING FROM AN APPROVED LEAVE OF ABSENCE WHO, BEFORE MERGER CLOSING DATE,
WERE EMPLOYED BY PARENT; AND ANY SUCH EMPLOYEE SHALL BE TREATED AS A TRANSFERRED
EMPLOYEE.

 

9.09         Access to Information; Cooperation.  Parent and Subsidiary and
their authorized agents shall be given reasonable access to and may take copies
of all information relating to the subjects of this Article 9 (to the extent
permitted by federal and state confidentiality laws) in the custody of the other
party, including any agent, contractor, subcontractor, agent or any other Person
under the contract of such party.  The parties hereto shall provide one another
with such information within the scope of this Article 9 as is reasonably
necessary to administer each party’s Plans, properly compensate its Employees,
perform payroll administration and make all reports required by applicable laws
and regulations.   The parties hereto shall cooperate in good faith with each
other to minimize the disruption caused by any such access and providing of
information.

 

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9.10         Reimbursement.  Parent and Subsidiary acknowledge that Parent, on
the one hand, and Subsidiary, on the other hand, may incur costs and expenses,
including, but not limited to, contributions to Plans and the payment of
insurance premiums arising from or related to any of the Plans that are, as set
forth in this Agreement, the responsibility of the other party hereto. 
Accordingly, Parent and Subsidiary shall reimburse each other, as soon as
practicable, but in any event within thirty (30) days after receipt from the
other party hereto of appropriate verification, for all such costs and expenses.

 

9.11         Preservation of Right To Amend or Terminate Plans.  Except as
otherwise expressly provided herein, no provision of this Agreement other than
Section 9.05(b), including without limitation the agreement of Parent or
Subsidiary to make a contribution or payment to or under any Plan referred to
herein for any period, shall be construed as a limitation on any right of Parent
or Subsidiary to amend such Plan or terminate its participation therein that
Parent or Subsidiary would otherwise have under the terms of such Plan or
otherwise; and no provision of this Agreement shall be construed to create a
right in any Employee or former Employee, or dependent or beneficiary of such
Employee or former Employee under a Plan that such individual would not
otherwise have under the terms of the Plan itself; provided, however, that
neither party shall amend any Plan to the extent that such amendment would have
the effect of increasing the Liabilities of the other party under any Plan of
the other party, without such other party’s consent.

 

9.12         Effect on Employees.  No provision of this Agreement shall create
any third party beneficiary rights in any Employee, former Employee or any
beneficiary or dependent thereof, with respect to the compensation, terms and
conditions of employment and benefits that may be provided to any such
individual by either party hereto or under any Plan that a party may maintain.

 

Nothing contained in this Agreement shall confer upon any Employee any right
with respect to continuance of employment by either party hereto, nor shall
anything herein interfere with the right of either party hereto to terminate the
employment of any Employee at any time, with or without cause, or restrict a
party in the exercise of its independent business judgment in modifying any of
the terms and conditions of the employment of an Employee, except as provided by
any applicable law or any other agreement.

 

ARTICLE 10
TAX MATTERS

 

10.01       Definitions.  For purposes of this Article 10, the following terms
shall have the meanings set forth below:

 

“Affiliated Group” means, with respect to any Taxable Period, an affiliated
group of corporations within the meaning of Code Section 1504(a) (and without
regard to the exclusions contained in Section 1504(b) of the Code) for the
Taxable Period; or, for purposes of any state, foreign or local Income Tax
matters, any consolidated, affiliated, combined or unitary group of corporations
within the meaning of the corresponding provisions of Tax law for the Tax
Authority in question.

 

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“Combined Jurisdiction” means, for any Taxable Period, any state, local or
foreign Tax Authority jurisdiction in which Parent or an Affiliate of Parent is
included in a consolidated, affiliated, combined, unitary or similar Tax Return
with Parent or any other Affiliate of Parent for state, local or foreign Income
Tax purposes.

 

“Final Determination” means (i) a decision, judgment, decree, or other order by
a court of competent jurisdiction, which has become final and non-appealable;
(ii) a closing agreement or accepted offer in compromise under Code Sections
7121 or 7122, or comparable agreements under the laws of other Tax Authority
jurisdictions; (iii) any other final settlement with the IRS or other Tax
Authority; or (iv) the expiration of an applicable statute of limitations.

 

“Income Tax(es)” shall mean, with respect to any corporation or Affiliated
Group, any and all Taxes based upon or measured by its net income (regardless of
whether denominated as an income Tax, a franchise Tax or otherwise).

 

“IRS” means the United States Internal Revenue Service.

 

“Overdue Rate” means a rate of interest per annum that fluctuates with the
federal short-term rate established from time to time pursuant to Code
Section 6621.

 

“Post-Distribution Member” means a corporation that is a member of the
Post-Distribution Parent Group at any time after the Distribution Date.

 

“Post-Distribution Straddle Period” means, with respect to any Straddle Period,
the portion beginning on the day after the Distribution Date and ending on the
last day of such Taxable Year.

 

“Post-Distribution Taxable Period” means a Taxable Year that begins after the
Distribution Date.

 

“Post-Distribution Parent Group” means, collectively, Parent, Plains Energy (as
successor to Merger Subsidiary in the Merger), and each other corporation that
is or becomes a member of an Affiliated Group with respect to which Parent is or
would be the common parent at any time after the Distribution Effective Time. 
To the extent applicable to any state or local Income Tax matters, the
“Post-Distribution Parent Group” shall include all corporations joining in the
filing of a consolidated, unitary or combined Income Tax Return for the state or
local Tax Authority in question for any Straddle Period or Post-Distribution
Taxable Period.

 

“Post-Distribution Parent Member” means any corporation that is a member of the
Post-Distribution Parent Group.

 

“Pre-Distribution Group” means the Affiliated Group consisting of Parent,
Subsidiary, Merger Subsidiary, Plains Energy (as successor to Merger Subsidiary
in the Merger) and any other members of an Affiliated Group that includes Parent
at any time before the Distribution Effective Time.  For purposes of this
Agreement, except as provided otherwise in Section 10.03, the Pre-Distribution
Group shall terminate as of the Distribution Effective Time and the
Post-Distribution Parent Group shall then become effective.  To the extent
applicable to any state Income Tax matters, the “Pre-Distribution Group” shall
include all corporations joining in the

 

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filing of a consolidated, combined or unitary Income Tax Return for the state in
question for any Pre-Distribution Taxable Period.

 

“Pre-Distribution Member” means a corporation that was a member of the
Pre-Distribution Group immediately before the Distribution Effective Time.

 

“Pre-Distribution Straddle Period” means, with respect to any Straddle Period,
the portion beginning on the first day of such Taxable Year and ending at the
close of business on the Distribution Date.

 

“Pre-Distribution Taxable Period” means a Taxable Year that ends on or before
the Distribution Date.

 

“Representative” means, with respect to any Person, any of such Person’s or
entity’s directors, officers, employees, agents, consultants, accountants,
attorneys and other advisors.

 

“Separate Jurisdiction” means, for any Taxable Period, any state, local or
foreign Tax Authority jurisdiction that is not a Combined Jurisdiction.

 

“Separate Return Basis” means, with respect to any Taxable Year or portion
thereof, (i) in the case of a Tax Liability of the Subsidiary Group, calculated
with Subsidiary as the common parent of that Affiliated Group and without regard
to any Post-Distribution Parent Group Members; and (ii) in the case of any
individual Subsidiary Member, calculated as if such Subsidiary Member were a
separate entity outside of any Affiliated Group.

 

“Straddle Period” means any Taxable Year beginning before the Distribution Date
and ending after the Distribution Date.

 

“Subsidiary Group” means Subsidiary and each other corporation that becomes a
member of an Affiliated Group with respect to which Subsidiary is the common
parent at any time after the Distribution Date.

 

“Subsidiary Member” means any corporation that is a member of a Subsidiary
Group.

 

“Tax” (and with the corresponding meaning “Taxes” and “Taxable”):  (i) Any net
income, alternative or add-on minimum, gross income, gross receipts, sales, use,
transfer, value added, ad valorem, franchise, capital stock, profits, license,
withholding, payroll, employment, social security, unemployment, disability,
workers’ compensation, employment-related insurance, excise, environmental,
severance, stamp, occupation, premium, real property, personal property, or
windfall profit tax, custom duty or other tax, governmental fee or other like
assessment or charge of any kind whatsoever, together with any interest and any
penalty, addition to tax or additional amount, imposed by any Tax Authority,
whether disputed or not; and (ii) any Liability for the payment of any amount of
the type described in clause (i) as a result of an entity being a member of an
Affiliated Group.

 

“Tax Benefit(s)” shall mean (i) in the case of an Income Tax for which a
consolidated federal or a consolidated, combined or unitary state or other Tax
Return is filed, the amount by which the Tax Liability of the applicable
Affiliated Group is actually reduced on a “with and

 

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without” basis (by deduction, entitlement to refund, credit, offset or
otherwise, whether available in the current Taxable Year, as an adjustment to
Taxable income in any other Taxable Year or as a carry-forward or carryback, and
including the effect on other Taxes of such reduction), plus any interest
received with respect to any related Tax refund; and (ii) in the case of any
other Tax, the amount by which the Tax Liability of a corporation is actually
reduced on a “with and without” basis (by deduction, entitlement to refund,
credit, offset or otherwise, whether available in the current Taxable Year, as
an adjustment to Taxable income in any other Taxable Year or as a carry-forward
or carryback, and including the effect on other Taxes of such reduction), plus
any interest received with respect to any related Tax refund.

 

“Tax Practices” shall mean the most recently applied policies, procedures and
practices employed by the Pre-Distribution Group in the preparation and filing
of, and positions taken on, any Tax Returns of Parent, Subsidiary, Merger
Subsidiary or Plains Energy for any Pre-Distribution Taxable Period.

 

“Tax Returns” (and with corresponding meaning “Tax Return”):  All returns,
claims for refund, declarations, reports, estimates, elections and information
returns and statements (including any attached schedules and any amendments
thereto) required by a Tax Authority to be filed or sent by or relating to a
party to this Agreement or any member of any Affiliated Group in which the party
is a member; and relating to any Taxes with respect to any income, properties or
operations of such party or any such member.

 

“Taxable Period” means a Pre-Distribution Taxable Period, a Straddle Period or a
Post-Distribution Taxable Period.

 

“Taxable Year” means a Taxable year (which may be shorter than a full calendar
or fiscal year), year of assessment or similar period with respect to which any
Tax may be imposed.

 

“Tax Authority” means the IRS and any other federal, state, local or foreign
Governmental Entity responsible for the administration of any Tax.

 

10.02       Preparation and Filing of Tax Returns.

 

(A)           BY PARENT.  PARENT SHALL PREPARE AND TIMELY FILE (OR CAUSE TO BE
PREPARED AND TIMELY FILED):

 

(I)            ALL TAX RETURNS OF THE PRE-DISTRIBUTION GROUP AND ANY
PRE-DISTRIBUTION MEMBER (OTHER THAN SUCH RETURNS THAT RELATE SOLELY TO
SUBSIDIARY) FOR ALL PRE-DISTRIBUTION TAXABLE PERIODS THAT ARE REQUIRED TO BE
FILED EITHER BEFORE OR AFTER THE DISTRIBUTION DATE, EXCEPT FOR TAX RETURNS OF
PLAINS ENERGY REQUIRED TO BE FILED ON OR BEFORE THE MERGER CLOSING DATE; AND

 

(II)           ALL TAX RETURNS OF THE POST-DISTRIBUTION PARENT GROUP AND ANY
POST-DISTRIBUTION MEMBER FOR ALL STRADDLE PERIODS AND POST-DISTRIBUTION TAXABLE
PERIODS.

 

(B)           BY SUBSIDIARY.  SUBSIDIARY SHALL PREPARE AND TIMELY FILE (OR CAUSE
TO BE PREPARED AND TIMELY FILED):

 

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(I)            ALL TAX RETURNS THAT RELATE SOLELY TO SUBSIDIARY FOR ALL
PRE-DISTRIBUTION TAXABLE PERIODS THAT ARE REQUIRED TO BE FILED BEFORE OR AFTER
THE DISTRIBUTION DATE; AND

 

(II)           ALL TAX RETURNS OF THE SUBSIDIARY GROUP AND ANY SUBSIDIARY MEMBER
FOR ALL STRADDLE PERIODS AND POST-DISTRIBUTION TAXABLE PERIODS.

 

(C)           SALES AND TRANSFER TAXES.  PARENT AND SUBSIDIARY AGREE TO
COOPERATE IN GOOD FAITH TO DETERMINE THE AMOUNT OF SALES, TRANSFER OR OTHER
TAXES (INCLUDING, WITHOUT LIMITATION, ALL REAL ESTATE, PATENT, TRADEMARK AND
TRANSFER TAXES AND RECORDING FEES, BUT EXCLUDING ANY INCOME TAXES), IF ANY,
INCURRED IN CONNECTION WITH THE SUBSCRIPTION AGREEMENT, THE DISTRIBUTION AND
OTHER TRANSACTIONS (OTHER THAN THE FORMATION OF MERGER SUBSIDIARY AND THE
MERGER) CONTEMPLATED BY THIS AGREEMENT (THE “DISTRIBUTION TRANSACTION TAXES”). 
SUBSIDIARY AGREES TO FILE PROMPTLY AND TIMELY THE TAX RETURNS FOR SUCH
DISTRIBUTION TRANSACTION TAXES; AND PARENT WILL JOIN IN THE EXECUTION OF ANY
SUCH TAX RETURNS AND ANY RELATED DOCUMENTATION.  SUBSIDIARY SHALL BE RESPONSIBLE
FOR PAYMENT OF ALL SUCH TRANSACTION TAXES.

 

(D)           PROVISION OF FILING INFORMATION.  SUBSIDIARY (OR PARENT, AS THE
CASE MAY BE) SHALL COOPERATE IN GOOD FAITH AND ASSIST PARENT (OR SUBSIDIARY) IN
THE PREPARATION AND FILING OF ALL TAX RETURNS SUBJECT TO THIS SECTION 10.03 AND
SUBMIT TO PARENT (OR SUBSIDIARY) (I) ALL NECESSARY FILING INFORMATION IN A
MANNER CONSISTENT WITH PAST TAX PRACTICES, AND (II) ALL OTHER INFORMATION
REASONABLY REQUESTED BY PARENT (OR SUBSIDIARY) IN CONNECTION WITH THE
PREPARATION OF SUCH TAX RETURNS PROMPTLY AFTER SUCH REQUEST.  IT IS EXPRESSLY
UNDERSTOOD AND AGREED THAT PARENT’S (OR SUBSIDIARY’S) ABILITY TO DISCHARGE ITS
TAX RETURN PREPARATION AND FILING RESPONSIBILITIES IS CONTINGENT UPON SUBSIDIARY
(OR PARENT) PROVIDING PARENT (OR SUBSIDIARY) WITH ALL COOPERATION, ASSISTANCE
AND INFORMATION REASONABLY NECESSARY OR REQUESTED FOR THE FILING OF SUCH INCOME
TAX RETURNS; AND THAT SUBSIDIARY (OR PARENT) SHALL INDEMNIFY PARENT (OR
SUBSIDIARY) IF, AND TO THE EXTENT THAT, TAXES ARE INCREASED AS A RESULT OF
MATERIAL INACCURACIES IN SUCH INFORMATION OR FAILURES TO PROVIDE SUCH
INFORMATION AND ASSISTANCE ON A TIMELY BASIS.

 

10.03       Taxable Years.  Subsidiary and Parent agree that, to the extent
permitted by applicable Tax law, including but not limited to Treasury
Regulation Section 1.1502-76(b)(ii):

 

(A)           THE TAXABLE YEAR OF SUBSIDIARY THAT IS INCLUDED IN THE
CONSOLIDATED FEDERAL INCOME TAX RETURN OF THE PRE-DISTRIBUTION GROUP FOR THE
PRE-DISTRIBUTION TAXABLE PERIOD THAT INCLUDES THE DISTRIBUTION DATE (AND ALL
CORRESPONDING CONSOLIDATED, COMBINED OR UNITARY STATE, LOCAL OR OTHER INCOME TAX
RETURNS OF THE PRE-DISTRIBUTION GROUP) SHALL END AS OF THE DISTRIBUTION
EFFECTIVE TIME;

 

(B)           THE TAXABLE YEAR OF PLAINS ENERGY (AS A SUCCESSOR TO MERGER
SUBSIDIARY) THAT WILL BE INCLUDED IN THE CONSOLIDATED FEDERAL INCOME TAX RETURN
OF THE POST-DISTRIBUTION PARENT GROUP FOR THE POST DISTRIBUTION TAXABLE PERIOD
THAT BEGINS ON THE DAY AFTER THE MERGER (AND ALL CORRESPONDING CONSOLIDATED,
COMBINED OR UNITARY STATE, LOCAL OR OTHER INCOME TAX RETURNS OF THE
PRE-DISTRIBUTION GROUP) FOR PURPOSES OF SUCH FEDERAL, STATE, LOCAL OR OTHER
INCOME TAXES SHALL BEGIN AT THE CLOSE OF BUSINESS ON THE DATE OF THE MERGER; AND

 

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(C)           THE SUBSIDIARY GROUP AND EACH SUBSIDIARY MEMBER SHALL BEGIN A NEW
TAXABLE YEAR FOR PURPOSES OF SUCH FEDERAL, STATE, LOCAL OR OTHER INCOME TAXES AS
OF THE DISTRIBUTION EFFECTIVE TIME.

 

The parties further agree that, to the extent permitted by applicable law, all
federal, state, local or other Tax Returns shall be filed consistently with
these positions.

 

10.04       Advance Review of Tax Returns.  At least thirty (30) days before the
filing of any Income Tax Return (including amendments thereto) that includes
both Parent and Subsidiary, and at least fifteen (15) days before the filing of
any other Tax Return (including amendments thereto) that includes both Parent
and Subsidiary, the party preparing the Tax Return shall provide the other party
with the portion of such Tax Return related to such other party, except for any
such Tax Return filed before the date of this Agreement.  In the case of each
Tax Return subject to the conformity requirements of Section 10.05 and filed
pursuant to Section 10.02(a) or Section 10.02(b), the party preparing the Tax
Return shall provide the other party with copies of any such Tax Return at least
thirty (30) days before the filing thereof (including amendments thereto). 
Subsidiary and its Representatives (or Parent and its Representatives, as the
case may be) shall have the right to review all related work papers before the
filing of any such Tax Return.  Parent (or Subsidiary, as the case may be) shall
consult with Subsidiary (or Parent) regarding its comments with respect to such
Tax Returns and shall in good faith (a) consult with Subsidiary (or Parent) in
an effort to resolve any differences with respect to the preparation and
accuracy of such Tax Returns, and their consistency with past Tax Practices; and
(b) consider Subsidiary’s (or Parent’s) recommendations for alternative
positions with respect to items reflected on such Tax Return; provided, however,
that Parent (or Subsidiary) shall not be required to consider any such
recommendation if the result thereof would adversely affect the Taxes of the
Post-Distribution Parent Group or any Post-Distribution Member (or the
Subsidiary Group or any Subsidiary Member) for any Taxable Period beginning
after the Merger Closing Date; and may condition the acceptance of any such
recommendation upon the receipt of appropriate indemnification from Subsidiary
(or Parent) for any increase in Tax Liability (under this Agreement or
otherwise) of such party that may reasonably be expected to result from the
adoption of the relevant alternative position.

 

10.05       Consistent Positions on Tax Returns.  Parent (or Subsidiary, as the
case may be) shall prepare all Tax Returns filed pursuant to Section 10.02 for
all Pre-Distribution Taxable Periods and Straddle Periods, in a manner
consistent with past Tax Practices, except as otherwise required by changes in
applicable law or material underlying facts or as the parties hereto shall
otherwise agree in writing.

 

10.06       Allocation of Straddle Period Taxes.  For purposes of this
Agreement, Taxes shall be allocated between each Pre-Distribution Straddle
Period and Post-Distribution Straddle Period, in Subsidiary’s reasonable
judgment with the written consent of Parent (which shall not be unreasonably
withheld), in the following manner:

 

(A)           TO THE EXTENT NOT IMPRACTICAL, ON THE BASIS OF THE ACTUAL
OPERATIONS AND TAXABLE INCOME (IF ANY) FOR EACH SUCH PERIOD, DETERMINED BY
CLOSING THE BOOKS OF THE ENTITY AS OF THE DISTRIBUTION EFFECTIVE TIME; OR

 

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(B)           TO THE EXTENT THAT AN ALLOCATION BASED ON A CLOSING OF THE BOOKS
IS IMPRACTICAL, ON THE BASIS OF ANY REASONABLE METHOD OR METHODS, INCLUDING
ALLOCATIONS BASED ON (I) ALLOCATIONS OF TAXABLE INCOME, LOSS, GAIN, DEDUCTION
AND CREDITS MADE FOR THE ENTITY FOR FEDERAL INCOME TAX PURPOSES, (II) ROUNDING
TO THE NEXT NEAREST ACCOUNTING PERIOD-END, OR (III) THE ACTUAL NUMBER OF DAYS IN
THE PRE-DISTRIBUTION STRADDLE PERIOD AND POST-DISTRIBUTION STRADDLE PERIOD IN
PROPORTION TO THE NUMBER OF DAYS IN THE ENTIRE STRADDLE PERIOD.

 

10.07       Payment of Taxes.

 

(A)           PARENT SHALL PAY: (I) ALL TAXES SHOWN TO BE DUE AND PAYABLE ON ALL
TAX RETURNS FILED PURSUANT TO SECTION 10.02(A); AND (II) SUBJECT TO
SECTION 10.08, ALL TAXES THAT SHALL THEREAFTER BECOME DUE AND PAYABLE AS A
RESULT OF A FINAL DETERMINATION WITH RESPECT TO ALL TAX RETURNS FILED BY PARENT
PURSUANT TO SECTION 10.02(A); PROVIDED, HOWEVER, THAT SUBSIDIARY SHALL REIMBURSE
PARENT, FOR THE AMOUNT OF ANY TAXES REQUIRED TO BE PAID AS A RESULT OF CLAUSE
(I) OR (II), WITHIN FIFTEEN (15) DAYS AFTER RECEIPT OF WRITTEN NOTIFICATION FROM
PARENT, IF AND TO THE EXTENT SUCH TAXES ARE DIRECTLY ATTRIBUTABLE TO EITHER
(X) THE TAX LIABILITY OF SUBSIDIARY OR ONE OR MORE SUBSIDIARY MEMBERS, AS A
RESULT OF SUBSIDIARY BEING A PRE-DISTRIBUTION MEMBER OR OTHERWISE, AFTER PARENT
TAKES INTO ACCOUNT ANY TAX BENEFIT (INCLUDING BUT NOT LIMITED TO ANY
CARRY-FORWARD DESCRIBED IN SECTION 10.11) THAT REDUCES THE AMOUNT OF PARENT’S
TAX LIABILITY ATTRIBUTABLE TO SUCH TAX LIABILITY OF SUBSIDIARY; OR (Y) SUBJECT
TO THE LIMITATION IN THE LAST PARAGRAPH OF SECTION 6.01, THE TAX LIABILITY OF
THE PRE-DISTRIBUTION GROUP FOR ANY PERIOD ENDING ON OR BEFORE THE MERGER CLOSING
DATE; AND THE ATTRIBUTION OF SUCH TAX LIABILITY OF THE PRE-DISTRIBUTION GROUP
SHALL BE DETERMINED PURSUANT TO THE PRINCIPLES SET FORTH IN SECTION 10.06.

 

(B)           SUBSIDIARY SHALL PAY: (I) ALL TAXES SHOWN TO BE DUE AND PAYABLE ON
ALL TAX RETURNS FILED BY SUBSIDIARY PURSUANT TO SECTION 10.02(B); AND
(II) SUBJECT TO SECTION 10.08, ALL TAXES THAT SHALL THEREAFTER BECOME DUE AND
PAYABLE AS A RESULT OF A FINAL DETERMINATION WITH RESPECT TO ALL TAX RETURNS
FILED BY SUBSIDIARY PURSUANT TO SECTION 10.02(B); PROVIDED, HOWEVER, THAT PARENT
SHALL REIMBURSE SUBSIDIARY, FOR THE AMOUNT OF ANY TAXES REQUIRED TO BE PAID AS A
RESULT OF CLAUSE (I) OR (II), WITHIN FIFTEEN (15) DAYS AFTER RECEIPT OF WRITTEN
NOTIFICATION FROM SUBSIDIARY, IF AND TO THE EXTENT SUCH TAXES ARE DIRECTLY
ATTRIBUTABLE TO THE TAX LIABILITY OF PARENT OR PLAINS ENERGY (OR ANY OF THEIR
SUBSIDIARIES OTHER THAN SUBSIDIARY) FOR ANY PERIOD BEGINNING AFTER THE MERGER
CLOSING DATE; AND THE ATTRIBUTION OF SUCH TAX LIABILITY SHALL BE DETERMINED
PURSUANT TO THE PRINCIPLES SET FORTH IN SECTION 10.06.

 

10.08       Amendments to Tax Returns.  Parent (or Subsidiary, as the case may
be) shall be entitled to amend Tax Returns filed by Parent (or Subsidiary)
pursuant to Section 10.02; provided, however, that Parent (or Subsidiary) shall
not amend for any reason whatsoever any Tax Return of Parent, the
Pre-Distribution Group, the Post-Distribution Parent Group or any
Post-Distribution Member (or of Subsidiary, a Subsidiary Group or any Subsidiary
Member) for any Pre-Distribution Taxable Period or any Straddle Period, except
(a) pursuant to the settlement or other resolution of a contest subject to
Section 10.15, or (b) with Parent’s (or Subsidiary’s) written consent (which
shall not be unreasonably withheld); provided, however, that such prohibition
shall not extend to the correction of mathematical or material factual errors or
other adjustments necessary to conform such Tax Return to applicable law or past
Tax Practices.

 

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10.09       Refunds of Taxes.

 

(A)           PARENT SHALL BE ENTITLED TO ANY REFUND OF TAXES ATTRIBUTABLE TO
EITHER A TAX RETURN FILED BY PARENT PURSUANT TO SECTION 10.02(A) OR A FINAL
DETERMINATION WITH RESPECT TO ANY SUCH TAX RETURN; PROVIDED, HOWEVER, THAT
(EXCEPT AS OTHERWISE PROVIDED IN THIS AGREEMENT) PARENT SHALL PAY TO SUBSIDIARY
(IN ACCORDANCE WITH SECTION 11.16), PROMPTLY AFTER RECEIPT OF SUCH REFUND, ANY
PORTION OF SUCH REFUND (INCLUDING ANY INTEREST RECEIVED ON THAT PORTION)
DIRECTLY ATTRIBUTABLE TO A TAX FOR WHICH SUBSIDIARY REIMBURSED PARENT UNDER
SECTION 10.07(A).

 

(B)           SUBSIDIARY SHALL BE ENTITLED TO ANY REFUND OF TAXES ATTRIBUTABLE
TO EITHER A TAX RETURN FILED BY SUBSIDIARY PURSUANT TO SECTION 10.02(B) OR A
FINAL DETERMINATION WITH RESPECT TO ANY SUCH TAX RETURN; PROVIDED, HOWEVER, THAT
(EXCEPT AS OTHERWISE PROVIDED IN THIS AGREEMENT) SUBSIDIARY SHALL PAY TO PARENT
(IN ACCORDANCE WITH SECTION 11.16), PROMPTLY AFTER RECEIPT OF SUCH REFUND, ANY
PORTION OF SUCH REFUND (INCLUDING ANY INTEREST RECEIVED ON THAT PORTION)
DIRECTLY ATTRIBUTABLE TO A TAX FOR WHICH PARENT REIMBURSED SUBSIDIARY UNDER
SECTION 10.07(B).

 

10.10       Carrybacks.  Subsidiary shall notify Parent promptly of the
existence of any items of deduction, loss or credit arising in a
Post-Distribution Taxable Year that are required to be carried back to a Taxable
Period of the Pre-Distribution Group or any Pre-Distribution Member (other than
to a separate Tax Return of Subsidiary).  Subsidiary hereby expressly agrees (on
its behalf and on behalf of all Subsidiary Members and successors thereto) that
Parent or any other member of the Post-Distribution Parent Group may retain any
cash refund or reduction of a Tax Liability or any other Tax Benefit obtained by
Parent or any other member of the Post-Distribution Parent Group as a result of
any such carryback, without compensation to Subsidiary or any Subsidiary
Member.  Subsidiary and Parent agree that Subsidiary shall elect to carry
forward all such items that affect Subsidiary to the extent permitted under
applicable law.

 

10.11       NOL, ITC and AMT Credit Benefit.  Subsidiary acknowledges that,
notwithstanding Parent’s contribution of the Transferred Assets to the capital
of Subsidiary, Subsidiary will not be entitled, at any time after the
Distribution Date, to use or benefit from any net operating loss carry-forwards,
investment Tax credit carry-forwards and alternative minimum Tax credit
carry-forwards (“Carry-forwards”) that are attributable to Parent, or any
portion of the consolidated Code Section 382 limitation that Parent could
apportion to Subsidiary under applicable Treasury Regulations, except to the
extent provided in Section 10.07(a).  If Subsidiary has, at any time after the
Distribution Date, any Carry-forwards attributable to it under applicable
federal and state Income Tax law, the parties hereto agree that the Subsidiary
Group and the Subsidiary Members shall be exclusively entitled to use and
benefit from those Carry-forwards without compensation to the Pre-Distribution
Group or any other Pre-Distribution Member.  Parent further agrees that it shall
have no recourse against the Pre-Distribution Group, any Pre-Distribution
Member, the Subsidiary Group or any Subsidiary Member regardless of (a) what
amount of such Carry-forwards attributable to Subsidiary are or will be
available to the Subsidiary Group and the Subsidiary Members in
Post-Distribution Taxable Years, or (b) whether such Carry-forwards shall be
subject to any limitation imposed as a result of the application of Code
Sections 382 and 383, the Treasury Regulations thereunder or other applicable
law.  Parent hereby agrees to take any action or make any election reasonably
required to permit Subsidiary and the Subsidiary Members to utilize any
Carry-forwards attributable to

 

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Subsidiary; provided, however, that no such action or election shall be required
if it would adversely affect in any way the Income Tax Liabilities of the
Post-Distribution Parent Group or any Post-Distribution Member for any Taxable
Year.  The parties also hereby agree that the provisions of this Section 10.11
shall apply with respect to any similar carry-forwards available under
applicable state, local or foreign Income Tax law.

 

10.12       Payroll Taxes.

 

(A)           REPORTING ON FORMS W-2 AND 941.  PARENT AND SUBSIDIARY HEREBY
AGREE TO ADOPT THE “ALTERNATIVE PROCEDURE” FOR PREPARING AND FILING TREASURY
FORMS W-2 (WAGE AND TAX STATEMENTS), AS DESCRIBED IN SECTION 5 OF IRS REVENUE
PROCEDURE 84-77, 1984-2 IRS CUMULATIVE BULLETIN 753 (“REV. PROC. 84-77”).  IN
CONNECTION WITH SUCH AGREEMENT, THE TRANSFERRED ASSETS AND ALL RELATED BUSINESS
OPERATIONS ARE BEING ASSIGNED TO SUBSIDIARY, ALL CURRENT EMPLOYEES OF PARENT ARE
BECOMING TRANSFERRED EMPLOYEES ON THE MERGER CLOSING DATE; AND EACH SUBSIDIARY
INDIVIDUAL ASSOCIATED WITH SUCH OPERATIONS SHALL BE ASSIGNED FOR PAYROLL
REPORTING PURPOSES TO SUBSIDIARY.  UNDER REV. PROC. 84-77, SUBSIDIARY AS THE
SUCCESSOR EMPLOYER FOR SUBSIDIARY INDIVIDUALS SHALL PROVIDE THEM WITH ALL
REQUIRED TREASURY FORMS W-2 FOR THE CALENDAR YEAR 2010, REFLECTING ALL WAGES
PAID AND TAXES WITHHELD BY BOTH PARENT AS THE PREDECESSOR EMPLOYER AND
SUBSIDIARY AS THE SUCCESSOR EMPLOYER FOR THE ENTIRE YEAR IN WHICH THE
DISTRIBUTION TAKES PLACE.  PARENT AND SUBSIDIARY SHALL EACH BE RESPONSIBLE FOR
FILING TREASURY FORMS 941 FOR ITS EMPLOYEES, WITH RESPECT TO EACH QUARTERLY
TAXABLE PERIOD IN WHICH SUCH EMPLOYER PAYS ITS EMPLOYEES’ COMPENSATION.  PARENT
SHALL PROVIDE ALL PARENT INDIVIDUALS WITH ALL REQUIRED TREASURY FORMS W-2 FOR
THE CALENDAR YEAR 2010, REFLECTING ALL WAGES AND TAXES PAID AND WITHHELD BY
PARENT AS A SEPARATE EMPLOYER AFTER THE DISTRIBUTION DATE.

 

(B)           FORMS W-4 AND W-5.  PARENT AND SUBSIDIARY ALSO AGREE TO ADOPT THE
ALTERNATIVE PROCEDURE OF REV. PROC. 84-77 FOR PURPOSES OF FILING TREASURY FORMS
W-4 (EMPLOYEE’S WITHHOLDING ALLOWANCE CERTIFICATE) AND W-5 (EARNED INCOME CREDIT
ADVANCE PAYMENT CERTIFICATE).  UNDER THIS PROCEDURE, PARENT SHALL PROVIDE TO
SUBSIDIARY ALL TREASURY FORMS W-4 AND W-5 ON FILE WITH PARENT FOR TRANSFERRED
EMPLOYEES AND OTHER SUBSIDIARY INDIVIDUALS; AND SUBSIDIARY WILL HONOR THESE
FORMS AFTER THE MERGER CLOSING DATE UNTIL SUCH TIME, IF ANY, THAT SUCH
SUBSIDIARY INDIVIDUAL SUBMITS A REVISED FORM.

 

(C)           ASSUMPTION OF UNEMPLOYMENT TAX RATES.  PARENT’S STATE UNEMPLOYMENT
TAX EXPERIENCE AS OF THE MERGER CLOSING DATE SHALL BE HANDLED AS FOLLOWS.  IF AN
OPTION EXISTS UNDER APPLICABLE LAW TO ALLOCATE ANY SUCH STATE UNEMPLOYMENT TAX
EXPERIENCE OF PARENT TO SUBSIDIARY AS THE SUCCESSOR TO PARENT’S BUSINESS
INCLUDED IN THE TRANSFERRED ASSETS, SUBSIDIARY MAY ELECT IN WRITING, AT ANY TIME
BEFORE JANUARY 1, 2011, BUT NO LATER THAN THE TIME PERMITTED UNDER APPLICABLE
LAW, TO HAVE PARENT TRANSFER SUCH EXPERIENCE TO SUBSIDIARY AS SOON AS
PRACTICABLE AFTER PARENT RECEIVES NOTICE OF SUCH ELECTION.

 

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10.13       Tax Indemnification.

 

(A)           BY PARENT.  SUBJECT TO THE FOLLOWING SUBSECTIONS OF THIS
SECTION 10.13, OTHER THAN SUBSECTION 10.13(B), PARENT SHALL INDEMNIFY, DEFEND
AND HOLD SUBSIDIARY AND THE SUBSIDIARY MEMBERS HARMLESS (ON AN AFTER-TAX BASIS)
AGAINST:

 

(I)            EACH AND EVERY LIABILITY FOR ANY AND ALL TAXES FOR WHICH PARENT
IS ULTIMATELY LIABLE UNDER SECTION 10.07; AND

 

(II)           EACH AND EVERY LIABILITY FOR ANY AND ALL TAXES OF THE
POST-DISTRIBUTION PARENT GROUP UNDER TREASURY REGULATIONS SECTION 1.1502-6 OR
ANY SIMILAR LAW, RULE OR REGULATION ADMINISTERED BY ANY TAX AUTHORITY.

 

(B)           BY SUBSIDIARY.  SUBSIDIARY SHALL INDEMNIFY, DEFEND AND HOLD
PARENT, PLAINS ENERGY, THE POST-DISTRIBUTION PARENT GROUP AND THE
POST-DISTRIBUTION MEMBERS HARMLESS (ON AN AFTER-TAX BASIS) AGAINST EACH AND
EVERY LIABILITY FOR ANY AND ALL TAXES FOR WHICH SUBSIDIARY IS ULTIMATELY LIABLE
UNDER SECTION 10.07; PROVIDED, HOWEVER, THAT TO THE EXTENT ANY SUCH TAX
LIABILITY IS ATTRIBUTABLE TO PARENT, SUBSIDIARY, MERGER SUBSIDIARY OR ANY OTHER
DIRECT OR INDIRECT SUBSIDIARY OF PARENT FOR ANY TAXABLE PERIOD ENDING ON OR
BEFORE THE MERGER CLOSING DATE, AS DETERMINED PURSUANT TO THE PRINCIPLES SET
FORTH IN SECTION 10.06, SUBSIDIARY’S INDEMNIFICATION OBLIGATION UNDER THIS
SUBSECTION SHALL BE SUBJECT TO THE LIMITATIONS IN THE LAST PARAGRAPH OF
SECTION 6.01.

 

(C)           ASSUMED TAX TREATMENTS.

 

(I)            THE PARTIES EXPRESSLY AGREE FOR ALL PURPOSES TO TREAT THE
FORMATION OF SUBSIDIARY AS A TAX-FREE TRANSACTION UNDER CODE SECTION 351(A) (THE
“TAX TREATMENT”).  EACH PARTY HERETO ALSO EXPRESSLY AGREES NOT TO TAKE (AND TO
CAUSE EACH OF ITS AFFILIATES NOT TO TAKE) ANY ACTION (EXCEPT WHERE SUCH ACTION
IS REQUIRED BY LAW) THAT IS INCONSISTENT WITH THE TREATMENT OF THE DISTRIBUTION
AND ALL RELATED TRANSACTIONS IN ACCORDANCE WITH THE TAX TREATMENT AND TO TAKE
(AND TO CAUSE EACH OF ITS AFFILIATES TO TAKE) ANY AND ALL ACTIONS REASONABLY
AVAILABLE TO SUCH PARTY (OR ANY OF ITS AFFILIATES) TO SUPPORT AND DEFEND SUCH
TREATMENT.

 

(II)           NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SECTIONS 10.07,
10.03(A) OR 10.03(B):

 

(A)          IF THERE IS A FINAL DETERMINATION THAT RESULTS IN THE DISALLOWANCE,
IN WHOLE OR IN PART, OF THE TAX TREATMENT, AND IF ONE OR MORE MEMBERS OF BOTH
THE POST-DISTRIBUTION PARENT GROUP AND THE SUBSIDIARY GROUP HAVE TAKEN ACTIONS
AFTER THE DISTRIBUTION THAT MATERIALLY CONTRIBUTED TO SUCH DISALLOWANCE, THEN
ANY LIABILITY OF PARENT FOR TAXES AS A RESULT OF SUCH DISALLOWANCE SHALL BE
DIVIDED BETWEEN PARENT AND SUBSIDIARY IN THE RATIO PROVIDED IN SECTION 5.02.

 

(B)           IF THERE IS A FINAL DETERMINATION THAT RESULTS IN THE
DISALLOWANCE, IN WHOLE OR IN PART, OF THE TAX TREATMENT AND ANY MEMBER OF THE
SUBSIDIARY GROUP (AND NO MEMBER OF THE POST-DISTRIBUTION PARENT GROUP) HAS TAKEN
ANY ACTION AFTER THE DISTRIBUTION THAT MATERIALLY CONTRIBUTES TO SUCH
DISALLOWANCE, THEN SUBSIDIARY SHALL INDEMNIFY AND HOLD THE POST-DISTRIBUTION
PARENT GROUP HARMLESS FOR ANY TAXES THAT WOULD NOT HAVE BEEN

 

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PAYABLE BUT FOR SUCH DISALLOWANCE.

 

(C)           IF THERE IS A FINAL DETERMINATION THAT RESULTS IN THE
DISALLOWANCE, IN WHOLE OR IN PART, OF THE TAX TREATMENT, AND ANY MEMBER OF THE
POST-DISTRIBUTION PARENT GROUP (AND NO MEMBER OF THE SUBSIDIARY GROUP) HAS TAKEN
ANY ACTION AFTER THE DISTRIBUTION THAT MATERIALLY CONTRIBUTES TO SUCH
DISALLOWANCE, THEN PARENT SHALL INDEMNIFY AND HOLD THE SUBSIDIARY GROUP HARMLESS
FOR ANY TAXES THAT WOULD NOT HAVE BEEN PAYABLE BUT FOR SUCH DISALLOWANCE.

 

Any such claim for indemnification shall otherwise be handled in the manner
specified under this Section 10.13, but shall not affect in any manner the
provisions of Sections 10.14 and 10.15 with respect to cooperation and control
of contests and audits.

 

(D)           CERTAIN REIMBURSEMENTS.  SUBSIDIARY (OR PARENT, AS THE CASE MAY
BE) SHALL NOTIFY PARENT (OR SUBSIDIARY) OF ANY TAXES PAID BY THE SUBSIDIARY
GROUP OR ANY SUBSIDIARY MEMBER (OR THE POST-DISTRIBUTION PARENT GROUP OR ANY
POST-DISTRIBUTION PARENT MEMBER) THAT ARE SUBJECT TO INDEMNIFICATION UNDER THIS
SECTION 10.13; PROVIDED, HOWEVER, THAT NO TAX LIABILITY OF $10,000 OR LESS IN
THE AGGREGATE SHALL IN ANY EVENT BE INDEMNIFIED HEREUNDER.  TO THE EXTENT NOT
OTHERWISE PROVIDED IN THIS SECTION 10.13, ANY OTHER NOTIFICATION CONTEMPLATED BY
THIS SUBSECTION (D) SHALL INCLUDE A DETAILED CALCULATION (INCLUDING, IF
APPLICABLE, SEPARATE ALLOCATIONS OF SUCH TAXES BETWEEN PRE- AND
POST-DISTRIBUTION TAXABLE PERIODS AND SUPPORTING WORK PAPERS) AND A BRIEF
EXPLANATION OF THE BASIS FOR INDEMNIFICATION HEREUNDER.  WHENEVER A NOTIFICATION
DESCRIBED IN THIS SUBSECTION (D) IS GIVEN, THE NOTIFIED PARTY SHALL PAY THE
AMOUNT REQUESTED IN SUCH NOTICE TO THE NOTIFYING PARTY IN ACCORDANCE WITH
SECTION 11.16, BUT ONLY TO THE EXTENT THAT THE NOTIFIED PARTY AGREES WITH SUCH
REQUEST.  TO THE EXTENT THE NOTIFIED PARTY DISAGREES WITH SUCH REQUEST, IT
SHALL, WITHIN TWENTY (20) DAYS, SO NOTIFY THE NOTIFYING PARTY, WHEREUPON THE
PARTIES SHALL USE THEIR BEST EFFORTS TO RESOLVE ANY SUCH DISAGREEMENT.  TO THE
EXTENT NOT OTHERWISE PROVIDED FOR IN THIS SECTION 10.13 OR IN SECTION 11.16, ANY
PAYMENT MADE AFTER SUCH 20-DAY PERIOD SHALL INCLUDE INTEREST AT THE OVERDUE RATE
FROM THE DATE SUCH PAYMENT WOULD HAVE BEEN MADE UNDER SECTION 11.16 BASED UPON
THE ORIGINAL NOTICE GIVEN BY THE NOTIFYING PARTY.

 

(E)           LOSS OF TAX BENEFITS.  APPROPRIATE PAYMENTS SHALL BE MADE BETWEEN
THE PARTIES TO TAKE ACCOUNT OF SUBSEQUENT LOSSES OF, OR CHANGES IN, ANY TAX
BENEFIT THAT HAS BEEN TAKEN INTO ACCOUNT FOR PURPOSES OF DETERMINING THE
AFTER-TAX BASIS OF ANY INDEMNIFICATION PAYMENT.

 

10.14       Cooperation; Document Retention; Confidentiality.

 

(A)           PROVISION OF COOPERATION, DOCUMENTS AND OTHER INFORMATION.  UPON
REASONABLE REQUEST BY A REQUESTING PARTY, PARENT AND SUBSIDIARY SHALL PROMPTLY
PROVIDE (AND SHALL CAUSE THE MEMBERS OF THEIR RESPECTIVE AFFILIATED GROUPS TO
PROVIDE) SUCH REQUESTING PARTY WITH SUCH COOPERATION AND ASSISTANCE, DOCUMENTS,
AND OTHER INFORMATION, WITHOUT CHARGE, AS MAY BE NECESSARY OR REASONABLY HELPFUL
IN CONNECTION WITH (I) THE PREPARATION AND FILING OF ANY ORIGINAL OR AMENDED TAX
RETURN; (II) THE CONDUCT OF ANY AUDIT OR OTHER EXAMINATION OR ANY JUDICIAL OR
ADMINISTRATIVE PROCEEDING INVOLVING TO ANY EXTENT TAXES, TAX RETURNS WITHIN THE
SCOPE OF THIS AGREEMENT; OR (III) THE VERIFICATION BY A PARTY OF AN AMOUNT
PAYABLE HEREUNDER TO, OR RECEIVABLE HEREUNDER FROM, ANOTHER PARTY.

 

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Such cooperation and assistance shall include, without limitation:  (w) the
provision on demand of books, records, Tax Returns, documentation or other
information relating to any relevant Tax Return; (x) the execution of any
document that may be necessary or reasonably helpful in connection with the
filing of any Tax Return by the Pre-Distribution Group, a Pre-Distribution
Member, the Post-Distribution Parent Group, a Post-Distribution Parent Member,
the Subsidiary Group or a Subsidiary Member, or in connection with any audit,
proceeding, suit or action of the type generally referred to in the preceding
sentence, including, without limitation, the execution of powers of attorney and
extensions of applicable statutes of limitations, with respect to Tax Return
which Parent may be obligated to file on behalf of Subsidiary Members pursuant
to Section 10.02(a); (y) the prompt and timely filing of appropriate claims for
refund; and (z) the use of reasonable best efforts to obtain any documentation
from a Governmental Entity or a third party that may be necessary or helpful in
connection with the foregoing.  Each party shall make its employees and
facilities available on a mutually convenient basis to facilitate such
cooperation.

 

(B)           RETENTION OF BOOKS AND RECORDS.  PARENT, EACH POST DISTRIBUTION
MEMBER, AND SUBSIDIARY SHALL RETAIN OR CAUSE TO BE RETAINED ALL TAX RETURNS
REQUIRED TO BE PREPARED WITH RESPECT TO EACH PRE-DISTRIBUTION TAXABLE PERIOD AND
EACH STRADDLE PERIOD; AND ALL BOOKS, RECORDS, SCHEDULES, WORK PAPERS, AND OTHER
DOCUMENTS RELATING THERETO, UNTIL THE EXPIRATION OF THE LATER OF (I) ALL
APPLICABLE STATUTES OF LIMITATIONS (INCLUDING ANY WAIVERS OR EXTENSIONS
THEREOF), AND (II) ANY RETENTION PERIOD REQUIRED BY LAW OR PURSUANT TO ANY
RECORD RETENTION AGREEMENT.  THE PARTIES HERETO SHALL NOTIFY EACH OTHER IN
WRITING OF ANY WAIVERS, EXTENSIONS OR EXPIRATIONS OF APPLICABLE STATUTES OF
LIMITATIONS.  THE PARTIES HERETO SHALL PROVIDE AT LEAST THIRTY (30) DAYS PRIOR
WRITTEN NOTICE OF ANY INTENDED DESTRUCTION OF THE DOCUMENTS REFERRED TO IN THIS
SUBSECTION (C).  A PARTY GIVING SUCH A NOTIFICATION SHALL NOT DISPOSE OF ANY OF
THE FOREGOING MATERIALS WITHOUT FIRST OBTAINING THE WRITTEN APPROVAL (WHICH MAY
NOT BE UNREASONABLY WITHHELD) OF THE NOTIFIED PARTY.

 

(C)           STATUS AND OTHER INFORMATION REGARDING AUDITS AND LITIGATION. 
PARENT (OR SUBSIDIARY, AS THE CASE MAY BE) SHALL USE REASONABLE BEST EFFORTS TO
KEEP SUBSIDIARY (OR PARENT) ADVISED, AS TO THE STATUS OF TAX AUDITS AND
LITIGATION INVOLVING ANY ISSUE RELATING TO ANY TAXES, TAX RETURNS OR TAX
BENEFITS SUBJECT TO INDEMNIFICATION UNDER THIS AGREEMENT.  TO THE EXTENT
RELATING TO ANY SUCH ISSUE, PARENT (OR SUBSIDIARY) SHALL PROMPTLY FURNISH
SUBSIDIARY (OR PARENT) WITH COPIES OF ANY INQUIRIES OR REQUESTS FOR INFORMATION
FROM ANY TAX AUTHORITY OR ANY OTHER ADMINISTRATIVE, JUDICIAL OR OTHER
GOVERNMENTAL ENTITY, AS WELL AS COPIES OF ANY REVENUE AGENT’S REPORT OR SIMILAR
REPORT, NOTICE OF PROPOSED ADJUSTMENT OR NOTICE OF DEFICIENCY.

 

(D)           CONFIDENTIALITY OF DOCUMENTS AND INFORMATION.  EXCEPT AS REQUIRED
BY LAW OR WITH THE PRIOR WRITTEN CONSENT OF THE OTHER PARTY, ALL TAX RETURNS,
DOCUMENTS, SCHEDULES, WORK PAPERS AND SIMILAR ITEMS AND ALL INFORMATION
CONTAINED THEREIN, WHICH TAX RETURNS AND OTHER MATERIALS ARE WITHIN THE SCOPE OF
THIS AGREEMENT SHALL BE KEPT CONFIDENTIAL BY THE PARTIES HERETO AND THEIR
REPRESENTATIVES, SHALL NOT BE DISCLOSED TO ANY OTHER PERSON AND SHALL BE USED
ONLY FOR THE PURPOSES PROVIDED HEREIN.

 

10.15       Contests and Audits.

 

(A)           NOTIFICATION OF AUDITS OR DISPUTES.  UPON THE RECEIPT BY PARENT OR
ANY POST-DISTRIBUTION PARENT MEMBER (OR SUBSIDIARY OR ANY SUBSIDIARY MEMBER, AS
THE CASE MAY BE)

 

42

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OF NOTICE OF ANY PENDING OR THREATENED TAX AUDIT, CONTEST OR ASSESSMENT THAT
COULD REASONABLY BE EXPECTED TO AFFECT ANY LIABILITY FOR TAXES SUBJECT TO
INDEMNIFICATION HEREUNDER, PARENT (OR SUBSIDIARY) SHALL PROMPTLY NOTIFY
SUBSIDIARY (OR PARENT) IN WRITING OF THE RECEIPT OF SUCH NOTICE.

 

(B)           CONTROL AND SETTLEMENT.

 

(I)            CONTROL AND CONSULTATION BY PARENT.  PARENT SHALL HAVE THE RIGHT
TO CONTROL, AND TO REPRESENT THE INTERESTS OF ALL AFFECTED TAXPAYERS IN, ANY TAX
AUDIT OR ADMINISTRATIVE, JUDICIAL OR OTHER PROCEEDING RELATING IN WHOLE OR IN
PART, TO ANY PRE-DISTRIBUTION TAXABLE PERIOD OR ANY OTHER TAXABLE PERIOD FOR
WHICH PARENT IS RESPONSIBLE, IN WHOLE OR IN PART, FOR TAXES UNDER
SECTION 10.07(A) AND SECTION 10.13; AND TO EMPLOY COUNSEL OF ITS CHOICE AT ITS
EXPENSE; PROVIDED, HOWEVER, THAT, WITH RESPECT TO SUCH ISSUES THAT MAY IMPACT
SUBSIDIARY OR ANY SUBSIDIARY MEMBER FOR ANY POST-DISTRIBUTION TAXABLE PERIOD OR
FOR WHICH SUBSIDIARY MAY BE RESPONSIBLE IN PART UNDER SECTION 10.07(B) AND
SECTION 10.13, PARENT SHALL (A) AFFORD SUBSIDIARY FULL OPPORTUNITY TO OBSERVE AT
ANY SUCH PROCEEDINGS AND TO REVIEW ANY SUBMISSIONS RELATED TO SUCH ISSUES,
(B) IN GOOD FAITH CONSULT WITH SUBSIDIARY REGARDING ITS COMMENTS WITH RESPECT TO
SUCH PROCEEDINGS AND SUBMISSIONS IN AN EFFORT TO RESOLVE ANY DIFFERENCES WITH
RESPECT TO PARENT’S POSITIONS WITH REGARD TO SUCH ISSUES, (C) IN GOOD FAITH
CONSIDER SUBSIDIARY’S RECOMMENDATIONS FOR ALTERNATIVE POSITIONS WITH RESPECT TO
SUCH ISSUES, AND (D) ADVISE SUBSIDIARY OF THE REASONS FOR REJECTING ANY SUCH
ALTERNATIVE POSITION.  IN THE EVENT OF ANY DISAGREEMENT REGARDING THE
PROCEEDINGS, PARENT SHALL HAVE THE ULTIMATE CONTROL OF THE CONTEST AND ANY
SETTLEMENT OR OTHER RESOLUTION THEREOF.

 

(II)           CONTROL AND CONSULTATION BY SUBSIDIARY.  SUBSIDIARY SHALL HAVE
THE RIGHT TO CONTROL, AND TO REPRESENT THE INTERESTS OF ALL AFFECTED TAXPAYERS
IN, ANY TAX AUDIT OR ADMINISTRATIVE, JUDICIAL OR OTHER PROCEEDING RELATING
SOLELY TO ANY POST-DISTRIBUTION TAXABLE PERIOD OF THE SUBSIDIARY GROUP OR ANY
SUBSIDIARY MEMBER, OR RELATING TO ANY OTHER TAXABLE PERIOD FOR WHICH SUBSIDIARY
IS SOLELY RESPONSIBLE FOR TAXES UNDER SECTION 10.07 AND SECTION 10.13; AND TO
EMPLOY COUNSEL OF ITS CHOICE AT ITS EXPENSE; PROVIDED, HOWEVER, THAT SUBSIDIARY
SHALL (A) AFFORD PARENT FULL OPPORTUNITY TO OBSERVE AT ANY SUCH PROCEEDINGS AND
TO REVIEW ANY SUBMISSIONS RELATED THERETO AND (B) NOT AGREE TO SETTLE ANY SUCH
PROCEEDING IN A MANNER THAT COULD REASONABLY BE EXPECTED TO HAVE A MATERIAL AND
ADVERSE EFFECT ON (1) ANY INDEMNIFICATION OBLIGATION OF PARENT HEREUNDER,
(2) ANY TAX LIABILITY OF THE PRE-DISTRIBUTION GROUP OR ANY PRE-DISTRIBUTION
MEMBER FOR ANY PRE-DISTRIBUTION TAXABLE PERIOD OR (3) ANY TAX LIABILITY OF THE
POST-DISTRIBUTION PARENT GROUP OR ANY POST-DISTRIBUTION PARENT MEMBER FOR ANY
POST-DISTRIBUTION TAXABLE PERIOD, WITHOUT THE PRIOR WRITTEN CONSENT OF PARENT,
WHICH CONSENT SHALL NOT BE UNREASONABLY WITHHELD.

 

(III)          DELIVERY OF POWERS OF ATTORNEY.  SUBSIDIARY (AND, TO THE EXTENT
NECESSARY, ANY OTHER MEMBER OF ANY SUBSIDIARY GROUP) SHALL EXECUTE AND DELIVER
TO PARENT, PROMPTLY UPON REQUEST, SUCH POWERS OF ATTORNEY AUTHORIZING PARENT TO
EXTEND STATUTES OF LIMITATIONS, RECEIVE REFUNDS AND TAKE SUCH OTHER ACTIONS THAT
PARENT REASONABLY CONSIDERS TO BE APPROPRIATE IN EXERCISING ITS CONTROL PURSUANT
TO THIS SECTION 10.15.

 

10.16       Tax Elections.  Nothing in this Agreement is intended to change or
otherwise affect any Tax election made before the date of this Agreement by or
on behalf of the Pre-Distribution Group (including the election with respect to
the calculation of earnings and profits under Code Section 1552 and the Treasury
Regulations thereunder).  Parent, as common parent

 

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of the Pre-Distribution Group, shall continue to have sole discretion to make
any and all elections with respect to all members of the Pre-Distribution Group
for all Taxable Periods for which it is obligated to file Tax Returns under
Section 10.02(a).

 

ARTICLE 11
MISCELLANEOUS

 

11.01       Entire Agreement; No Third Party Beneficiaries.  This Agreement and
all documents and instruments referred to herein constitute the entire agreement
and supersede all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter of this Agreement; and are
not intended to confer upon any Person other than the parties hereto any rights
or remedies hereunder.

 

11.02       Forbearance.  Neither the failure nor any delay on the part of any
party hereto to exercise any right under this Agreement shall operate as a
waiver thereof, nor shall any single or partial exercise of any right preclude
any other or further exercise of the same or any other risk nor shall any waiver
of any right with respect to any occurrence be construed as a waiver of such
right with respect to any other occurrence.

 

11.03       Expenses.  Except as specifically provided in this Agreement or in a
Related Agreement, all fees and expenses incurred in connection with this
Agreement and the consummation of the transactions contemplated hereby shall be
paid by the party incurring such expenses.

 

11.04       Governing Law.  This Agreement shall be governed and construed in
accordance with the laws of the State of Minnesota, without regard to any
applicable conflicts of laws.

 

11.05       Notices.  All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (which is
confirmed) or mailed by registered or certified mail (return receipt requested)
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):

 

if to Parent, to

ante4, Inc.

 

2812 1st Avenue North, Suite 506

 

P.O. Box 1500

 

Billings, Montana 59103-1500

 

 

if to Subsidiary, to

ante5, Inc.

 

c/o Lyle Berman

 

One Hughes Center Drive, Suite 606

 

Las Vegas, Nevada 89169

 

11.06       Amendments.  This Agreement may be amended only by a written
agreement executed and delivered by duly authorized officers of Subsidiary and
Parent; provided, however, that any amendment made after the Merger Effective
Time shall be effective only if expressly authorized by the Parent Board and the
Subsidiary Board.

 

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11.07       Assignments; Predecessors and Successors.  Neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned by
either of the parties hereto (whether by operation of law or otherwise) without
the prior written consent of the other party.  Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and assigns.

 

To the extent necessary to give effect to the purposes of this Agreement, any
reference to any party, any of its Affiliates, any Affiliated Group or member of
an Affiliated Group, shall also include any predecessors or successors thereto,
by operation of law or otherwise.

 

11.08       Termination and Effectiveness.  This Agreement may be terminated and
the Distribution abandoned at any time before the Distribution Effective Time
only by the written approval of Subsidiary.  In the event of such termination,
no party shall have any liability to any other party pursuant to this Agreement.

 

This Agreement shall remain effective on and after the Distribution Date and
shall survive until the expiration of any applicable statute of limitations.

 

11.09       Guarantees.  Each of the parties hereto shall cause to be performed,
and hereby guarantees the complete and prompt performance of, all actions,
agreements and obligations set forth herein that may be required to be performed
by any corporation or other business entity (other than each other) that may
become controlled by such party on or after the Distribution Date.  If, on or
after the Distribution Date, either Parent or Subsidiary is acquired by another
entity such that 50% or more of the acquirer’s voting equity interests are under
common control with such party, such acquirer shall, by making such acquisition,
simultaneously agree to jointly and severally guarantee the complete and prompt
performance by the acquired corporation and any Affiliate of the acquired
corporation of all of their obligations and undertakings pursuant to this
Agreement.

 

11.10       Specific Performance.  The parties hereto agree that the remedy at
law for any breach of this Agreement will be inadequate and that any party by
whom this Agreement is enforceable shall be entitled to specific performance in
addition to any other appropriate relief or remedy.  Such party may, in its sole
discretion, apply to a court of competent jurisdiction for specific performance
or injunctive or such other relief as such court may deem just and proper in
order to enforce this Agreement or prevent any violation of this Agreement and,
to the extent permitted by applicable laws, each party waives any objection to
the imposition of such relief.

 

11.11       Headings; References; Rules of Construction.  The article, 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.  All references herein to “Articles,” “Sections,” “Exhibits” or
“Schedules” shall be deemed to be references to Articles or Sections of this
Agreement or Exhibits or Schedules attached hereto unless otherwise indicated.

 

Any ambiguities in this Agreement or the Related Agreements shall be resolved
without regard to which party drafted such instrument.

 

11.12       Counterparts.  This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two

 

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or more counterparts have been signed by each of the parties and delivered to
the other parties, it being understood that all parties need not sign the same
counterpart.

 

11.13       Severability; Enforcement.  The invalidity of any portion of this
Agreement shall not affect the validity, force or effect of the remaining
portions of this Agreement.  If it is ever held that any restriction hereunder
is too broad to permit enforcement of such restriction to its fullest extent,
each party agrees that a court of competent jurisdiction may enforce such
restriction to the maximum extent permitted by law, and each party hereby
consents and agrees that such scope may be judicially modified accordingly in
any proceeding brought to enforce such restriction.

 

11.14       Mediation and Arbitration of Disputes.

 

(A)           DISPUTE RESOLUTION.  EXCEPT FOR ANY DISPUTE THAT IS A PROPER
SUBJECT FOR INJUNCTIVE RELIEF, ANY DISPUTE, CONTROVERSY OR DISAGREEMENT
(“DISPUTE”) BETWEEN THE PARTIES THAT IS RELATED TO THEIR OBLIGATIONS UNDER THIS
AGREEMENT AND CANNOT BE SETTLED, SHALL BE SUBMITTED FOR MEDIATION TO A COMMITTEE
MADE UP OF AN EQUAL NUMBER OF MEMBERS OF EACH PARTY’S BOARD OF DIRECTORS WHO ARE
NOT ON THE BOARD OF DIRECTORS OF THE OTHER PARTY (“COMMITTEE”).  IF THE PARTIES
ARE UNABLE TO REACH AN AMICABLE RESOLUTION OF A DISPUTE WITHIN THIRTY DAYS AFTER
SUBMISSION TO THE COMMITTEE, THEN, TO THE MAXIMUM EXTENT ALLOWED BY LAW, THE
DISPUTE SHALL BE SUBMITTED AND RESOLVED BY FINAL AND BINDING ARBITRATION IN
MINNESOTA; PROVIDED, HOWEVER, THAT ANY PARTY MAY SEEK INJUNCTIVE RELIEF OR
ENFORCEMENT OF ANY AWARD RENDERED PURSUANT TO THE ARBITRATION PROVISIONS OF THIS
SECTION 11.14 BY BRINGING A SUIT IN ANY COURT OF COMPETENT JURISDICTION.  ANY
AWARD ISSUED AS A RESULT OF SUCH ARBITRATION SHALL BE FINAL AND BINDING BETWEEN
THE PARTIES THERETO AND SHALL BE ENFORCEABLE BY ANY COURT HAVING JURISDICTION
OVER THE PARTY AGAINST WHOM ENFORCEMENT WAS SOUGHT AND APPLICATION MAY BE MADE
TO SUCH COURT FOR JUDICIAL ACCEPTANCE OF THE AWARD AND ORDER OF ENFORCEMENT. 
THE FEES AND EXPENSES OF ARBITRATION (INCLUDING REASONABLE ATTORNEYS’ FEES)
SHALL BE PAID BY THE PARTY THAT DOES NOT PREVAIL IN SUCH ARBITRATION.

 

(B)           ATTORNEYS’ FEES.  IF ANY PARTY TO THIS AGREEMENT BRINGS AN ACTION
TO ENFORCE ITS RIGHTS UNDER THIS AGREEMENT, THE PREVAILING PARTY SHALL BE
ENTITLED TO RECOVER ITS COSTS AND EXPENSES, INCLUDING WITHOUT LIMITATION
REASONABLE ATTORNEYS’ FEES, INCURRED IN CONNECTION WITH SUCH ACTION, INCLUDING
ANY APPEAL OF SUCH ACTION.

 

(C)           SPECIFIC PERFORMANCE.  NOTHING CONTAINED IN THIS SECTION 11.14
SHALL LIMIT OR RESTRICT IN ANY WAY THE RIGHT OR POWER OF A PARTY AT ANY TIME TO
SEEK INJUNCTIVE RELIEF IN ANY COURT AND TO LITIGATE THE ISSUES RELEVANT TO SUCH
REQUEST FOR INJUNCTIVE RELIEF BEFORE SUCH COURT (I) TO RESTRAIN THE OTHER PARTY
FROM BREACHING THIS AGREEMENT OR (II) FOR SPECIFIC ENFORCEMENT OF THIS
SECTION 11.14.  THE PARTIES AGREE THAT ANY LEGAL REMEDY AVAILABLE TO A PARTY
WITH RESPECT TO A BREACH OF THIS SECTION 11.14 WILL NOT BE ADEQUATE AND THAT, IN
ADDITION TO ALL OTHER LEGAL REMEDIES, EACH PARTY IS ENTITLED TO AN ORDER
SPECIFICALLY ENFORCING THIS SECTION 11.14.

 

(D)           CONSENT TO JURISDICTION.  THE PARTIES HEREBY CONSENT TO THE
JURISDICTION OF THE FEDERAL AND STATE COURTS LOCATED IN THE STATE OF CALIFORNIA
FOR ALL PURPOSES UNDER THIS AGREEMENT.

 

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(E)           CONFIDENTIALITY.  NEITHER PARTY NOR THE ARBITRATORS MAY DISCLOSE
THE EXISTENCE OR RESULTS OF ANY ARBITRATION UNDER THIS AGREEMENT OR ANY EVIDENCE
PRESENTED DURING THE COURSE OF THE ARBITRATION WITHOUT THE PRIOR WRITTEN CONSENT
OF BOTH PARTIES, EXCEPT AS REQUIRED TO FULFILL APPLICABLE DISCLOSURE AND
REPORTING OBLIGATIONS, OR AS OTHERWISE REQUIRED BY LAW.

 

11.15       Payment Method and Character; No Setoffs.  All payments made
pursuant to this Agreement shall be made in immediately available funds.  Except
as otherwise provided herein, any payment not made within fifteen (15) days
after the date such payment is due shall thereafter bear interest at the Overdue
Rate (as defined in Section 10.01) from the date when the payment was due.

 

Any payment (other than interest thereon) made hereunder by Parent to
Subsidiary, or by Subsidiary to Parent, shall be treated by all parties for all
purposes to the extent permitted by law as a non-Taxable dividend distribution
or capital contribution made before the Distribution Effective Time.

 

Except as expressly provided in this Agreement or in a Related Agreement, all
payments to be made by any party under this Agreement shall be made without
setoff, counterclaim or withholding, all of which are expressly waived.

 

11.16       Third-Party Beneficiaries.  This Agreement is not intended to confer
any right or cause of action hereunder upon any Person other than the parties
hereto; provided, however, that Persons who are holders of Parent Common Stock
immediately before the Merger Effective Time shall thereafter be third-party
beneficiaries of, and have the right to enforce the provisions of, Article 2 and
Section 3.01, Article 4 and Section 11.06 of this Agreement.

 

11.17       Further Assurances.  Subject to the provisions hereof, the parties
hereto shall make, execute, acknowledge and deliver such other instruments and
documents, and take all such other actions, as may be reasonably required in
order to effectuate the purposes of this Agreement and to consummate the
transactions contemplated hereby.  Subject to the provisions hereof, each party
shall, in connection with entering into this Agreement, performing its
obligations hereunder and taking any and all actions relating hereto, comply
with all applicable laws, regulations, orders and decrees, obtain all required
consents and approvals and make all required filings with any government agency,
other regulatory or administrative agency, commission or similar Governmental
Entity and promptly provide the other party with all such information as it may
reasonably request in order to be able to comply with the provisions of this
paragraph.

 

[Signature Page to Follow]

 

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[Signature Page of Distribution Agreement]

 

IN WITNESS WHEREOF, Parent and Subsidiary have caused this Agreement to be
signed by their respective duly authorized officers as of the date first above
written.

 

 

ante4, Inc.

 

 

 

 

 

By

/s/ Steven Lipscomb

 

Steven Lipscomb

 

Its Chief Executive Officer

 

 

 

“PARENT”

 

 

 

 

 

Ante5, Inc.

 

 

 

 

 

By

/s/ Steven Lipscomb

 

Steven Lipscomb

 

Its Chief Executive Officer

 

 

 

“SUBSIDIARY”

 

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SCHEDULE A

 

to Distribution Agreement

between ante4, Inc.

and ante5, Inc.

 

Dated April 16, 2010

 

TRANSFERRED ASSETS

 

A.            Transferred Assets.  The Transferred Assets assigned to Subsidiary
by Parent under the Subscription Agreement include all of the good will, rights
and other assets of Parent, whether liquidated or contingent on future events,
in existence immediately before the Effective Time of the Merger, except for its
assets described in part B of this Schedule A as the “Parent Assets.”  The
Transferred Assets include but are not limited to the following assets of
Parent:

 

1.             Cash and other Working Capital:  Pursuant to the Subscription
Agreement, Parent will contribute to the capital of Subsidiary:

 

(a)           all cash and cash equivalents of Parent as of the Merger Closing
Date in excess of $27,500,000, to be delivered on or promptly after the Merger
Closing Date; and

 

(b)           all of the proceeds received by Parent with respect to the ARS, to
be delivered promptly after Parent’s receipt of such proceeds (expected in
June 2010).

 

Of the cash contributed to Subsidiary as of the Merger Closing Date, $500,000
will be repaid to Parent pursuant to a one-year promissory note from Subsidiary
to Parent, which will accrue interest at a rate of two percent (2.0%) per annum.

 

2.             Rights under Revenue Sharing Arrangement in Purchase Agreement: 
Pursuant to Section 3.2 of the Purchase Agreement, Parent is entitled to receive
the following revenue sharing payments from Buyer (the “ Revenue Sharing
Arrangement”): (a) in perpetuity from the closing of the 2009 Transaction (as
described in part A of the Introduction), 5% of “gross gaming revenue” and 5% of
“other revenue” (as those terms are defined in the Purchase Agreement) of Buyer
generated by Parent’s business, brands and other assets sold to Buyer in the
2009 Transaction; and (b) if Parent receives less than $3,000,000 of such
royalties during the three-year period after the closing of the 2009
Transaction, a guaranteed minimum payment of that deficit amount.  Buyer’s
parent company, ElectraWorks Ltd., has guaranteed all of Buyer’s obligations
under the Purchase Agreement.

 

For the initial two-year period after the closing of the 2009 Transaction, 20%
of the proceeds from the Revenue Sharing Arrangement must be placed into an
escrow account to settle Parent’s indemnification obligations, if any, arising
under the Purchase Agreement and the related agreements.  Parent is entitled to
any escrow proceeds not used for that purpose and that right is being assigned
to Subsidiary hereunder (Any Liability of Parent related to the Purchase
Agreement is also listed in Schedule B describing the Assumed Liabilities).

 

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3.             Rights to Xyience/Xenergy Sponsorship Claim:  Based on a
Sponsorship Agreement dated May 30, 2006, between Xyience, Incorporated
(“Xyience”) and Parent (the “Sponsorship Agreement”), Parent has a claim for
amounts owed by Xyience (and/or Xenergy), as former sponsor(s) of the WPT
television series (the “Sponsors”); and that claim has been asserted in the U.S.
Bankruptcy Court, District of Nevada (Case No. 08-10474).  The Sponsors owed
Parent approximately $1,500,000 based on the fully executed and performed
Sponsorship Agreement (including integration into the required show).  The
Sponsors paid Parent $250,000, but did not pay the balance.  After the Sponsors
declared Chapter 11 bankruptcy, the bankruptcy court sent Parent formal notice
that it may be required to return that $250,000, but that claim has been
satisfied by Parent by payment of $90,000 to the bankrupt estate.  Parent is now
an unsecured creditor of the Sponsors, with a claim in the bankruptcy proceeding
in the amount of approximately $1.4 million.

 

4.             Rights under Deloitte & Touche Lawsuit:  Parent’s claims in the
case of WPT Enterprises, Inc. v. Deloitte & Touche, LLP, currently pending
before the Superior Court of the State of California, County of Los Angeles
(Case No. BC 373 103).  The lawyers prosecuting this case have been engaged for
a contingency fee (i.e., Parent is not liable for attorneys’ fees, except as a
percentage of any recovery).  A trial is tentatively scheduled for the fall of
2010 (but may be delayed again).  Parent’s costs have totaled between $50,000
and $100,000 (Any Liability of Parent related to this item is also listed in
Schedule B describing the Assumed Liabilities).

 

5.             Rights to WPT China Investment:  As a business segment of Parent,
WPT China produced third-party branding at WPT China National Traktor Poker Tour
events, licensed the television broadcast of the WPT China National Traktor
Poker Tour and marketed the popular Chinese national card game “Tuo La Ji” or
“Traktor Poker”™ in online and mobile games. This segment began generating
revenue in January 2009.  Parent invested about $4.5 million on WPT China.  In
March 2009, Parent shut down most of its WPT China operations and transferred
the remaining business to a company that had worked with Parent on WPT China, in
exchange for a 10% interest in the company.  Parent has been notified that such
company is closing down those operations and trying to sell assets to another
entity in China.  Parent also retained certain trademark and servicemark
applications pending in China and Hong Kong.  Parent may have rights under the
following documents:

 

(a)           Cooperation Agreement dated July 26, 2007, by and between China
Leisure Sports Administrative Center and WPTAsia (Beijing) Consulting Co. Ltd.
(as assignee of Parent), as amended pursuant to Amendment No. 1 dated
December 16, 2008, and the letter agreement dated March 15, 2009.

 

(b)           Assignment and Assumption Agreement dated as of December 11, 2008,
by and between WPTAsia (Beijing) Consulting Co. Ltd.

 

(c)           Services, Sponsorship & License Agreement dated September 28,
2007, by and between United States Playing Card Company, Inc. and Parent
(Expired).

 

(d)           Instrument of Transfer dated April 21, 2008, by and between
Harefield Limited and WPT Asia Holdings, Inc. with respect to WPT Asia Limited.

 

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(e)           Capital Verification dated December 27, 2008 (written in Chinese).

 

(Any Liability of Parent related to this item is also listed in Schedule B
describing the Assumed Liabilities).

 

6.             Rights to Cecure Gaming Investment:  In July 2006, Parent entered
into a Licensing Agreement (the “Licensing Agreement”)with 3G Scene PLC, a/k/a
Cecure Gaming (“Cecure”), pursuant to which Parent granted Cecure a
non-exclusive license to use the World Poker Tour brand in conjunction with the
promotion of Cecure’s real-money mobile gaming applications.  Cecure designed
and operated software and other products that enabled it or its licensees to
offer gaming services to customers via mobile devices (i.e. a customer could
play casino or poker games on a cell phone for money against other players). 
Pursuant to the Licensing Agreement, Cecure offered real-money mobile games
solely in jurisdictions (such as the United Kingdom) where such gaming was not
then restricted.  In consideration for the license, Parent became entitled to
50% of Cecure’s net revenues.  In July 2006, Parent also paid $2,923,000 to
acquire a 10% ownership interest in Cecure (currently 8%), but Cecure’s business
was liquidated late in 2009.  That investment was made under the following
documents:

 

(a)           Subscription and Shareholders’ Agreement relating to 3G Scene
Limited dated in July 2006, by and among 3G Scene Limited, Bessemer Venture
Partners VI, L.P., Bessemer Venture Partners VI Institutional, L.P., Bessemer
Venture Partners Co-Investment L.P., Parent, Peter Karsten, and the “Existing
Shareholders.”

 

(b)           3G Scene Limited Registration Rights Agreement dated in July 2006,
by and among 3G Scene Limited and the investors listed on Schedule A thereto.

 

(c)           2008 Deed of Amendment of the Subscription and Shareholders
Agreement by and among Cecure Gaming Limited, Bessemer Venture Partners VI,
L.P., Bessemer Venture Partners VI Institutional, L.P., Bessemer Venture
Partners Co-Investment L.P., Parent, et. al.

 

7.             Poker Royalty Agreement:  ante4 is party to a Marketing
Agreement, dated May 15, 2004, with Poker Royalty, LLC, a poker talent
management company, pursuant to which ante4 receives a 25% interest in the gross
proceeds of Poker Royalty in perpetuity.

 

8.             Rights to Office Furniture:  Parent owns office equipment located
in its current leased office.  Parent believes the value of these items is less
than $50,000; and they are generally described as follows:  CEO furniture, CEO
wall hangings, CEO computer, other office furniture and telephones.

 

9.             Rights under Consulting Agreement for Financial Services:  John
Simonelli has been engaged to serve as Parent’s Interim Chief Financial Officer
pursuant to a consulting agreement between Parent and TechCFO-San Francisco, LLC
(the “Contractor”), dated September 2, 2009 (the “Consulting Agreement”).  
Pursuant to the Consulting Agreement, the Contractor provides the services of
Mr. Simonelli to Parent on a part-time basis as an independent contractor, and
remains an employee of TechCFO.  The Consulting Agreement provides that the
Company will pay the Contractor $8,000 per month for Mr. Simonelli’s services,
plus the payment of certain travel and incidental expenses.  The Consulting
Agreement

 

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was effective through December 31, 2009 and automatically renews for subsequent
one-year terms unless either party gives notice of termination to the other at
least thirty (30) days prior to the termination date; and currently remains in
effect.  (Any Liability of Parent related to this item is also listed in
Schedule B describing the Assumed Liabilities.)

 

10.           WPT Invitational Tournament Rights.  The right granted to Parent
by Buyer to send up to six people to attend the “WPT Invitational” poker
tournament.

 

11.           Accounts Receivable.  All accounts receivable due Parent
immediately before the Merger Effective Time, other than any amounts due under
an account that is part of the Parent Assets described below.

 

12.           Insurance Policy.  Parent’s Multi-Media Tail insurance coverage
with Chartis Inc.

 

B.            Parent Assets.  The following assets of Parent (the “Parent
Assets”) are excluded from the assets assigned to Subsidiary by Parent under the
Subscription Agreement:

 

1.             Investments.  (a) $27,500,000 in cash and cash equivalents, and
(b) a promissory note from Subsidiary to Parent in the amount of $500,000.

 

2.             Agreements.  All rights of Parent under this Agreement and the
Merger Agreement (and any agreements ancillary thereto, including but not
limited to its agreements with brokers and investment bankers).

 

3.             Post-Merger Acquired Assets. All rights and assets acquired by
Parent at or after the Merger Effective Time.

 

4.             Books and Records.  The Parent Books and Records.

 

5.             Insurance Policies.  The rights of Parent under the Shared
Policies (as defined in Section 8.01), other than Parent’s Multi-Media Tail
insurance coverage with Chartis Inc.

 

6.             Stock of Subsidiaries.  All outstanding capital stock of
Subsidiary and Merger Subsidiary (and Plains Energy as successor thereto in the
Merger).

 

7.             Lease.  The Lease dated as of September 24, 2004, between Parent
and Wilshire Courtyard L.L.C., as amended, for Parent’s office space located at
5700 Wilshire Boulevard, Los Angeles, California 90036.

 

8.             Other Assets.  All of the other assets expressly to be retained
by, or assigned or allotted to, Parent under this Agreement or any of the
Related Agreements.

 

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SCHEDULE B

 

to Distribution Agreement

between ante4, Inc.

and ante5, Inc.

 

Dated April 16, 2010

 

ASSUMED LIABILITIES

 

The following Liabilities of Parent, whether liquidated or contingent on future
events or conditions, are included in the Assumed Liabilities assumed by
Subsidiary under the Subscription Agreement:

 

1.             Contingent Liability for Escrow Proceeds under Purchase
Agreement:  Parent is obligated to indemnify Buyer in certain events under
Section 9 of the Purchase Agreement.

 

For the initial two-year period after the closing of the asset purchase under
that Purchase Agreement, 20% of the proceeds from the Revenue Sharing
Arrangement described in item (A)(2) of Schedule A (Transferred Assets) must be
deposited in an escrow account to secure Parent’s indemnification obligations
under Section 9 of the Purchase Agreement.  To the extent any proceeds of that
escrow, which are part of the Transferred Assets being contributed to Subsidiary
under this Agreement, must be used to satisfy those indemnification obligations
of Parent, the obligation to return those proceeds to Buyer will be treated as
an Assumed Obligation of Subsidiary.

 

2.             Contingent Liability Related to WPT China Investment:  Parent may
be liable to pay fees to close the WPT China operations described in item
(A)(5) of Schedule A if the company currently running them does not satisfy all
formal requirements in closing down the operations.

 

3.             Liability for Costs of Deloitte & Touche Lawsuit:  WPT
Enterprises v. Deloitte & Touche (Case No. BC 373 103).  Parent is responsible
for paying court costs and certain other out-of pocket expenses.

 

4.             Liability for Consulting Agreement:  Parent is liable to pay fees
of $8,000 per month under the Consulting agreement described in described in
item (A)(9) of Schedule A.

 

5.             Accounts Payable.  All accounts payable of Parent in existence
immediately before the Merger Effective Time, including but not limited to fees
payable by Parent to its lawyers, consultants and investment bankers (other than
the brokerage commission incurred by Parent in connection with the Merger).

 

6.             Contingent Liabilities:  All Liabilities relating to any Action
or threatened Action arising out of or pertaining to the Distribution, other
than Parent’s obligation to indemnify its officers and directors under its
bylaws, applicable Delaware law or any written agreements.

 

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SCHEDULE C

 

to Distribution Agreement

between ante4, Inc.

and ante5, Inc.

 

Dated April 16, 2010

 

1.             Directors of ante5, Inc.:

 

Lyle Berman

Steven Lipscomb

Bradley Berman

 

2.             Officers of ante5, Inc.:

 

Steven Lipscomb

Chairman of the Board and Chief Executive Officer

John Simonelli

Interim Chief Financial Officer

Steven Lipscomb

Secretary

 

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SCHEDULE D

 

to Distribution Agreement

between ante4, Inc.

and ante5, Inc.

 

Dated April 16, 2010

 

EXAMPLE OF ADJUSTMENT OF PARENT STOCK OPTIONS

 

The following example illustrates the agreed method for adjusting the Parent
Stock Options to ensuring that their intrinsic value before the Distribution
will be preserved thereafter pursuant to Sections 4.05 and 9.03 of this
Agreement.

 

1.             Assumed Facts.  For this example, assume the following facts:

 

(a)           $1.40 is the closing price of a share of Parent Common Stock
immediately before the Distribution.  Because the Distribution Record Date was
the previous day, that $1.40 price would represent both (i) the right of each
Parent Shareholder to receive one share of Subsidiary Common Stock as of that
date for each share of Parent Common Stock held by the Parent Shareholder (due
to the “one for one” ratio provided for in the Distribution); and (ii) the right
to continue holding those shares of Parent Common Stock after the Merger and the
Distribution.

 

(b)           A Transferred Employee holds a Parent Stock Option to purchase
1,000 shares of Parent Common Stock for $0.60 per share.  Therefore, if the
Transferred Employee exercised the Parent Stock Option on the Distribution Date,
its intrinsic value would be $800, which is 1,000 times the difference between
the $0.60 option exercise price and the $1.40 market price assumed above.  That
$0.80 intrinsic value per share would be about 57.1% of the market price
($0.80/$1.40) and the option exercise price would be about 42.9% of the market
price ($0.60/$1.40).

 

(c)           $0.09 is the closing price of a share of Subsidiary Common Stock
on its first day of trading, which will be the day after the Distribution Date.

 

(d)           Therefore, immediately before the Distribution, the value of the
right of a Parent Shareholder to receive a share of Subsidiary Common Stock
would have been about $0.09, which is about 6.43% of $1.40.

 

(e)           If the right to receive a share of Subsidiary Common Stock was
worth $0.09 immediately before the Distribution, and a share of Parent Common
Stock, including that same right, was worth $1.40 on that date, as assumed
above, then a share of Parent Common Stock without that right would be worth
about $1.31 (or about 93.57% of the combined value); and the value of a share of
Subsidiary Common Stock, if one then existed, would be worth $0.09, or about
6.43% of the $1.40 combined share value.

 

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2.             Resulting Adjustment.  As a result, on the Distribution Date, the
Transferred Employee’s option to buy 1,000 shares of Parent Common Stock for
$0.60 per share would be adjusted (or “split”) into an option to buy 1,000
shares of Parent Common Stock for $0.56 per share (93.57% of the original $0.60
option exercise price), and an right (a “Subsidiary Stock Right”) to buy 1,000
shares of Subsidiary Common Stock (before the Distribution) for $0.04 per share
(6.43% of the original $0.60 option price), due to the “one for one”
Distribution ratio for Subsidiary Common Stock.

 

3.             Proof of Adjustment Formula.  If the Transferred Employee
exercised both of the new options on the day after the Distribution, the
intrinsic value of the new separate options would be the same $800 they had
immediately before the Distribution, before the old Parent Stock Option was
adjusted (or “split”).  The new $800 intrinsic value would be preserved and
determined as follows: (a) the exercise of the new Parent Stock Option would
result in 1,000 shares of post-Distribution Parent Common Stock (worth $1.31 per
share) being bought for $0.56 per share, for an aggregate economic gain of $750
($1,310 - $560); and (b) the exercise of the Subsidiary Stock Option would
result in 1,000 shares of Subsidiary Common Stock (worth $0.09 per share) being
bought for $0.04 per share, for an aggregate economic gain of $50 ($90 - $40).

 

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